Adjudication errors drop by 50%, sloppy claims still cost billions

August 1, 2012

Much to the delight of providers, insurers have reduced claims-processing errors by a substantial amount thanks to streamlined adjudication.

NATIONAL REPORTS-Much to the delight of providers, insurers have reduced claims-processing errors by a substantial amount thanks to streamlined adjudication. A report card released recently by the American Medical Assn. (AMA) showed that efforts by the seven largest health insurers have cut errors in half over the past year.

The annual report measures timeliness, transparency and accuracy of claims processing. Errors dropped from 19.3% last year to 9.5%, resulting in $8 billion in health system savings, attributed to a reduction in unnecessary administrative work to resolve errors, according to AMA.

Aetna, Cigna, Humana, UnitedHealth Group, and Health Care Service Corp. plans in Illinois, Texas, Oklahoma and New Mexico improved their individual accuracy ratings from last year as well.

UnitedHealthcare has the highest accuracy rating (98.3%) on the first electronic remittance advice (ERA). Instead of submitting claims in bulk, physicians now file claims online for real-time adjudication through the plan's portal. Previously, the adjudication process could take days, but now routine claim responses reach providers in less than 10 seconds.

"If you shop at any retail organization today, you'd see prices on the shelves," says Tim Kaja, senior vice president of provider relations at UnitedHealthcare. "Healthcare is very different. Nowhere on the claim form does it say what we're expecting for payment."

According to Kaja, this is the first time any entity in the industry has measured how often the two parties agree on what should be reimbursed. The agreement eliminates some readjudication.

"At the end of the day, if a contract rate matches what the physician or the hospital is expecting, you're going to do pretty well," Kaja says. "From an administrative cost perspective, you want to eliminate all the noise."

In other words, it would be ideal for a claim to arrive electronically, autoadjudicate, reimburse electronically, and update in the physician's practice management system without any human intervention. Kaja says in some aspects, the industry is very close to the ideal with the HIPPA 5010 837 electronic remittance standards.

In other avenues of claims processing, however, the industry still has a long way to go-with eligibility and authorization in real time, for example. Today's practice management systems typically are unable to make the leap.

STATE OF THE ART SYSTEMS

According to Kaja, there are a lot of complications surrounding real-time eligibility, and it's all about economic incentives-for practice management systems to create the product, the clearinghouses to transport the product, the payers to provide the eligibility information back to the physician, and the physician practice management to have the ability to accept and process it.

"The administrative processes in healthcare need to follow the way healthcare happens, and they should be prompting the physician to recognize whether a referral or an authorization is required," says Kaja. "The last thing you want to do as a payer is deny a claim for a physician because they didn't get authorization."

Often the physicians don't even know prior authorization is required.

After a service is rendered, a state-of-the-art practice management system would be able to generate the claim after the services are delivered and secure the reimbursement update.

Kaja also emphasizes the importance of meeting the physicians' expectation of what payments should be vs. the payers' expectation of what they think payments should be. A disagreement will ultimately create additional unnecessary costs. Payers can track claim accuracy at 99%, but if physicians are consistently filing adjustments, the physicians' expectations aren't being met.