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Claims Processing Gets a Little Help
Health Data Management Magazine, 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.
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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."
ProMed also is using the Virtual Examiner application to improve transparency with its contracted physicians-especially when their claims are denied.
The system, which receives claims via a data feed from ProMed's EZ-CAP claims processing system, generates a code that indicates why a specific claim or charge should be denied.
When providers call to inquire about why their claims were denied, the TPA's claims auditors can look up what the code means in the Virtual Examiner application while on the call.
They also can access each of its fee-for-service and subcapitated contracts to verify payment terms and fax them to the inquiring provider-all from the same system, says Bahremand, the CFO.
The application also has other tools, such as the ability for managed care organizations to compare their contracts and reimbursements with Medicare guidelines, rules and regulations, and to trend their claims payments to detect patterns of fraud and abuse.
ProMed uses the Medicare comparison and analysis tools in a variety of ways. For example, the TPA has used them to show its subcapitated physicians that it was reimbursing them the correct rate called for in their contract, as well as how that compared with Medicare rates.
The TPA also periodically uses the tools to evaluate whether it's paying fee-for-service contract providers correctly and to create a reimbursement history for all providers, which it can use during contract negotiations.
"The system helps us negotiate subcapitated services contract rates because we know what the costs would be for fee-for-service contracts," Bahremand says.
Analytical Tools Included
But the TPA more frequently uses the application's ability to analyze bundled claims based on the rules of its submitter's subcapitated contract. For example, if a provider submits a single claim for four different X-rays, Virtual Examiner can audit it to determine whether the services were performed on the same or different days - which would trigger different billing rates, Bahremand says.
It also can assign a different code to a charge that was denied in a claim in which other charges were approved. Additionally, the application can flag duplicate billings, Bahremand adds.
"Most claims systems won't tell you if charges in a claim should be included within other charges or claims. It's like if there was a charge for a hand examination, you'd have to determine if there should be a separate charge for examining the wrist or it should be included in that." Bahremand says. "Virtual Examiner tells you how to unbundle charges, which can result in processing them at lower-and more accurate-rates."
The software also has helped ProMed improve its relationships with contracted physicians because it's been able to reimburse more accurately and offer more timely information, Bahremand says.
"Our claims system just showed us the information the physician was seeing on their statement. But we wanted to be able to quickly access the proper information on how physicians should be reimbursed," he says. "If you don't have the clean data to come up with any proper numbers, you can't document your findings and respond to providers quickly enough. We have to do that. If you don't edit and audit the claims, then forget it."
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