An article in the Journal of the American Medical Association(JAMA), entitled  “Waste in the US Health Care System: Estimated Costs and Potential for Savings,” (October 7, 2019), included these findings:

“The review yielded 71 estimates from 54 unique peer-reviewed publications, . . . Computations yielded the following estimated ranges of total annual cost of waste: failure of care delivery, $102.4 billion to $165.7 billion; failure of care coordination, $27.2 billion to $78.2 billion; overtreatment or low-value care, $75.7 billion to $101.2 billion; pricing failure, $230.7 billion to $240.5 billion; fraud and abuse, $58.5 billion to $83.9 billion; and administrative complexity, $265.6 billion.”

The amount of waste in the American medical system is clearly in the billions of dollars. Specifically we see in the above that the “fraud and abuse” cost per year ranged from $58.5 to $83.9 billion, but that might be presumed to mean only the bad actors that we hear about occasionally who bilk the system with fake care. Actually there is a far more prevalent problem, the billing errors that many providers supposedly innocently make that almost always cost the health plan more money, not less. While some “revenue enhancement” firms are perfectly legitimate, not all are, and medical billers are taught how to engage in “up charging,” “unbundling” or make other illegitimate billing practices.

Is it possible to correct these problems and save money? Fortunately the answer is yes, but it requires highly sophisticated software systems, tied to old-fashioned hard work that reviews and analyzes data.

To start, there are generally two versions of payment integrity:

Pre-Payment Review (which claims are looked at before paying them so there is no need to claw back overpayments to providers), and

Post-Payment Review (which analyzes two or more years of data and looks for errors made, with a need to go back and get those overpayments back from providers).

Pre-Payment Review is generally an electronic review of all of the incoming billing data for “low hanging fruit” savings. Such a review can take seconds, so the delay can be minimal. That includes, for example, looking for common errors in provider bills. However, there is a lot more to it than that. Here are other ways that sophisticated programs find errors and save money:

—While payment integrity generally focuses on billing errors, there are also errors in claim payments by TPAs and health plans. One rough expectation is that of the total of errors found, 15% will be errors made by such claims payers. We have seen and heard of many alarming (and even shocking) errors made by TPAs and ASO vendors that appear to set auto-adjudication on high so as to “just pay claims”—with too little attention paid to plan language that would otherwise deny certain claim payments. Why would they do that? In some cases it is laziness but in other cases it is to reduce “noise” that comes from claim denials. Some ASO providers are not eager to go against network providers and thus can be very lax in seeking out network provider billing errors.

Beyond payment integrity on a  mass scale, there are the important individual claims audits on large claims (especially hospital claims) where billing errors can be common and high dollar. The skill set for this can be quite different from the more computerized processes of payment integrity. Many of these large claims can be large enough to pierce the stop-loss limit, and thus the plan or consultant can look for rate concessions on stop-loss rates for mutual clients.

A partner firm, Trifecta Health Solutions, brings three solutions together into one: data management and analysis, post-payment forensic review, and large claim audit analysis. For more information on their powerful solution, give us or them a call.