Errors in insurance claims are costing the healthcare industry billions in wasteful spending, and both the payers and the providers are at fault, experts say.
"What the payer wants from the provider is a clean claim," said Bruce Hallowell, managing director in the healthcare practice at Navigant Consulting. "If I submit a clean claim, I'll get paid in five days."
While error rates for commercial health insurers for paid medical claims dropped significantly from nearly 20 percent in 2010, to 7.1 percent in 2013, more than $43 billion could have been saved if commercial insurers consistently paid claims correctly, according to the American Medical Association National Health Insurer Report Card, citing figures from 2010 to 2013, the latest available data.
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In 2013, Medicare led all insurers with an accuracy rating of 98.1 percent, followed by UnitedHealthcare at 97.5 percent, Humana and Cigna at 96.5 percent each, Aetna at 96 percent, Anthem at 90 percent and Regence at 85 percent, according to the AMA.
According to Hallowell, accuracy depends on clean claims, but the problem is the definition of a clean claim can be fuzzy.
Despite the adoption of the national uniform bill in 1982, creating a single billing form and standard data set for handling claims, insurers often have their own rules and providers don't always know what they are, Hallowell said.
"Payers don't understand why the hospital can't follow the basic rules," Hallowell said. "There's poor data quality from the provider and poor answers from the payer."
The best recommendation is for payers to communicate what they need so that providers can get paid right away.
If a provider knows the rule and the variations of those rules, it can go back and build into the system the definition of a clean claim, he said.
It's when a claim is returned to the provider, or sent back for additional information, that the costs start to add up. If the payer overpays, or pays incorrectly, waiting for a retroactive refund can take longer than hoped.
Payers and providers save the most money through electronic billing and auto-adjudication, a system which involves no human touch. At least half of claims are processed this way, he said.
"The biggest cost on the provider and payer side is labor," Hallowell said. "Nirvana is to get to the least amount of money spent to do the process. As soon as you hit the first error, is when costs start building up."
Bill Heitman, founder and managing director of consulting firm The Lab, works with insurers and other companies to weed out inefficiencies that can hinder the processing of a clean claim.
"New technology alone will not improve productivity until inefficient, dysfunctional, routine administrative processes are streamlined," Heitman said. "It boils down to understanding what's going on from front to back."
The Lab in Houston implements non-technology business improvements of the kind first introduced more than 100 years ago by Henry Ford in assembly line production.
When Heitman analyzes companies, he often finds productively is bogged down by what he calls "virtuous waste." This is loosely defined as processes continuing to be done the way they've always been done, even if it means someone must correct the same mistakes over and over again.
Accumulated, the small repetitive tasks can churn up 20 to 30 percent of a day, he said.
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"What we're working on is the long tail of improvements, hundreds of small improvements that never make it to the flip chart because they're too inconsequential," Heitman said.
Up to 60 and 70 percent of provider submitted claims have incomplete or incorrect data, Heitman said. Errors include missing ID numbers, numbers that don't match or names that don't match.
"Out of 100 plans, those with high error rates are usually not distributed equally," Heitman said. "We'll find usually the offenders are concentrated. The same people, the same plans are responsible for a disproportionate percent of the errors. You can knock out 60 to 70 percent of errors by concentrating on the violators. It's in everybody's interest to get it once and done."