Making the Shift to Pre-Payment of Itemized Bills

According to the Center for American Progress, payers and providers in the United States spend approximately $496 billion annually on billing and insurance-related costs (BIR). Another study by the National Academy of Medicine estimates that the U.S. spends about twice as much as is necessary on BIR costs. These high costs include claims submissions, billing, record keeping, and administrative costs for both payers and providers in the claims process.

As the CMS Interoperability Mandate rolls out change within the healthcare system, there is an opportunity for payers and providers to adopt new systems and processes driven by new standards and technological advances specific to healthcare.

The process of sharing medical records between payer and provider, as well as the entire claims process, has long been a laborious undertaking, requiring heavy administrative staffing, as well as exorbitant amounts of time, money, and resources. There’s a shift taking place in the payer-provider relationship that is already delivering on the potential to increase claims efficiencies, lower costs, and save millions (if not billions) in spending waste, all while also reducing administrative burden.

What is the shift?  Insourcing Pre-Payment Itemized Bill Review (IBR).  The shift in IB audits from outsourcing and post-pay to insourcing pre-pay is the growing trend in the healthcare industry. Typical industry standard policy agreements allow for up to a year in post-pay audits, while pre-pay audits must be done within 3-5 days of the claim being delivered. With payers paying out claims based on predetermined thresholds and specific IB coding, they often over-pay providers for services rendered, found only when they audit the IB after the payment has been made.

Here are some of the top considerations that are driving the shift to Insourced Pre-Pay IBR:

No More Pay and Chase

Quite simply, Insourced Pre-Pay audits drastically reduce a payer’s need to “pay and chase.” Once payment has been disbursed to the provider, the payer typically has a large window of time to audit. This essentially puts the payer on the clock in a perpetual cycle of pay and chase, where they have to spend the workforce and money to recoup the erroneous payment. The double-edged sword in this is that they pay additional administrative costs while trying to chase down the overpayment, losing the value of the original payment with every resource spent on recouping. Prepayment cost avoidance allows the plan to avoid costs associated with “chasing down” the inaccurate payment.

Reduces Inefficiencies

By auditing IBs pre-pay, the inefficiencies that come with multiple reviews and reworks of IBs once they’ve been paid are drastically reduced. The back-and-forth communication between payer and provider during an audit presents numerous opportunities for an inefficient process. Those inefficiencies begin at the start of the medical record exchange, as redundancy is common when payers request the same medical record multiple times.

Diminishes Provider Abrasion

The insurance claims process is significantly more cumbersome on the provider side. Doctors, nurses, and health providers spend hours outside their bedside duties, recording and documenting everything being done in patient care. From documenting a major surgery to each aspirin given, the amount of time for accurately documenting and coding is significant.

Post-pay audits require the provider to respond to the payer’s challenges of the IB so that appropriate reimbursement can be finalized. These types of audits require the provider to justify and/or correct the care they provided for the patient. The hours required from the initial care to the post-pay audit are difficult on providers who often lack the staff and bandwidth to adequately address claims, especially many IBs under a certain threshold.

By insourcing Pre-Pay IBR, payers can streamline the process of auditing the IBs before large sums are paid out, preventing significant overpayments that require the payer to recoup and further stress the provider in the process.

Technology Makes It Possible

It’s one thing to want to shift to insourcing IB audits; it’s another thing to be able to manage it. Archaic methods of sharing medical records via fax or email, mixed with a short window for auditing pre-pay IBs, make the process challenging, and at times, seemingly impossible. Additionally, most companies lack the staff and subsequent bandwidth required to handle these audits in a timely manner.

By leveraging open APIs, medical records can now be exchanged instantly, by the click of a button. What used to take anywhere from hours and days to fax or mail a medical record now takes seconds with these digital solutions. However, the speed of sharing medical records doesn’t guarantee a quick turnaround of an audit. For years, audits have been painfully managed by the careful eye of the staff paid to review the IB. Hours, days, or even over a month can be required to manually review an IB, depending on the size. Long hospital stay IBs are notorious for being hundreds of pages long. Painstakingly, a human on each side must review those bills, line-by-line, and millions of medical claims are made daily, overrunning the system with work.

Cutting-edge technology, like our CAVO® platform, intakes and extracts data from medical records, itemized bills, and other clinical information and puts it into manageable data forms and fields for rapid and accurate review within the organization’s workflow. By leveraging the latest FHIR® standards, open API, and artificial intelligence, CAVO® allows payers to review IBs with a 5x+ productivity lift. With the help of standardized data within the workflow, and the productivity lift, the impossibility of pre-pay IBs suddenly becomes not only possible but also the best option for any organization in the medical claims space.

And this is the reason the shift to pre-payment IBs is where the industry is headed. Technology, along with the new CMS Mandate requiring the exchange of important medical information so that patients can have access to their medical information, is paving the way for a new horizon within the medical ecosystem. One that makes it more efficient while requiring less administrative cost to manage and ultimately improving health care for patients.

Finding Balance

The sheer number of medical claims submitted each day requires close consideration of the balance between outsourcing and insourcing claims audits. For the foreseeable future, outsourced audits will remain an essential and needed component of the medical claims process, especially in the cases of larger IBs. Even with productivity lifts provided by technology, there is still a human element in managing the solutions. An organization must understand their parameters in which IBs will be audited in-house vs. outsourced, based on their staff, bandwidth, and ability to handle certain IBs.

However, the long-term play for the profitability and success of the claims process includes a move to insourcing pre-pay IBs. The future is here, and now is the time to make the shift.