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Claims Processing Gets a Little Help
January 1, 2008
As a third party administrator that serves two multispecialty Independent Physician Associations, ProMed Health Care Administrators handles a variety of payment contracts.
The Ontario, Calif.-based TPA manages conventional fee-for-service reimbursement schedules for some of the IPAs' 500 physicians, but manages subcapitated, per-member, per-month payment plans for others. The arrangement gives physicians and practices the freedom to choose a reimbursement schedule that fits their specialty's needs.
But processing claims under such vastly different payment schedules became troublesome for ProMed, says Baram Bahremand, CFO. While the TPA uses the EZ-CAP claims processing system from MZI Healthcare LLC, Valencia, Calif., the application isn't able to evaluate each claim for the various nuances involved in its submitter's reimbursement contract.
As a result, ProMed's two claims auditors had to manually review claims and contracts, which was extremely time consuming and sometimes resulted in incorrect payments or denials.
"Paying each claim under a subcapitated contract depends on how many services were done, during what period of time and with what other charges. So reimbursement schedules for charges may vary from claim to claim," Bahremand says. "It took so long to manually audit claims for these rules that we sometimes ended up overpaying them. But when we denied them, providers would call for justification, and we'd have to find the rules and regulations of their specific contracts to respond, which also took a lot of time and resources."
In early 2005, ProMed purchased software designed to help verify pending claims will be processed and paid correctly. The Virtual Examiner application, from PCG Software, Malibu, Calif., is embedded with coding and National Provider Identifier number rules that enable it to ensure these fields are filled out correctly.
ProMed also worked with the vendor before implementation to enter its various fee-for-service and subcapitated contracts into the application so it could process claims correctly per regulations stipulated by the reimbursement schedules.
ProMed runs Virtual Examiner twice a week to evaluate its claims before they are paid. The TPA's auditors review the claims the application flags as problematic, decide how they should be processed, then send them out to be paid or denied. The system also provides processing recommendations for each claim.
Since using the Virtual Examiner application and new workflow, ProMed's auditors have been able to improve productivity because they no longer must search for contract information. Instead, they can access all the information in the Virtual Examiner application, Bahremand says. And while the TPA hasn't calculated a return on investment, the application has saved money by catching claims that were about to be overpaid and reducing resource costs, he adds.
"We know it's paid for itself-but it's not just the money that matters," Bahremand says. "It's the indirect, positive impact the software has given us to run our operation and educate providers on correct billing procedures. The investment has been well worth it."
A Rising Trend
Systems designed to help automate claims adjudication are becoming more prevalent at TPA organizations, says Janice Young, program director at Framingham, Mass.-based Health Industry Insights, a wholly owned subsidiary of research firm IDC.
The allure of the software is how it can help payers reduce overpaid claims and administrative costs by addressing common hiccups in the adjudication process, such as coding errors, missing fields or incorrect provider numbers, she adds.
But systems that also can evaluate claims based on their submitter's specific contract will become increasingly important to TPAs as physicians continue to demand greater information transparency and quicker claims adjudication, Young says.
"If payers don't have the ability to manage adjudication, they are putting up walls to the information providers need," she says. "And until payers get transactions right, other advancements in transparency will just show they are using bad information."
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