Archive for November, 2013

When it comes to claims processes things are not always what they seem

Having been on the front lines of claims vendor management for a number of years, I will be the first to attest that things are not always what they seem.   As much as insurers would like to commoditize many aspects of the claims procurement process, the reality is that vendor selection is far from simplistic. 

From subrogation and salvage to legal counsel and private investigators, there is often a temptation to shoot for the lowest price.  But is the lowest price really the lowest price?  Rather than focus on price, the focus should be on the ultimate net cost.  Perhaps nowhere is this more evident than on the medical bill review front.

This aspect of claims is critical, as it provides both first and third party adjusters with the ability to more accurately assess true medical costs and necessity than by traditional means.   Medical indemnity is often a point of leakage, and medical bill review is arguably the best front line defense against excessive treatment and deceptive billing practices. 

From a claims perspective, medical bill review can be leveraged on the first party side to maximize insured benefits while controlling costs and adhering to any applicable fee schedules.  On the third party side, it is critical to identify excessive and unrelated treatment and procedures.   The question for any carrier is how best to leverage this process to optimize results at the lowest true cost. 

A key consideration with any claims process ultimately comes down to pricing.  There are a number of claims vendors that provide this service, with wide ranging prices and costs that often aren’t fully transparent or understood. 

It is often said that the devil is in the details, so doing important up front legwork can save a lot of money in the long run.   The most important aspect of pricing is not what the vendor is quoting, but what the carrier will actually pay.  

Consider the analogy of buying a house.  There is the sales price, which turns out to be a fraction of what the buyer really pays once interest, lender fees, point buy downs, title insurance, PMI, property tax, broker fees and other tangible costs are factored in.   All in all, the net cost of buying a $300,000 house can easily be doubled or tripled over the life of the loan.

While a low price for bill review may sound enticing, what is actually included in the review?   Are there additional fees for data capture and reporting?  What about bills that aren’t legible if the vendor is using OCR technology?  How much adjuster time will be spent in send back queues?  Is there a looping process involved where bills get scanned, and charged, multiple times?  These are all critical questions that can ultimately drive “loss leader” type pricing to be significantly higher than vendors who provider total transparency in pricing. 

A subsequent component of medical bill review is that of PPO networking capabilities.  There are a number of PPO networks available, but gaining access to them can be both challenging and expensive.  When leveraging a bill review partner, it is key to understand both the depth and breadth of network capabilities including both market penetration and bill savings potential.  

Companies such as Mitchell International’s Auto Casualty Solutions goes so far as to not only tier networks to optimize savings, but includes such features as NHQ, a direct to provider negotiation services that often finds savings with out of network providers. 

Beyond the basics of bill review and networking, what type of support, escalation and disaster recovery is available?  Is there adequate reporting to isolate trends down to the adjuster level?  Are there other products and services that can be bundled creating a singular, and arguably more cost effective, end to end claims solution?  Does the potential business partner have a commanding footprint in the industry enabling them to provide trends reports and analysis against which your organization can benchmark internal and external results?

The key for any product, bill review or otherwise, is to leverage the highest possible quality at the lowest possible net price.  By factoring in costs that are often lost in translation, it often becomes evident that the lowest price really may not be the lowest price. 

This is also true for quality!  In the world of bill review a critical metrics include accuracy and exception rates.  In other words, what percentage of bills presented could be processed versus those put into a send back queue that ultimately requires carrier resources to sort out.   When presented with a vendor statistic, such as 95% accuracy, it is important to look at whether this is bill detail or field detail.  Quite simply, there are many fields within medical bills. Consider the example of 100 bills with 1100 critical fields in total.  If there were errors on 25 bills, the accuracy rate would be 75%.  If there were errors on 25 fields, the accuracy rate would be 97.7%.  It is very important to understand this critical crosswalk and focus on business partners who can provide the highest level of bill accuracy, as field accuracy is not a good indicator of probable success.

Beware of the self-referral model, often an industry loss leader.  This approach offers very attractive bill review fees, but limited features which requires a high percentage to be pended to expensive nurse or peer review to make up for technology gaps.  The net cost to carriers is significantly more in the long run. 

With ICD-10 upon us, one of the most crucial considerations is having a business partner that invests heavily in R&D.   Remember, more is not always best when it comes to cost containment.  Rather, success is derived from a unique blend of accuracy, compliance and the ability to effectuate settlements versus litigation. 

In any industry, in particular claims, leaders gain their position by leveraging people, processes and technology.  Herein lies the challenge for decision makers in a society that has over commoditized many products.  Let’s face it, some people will drive miles out of their way just to save a penny or two on a gallon of gas.   But if the cost of driving the extra miles exceeds the few pennies saved, was that a wise decision? 

This is also a valid consideration on the claims front.  Those who have taken their organizations from ordinary to extraordinary have seen that investment in quality ultimately results in the lowest net cost to the organization.   As quality guru Edward Deming espoused, “Vendors should not compete for your business based upon price alone.  Analyze the total cost to you, not just the initial cost of the product.  Use single suppliers for your needs as quality relies on consistency.  The less variation you have in the input, the less variation you’ll have in the output.  Look at suppliers as your partners in quality.”

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Christopher Tidball is a Casualty Claims Consultant with Mitchell International and the author of multiple books, including Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary and Blocking & Tackling:  The Playbook for the Winning Claims Organization.  He is a veteran of the claims industry and provides claims solutions to a wide variety of industry leading organizations.   To learn more, please visit www.christidball.com or e-mail chris.tidball@mitchell.com

 

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November 13, 2013 at 12:08 pm Leave a comment


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Chris Tidball is a claims and revenue management consultant and author of the "20 Essential Rules" series of self and organizational improvement books. You can ask him a question at chris@christidball.com

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