Health plans are working harder than ever to avoid inaccurate claims payments upfront to minimize the cost and resources required to recover over-payments on the back end. Although pre-payment itemized bill review (IBR) is still in its infancy stages of mass adoption, it is proving to be an effective method of helping plans avoid post-payment loss, while also reducing administrative burden and the subsequent administrative cost.
While post-payment recovery will always be a part of the equation in settling claims, there is a tremendous opportunity to maximize on the insource pre-pay movement, especially expanding into outpatient claims. Here are three reasons why plans should expand into pre-payment IBR with outpatient claims:
The Need For Speed
Generally speaking, outpatient IBs are shorter and require less time to review and audit. Typically, the payer-provider policy allows for 3-5 days for pre-pay audits, a smaller window for review than post-pay audits. Although the IB may be shorter in most cases, you still have to consider the sheer workload of reviewing potentially 1000s of outpatient claims in that 3-5 day window, in addition to the larger IBs typically associated with inpatient care claims.
With today’s healthcare technology, IBs can be audited in a fraction of the time required for manual review by human staff. Settling these claims quickly after their filing allows for quicker time to appropriate reimbursement for plans and quicker time to revenue for providers. It’s a game of speed that pays big dividends for payer and provider.
In a 2020 audit of St. Vincent Infirmary, it was discovered that 103 outpatient outlier claims totaled $581,136 and contained 173 billing errors. In this instance, Medicare made the outlier payments, directly influenced by the hospital charges. The audit found that the hospital charged high rates unrelated to cost, leading to excessive inpatient and outpatient outlier payments.
This occurred because St. Vincent lacked processes and control systems that would prevent these errors that included: “overcharged time, charge errors, and coding errors.” The appropriate portion of each outlier payment was unable to be determined without St. Vincent amending the claims. To make a long story short, Medicare ended up paying an excessive amount more than what was considered appropriate reimbursement.
There is a tremendous cost savings to health plans when utilizing pre-pay methods because it eliminates the vendor fees and administrative costs associated with recovering a claim that was paid erroneously. Depending on the vendor fees, the number of claims worked, and the final claims settlement, pre-payment can save the health plans thousands to millions of dollars annually.
Diminished Provider Abrasion
Assuring accurate payments to providers is a costly endeavor, and especially to providers. In a study conducted by Frost & Sullivan, it was found that 8% of providers spent upwards of $1 million annually dealing with post-payment audits. Another 10% spend between $500,000 and $1 million, while another 46% spend less than $500,000 annually. In a stunning find, 37% of providers have no idea what post-payment audits are costing their company.
The study also found that nearly 1/3 of providers report negative experiences with audit programs, and 92% cited their dissatisfaction with the high number of payer requests for medical records.
But there was an upside to the research for payers. The study showed that payers could help providers reduce the time and cost required for audits and greatly diminish the dissatisfaction associated with the process. This reduction in provider abrasion and administrative cost is accomplished via “pre-submission notification” or a pre-payment process. In fact, the study showed that 43% of providers say that pre-payment claims reduce their organization’s administrative burden and subsequent costs.
In addition to the cost savings for both payer and provider associated with post-payment audits, pre-payment claims offer an opportunity for an improved working relationship between payer and provider, ultimately benefiting the patient.