Claims Leakage and the Path to Avoidance

All managed care organizations must operate a high-performing Claims Management. With strict medical loss ratios (MLR) as required by healthcare reform, timeliness provisions, payment accuracy, and constant regulatory requirement changes, covering operating costs pose significant challenges. Cost containment whereby eliminating excess, leakage and waste must be top priority.

The environment is rapidly changing. It doesn’t mean that healthcare will be less complex—indeed, probably the opposite. These changes must be properly evaluated, managed and monitored with a focus on cost control. Claims spend is the main expense for many organizations. As customer expectations, competition and regulatory burdens crunch margins, eradicating claims leakage is critical. Throughput and efficiency are key performance data measurements. Organizations need processes and systems that minimize costs while delivering a high-quality claims experience. Rather, operational silos, as well as ineffective and disparate systems across multiple products lines cause many issues.

What is Claims Leakage?

Claims Leakage is defined as the difference between the actual claim payment made and the amount that would have been paid if more practical claim payment controls had been in place.

Claims is a key driver to a couple of very critical components of your revenue. Everyone is aware of claims as it relates to MLR, but equally important is how the claims data impacts revenue in the forms of HEDIS measures and Star Ratings (year to year composite score). As a component of MLR on the costs side — this drives benefit design; if your medical costs are lower than 85% you need additional benefits. HCC (hierarchal conditions categories) are assigned risk adjustment factors — missing claims information (leaking) could result in diminished Risk adjustment scores — same thing as with HEDIS and Stars — missing claims information means less performance in Stars measure and HEDIS.

Leakage equals wrong payment that went out the door. Bottom line, it can cause you money and rework.

Examples of leakage include:

• Inappropriate benefit design, including member cost sharing
• Inaccurate provider pricing and reimbursement methodologies design and updates
• Missing claims and encounter data
• General configuration issues: Edit rules, duplicate check, NCCI (national correct coding initiatives) and auto-denial/pay rules
• Minimal data scrubbing: The number 1 and 2 causes of claims leakage is inaccurate membership information and inaccurate provider information.
• Lack or poorly designed MUEs (medical unlikely edits), coding and mapping issues, including CPT, modifier guidelines, HCPCS, ICD-9/ICD-10, and all UB04 institutional coding
• Upcoding — billing for higher level of services while lower level services were
• Claims submitted by bogus providers
• Pharmacy claims: Appropriate payment allocation of Medicare drug coverage: Part D versus Part A or Part B payments

How does it stop?

The path to avoidance and some best practices are as follows:

• Develop a strategy in enhancing claims quality control and oversight activities.
• Implement quality control auditing through pre-payment auditing reviews.
• Develop and generate focused exception reports of where the leakage dollars are
• Invest in strong post-pay detection technology to achieve cost avoidance savings.
• Develop and implement automated and sophisticated algorithms:
  • Scale
  • Claims Check and Edits
  • Focus on the 5% of the financial leakage

Execution of these best practices and automating each procedural step of the claims cycle results in accurate claims resolution. Monitoring operational performance helps continuously track and trend claims inputs and outputs.

Proven Strategies to Plug the Leaks

Optimize your organization’s operational performance, requiring coordination across people, processes and systems. Align and take a holistic integrated view, end-to-end, when monitoring operations.

Leaks don’t occur because we plan them. They happen because we fail to plan to address them.

Resources

GHG Operational Performance Group includes some of our industries most experienced and proficient claims subject matter experts. Our consultants can help your organization implement best practices in claims cost containment. Contact us today to get started >>

When it comes to financial reconciliation and overall membership data management, you must protect against leakage. Need help staying ahead of the CMS reconciliation process? GHG will access your member premium revenue, accounts receivable and CMS revenue reconciliation. Visit our website to learn more >>