A more efficient claims process

Since the American Medical Association launched its National Health Insurer Report Card in 2008, there has been noticeable progress by plans that apparently have taken to heart the AMA's call to improve the efficiency and transparency of their claims processing.

However, the AMA's 2010 report -- the first report that has measured the overall rate of claims accuracy -- finds the industry's efforts to address the issues have a long way to go. That's because, for all the improvements that health plans have made in three years about disclosing to physicians when a claim was received, and how much will be paid for each service, one out of every five physician claims is still processed or paid incorrectly.

It seems that insurers have realized that it's in their financial best interest to make the claims process more efficient, something that benefits physicians as well. Some plans have reached out to the AMA to work on ways to improve their systems. Notably, Cigna has gone from not disclosing to the physician the date it received a claim and not disclosing the contracted rate to doing both nearly 100% of the time on its electronic remittance advices or explanation of benefit forms.

But insurers also continue to hold on to proprietary, complex processes that create the one-in-five claims failure rate.

All told, that inefficiency wastes an estimated $15.5 billion annually, including a toll of up to 14% of physician revenue to ensure timely and accurate payment from private insurers.

Rather than use an industrywide standard set of filing rules -- as the AMA has advocated -- payers require physicians to fill out different forms for each payer, creating more paperwork bottlenecks and increasing the complexity of the claims process. Also, plans still are not transparent or consistent in their claim edits or denials.

So while insurers are more willing to tell physicians what they will be paid for each service, they are still all over the map in terms of how they will make those payments -- and whether claims will be bundled, denied or downcoded. A claim that gets a thumbs-up from one insurer could generate a note from another saying there is an error. The 20% error rate is not uniform among the seven major private-pay plans rated -- the plan at the top of the list was accurate 88.4% of the time, and the least accurate plan came in at 74%, according to the report card. The 2010 and past years' report cards are available online (link).

Certainly there are times when a physician practice makes a mistake in its claims, and the AMA has encouraged physicians to reduce errors by filing timely and accurate claims to the best of their ability the first time, and by reviewing and reconciling claims payments. Patients also need to know their own insurance. Lack of eligibility is the No. 1 reason a claim is denied, which speaks to the need of employers and insurers to educate their patients on what their plans will cover.

Processing errors are another matter. When they arise, the AMA and industry analysts say, the confusion often comes from the insurer, particularly on more complex claims involving multiple physicians.

The AMA's goal -- which should be the health plan industry's goal -- is to see the error rate reduced from its current 20% to 1%. For each percentage point that error rate goes down, the health system -- including physicians and insurers -- saves an estimated $777 million.

The AMA has worked, through its Heal the Claims Process campaign, to help physicians with the claims processing system. The National Health Insurer Report Card grew out of that initiative as a way to tell insurers what they can do to make things better.

That some health plans are taking steps to improve matters is a positive sign. However, a 20% error rate represents an intolerable level of inefficiency. This is even more important as health system reform is expected to add more insured individuals -- and thus more claims -- to the system. It clearly will benefit all concerned -- payer, patient and physician -- to get that rate down.