Improved Medical Billing is a Path to Lower Healthcare Costs
Posted by: Carl Mays II in Education, tags: EducationAn underappreciated source of today’s high medical care costs is the medical claim adjudication process that is employed by commercial payers. The current process is intentionally fraught with unnecessary hurdles and pitfalls that save the payers money by lowering the amount they reimburse physicians and facilities. Well designed medical billing processes from medical billing companies and medical offices can eliminate the profitability of the current adjudication process and streamline the entire insurance reimbursement process.
Although the issue of claims processing is mentioned as one of the sources of rising healthcare costs, the true economic drivers that are keeping the current inefficient and opaque processes in place has not been well explored. The fact of the matter is that the current process prey’s upon the technology, process and staffing limitations of most physician offices to take money from the physicians and give it to the payers. The result is rising costs and following revenues for the average medical provider.
The tactics used by payers to save money (and drive up the cost for medical practices to operate a medical billing process) include: Underpaying over 10% of medical claims, “losing” submitted claims on a regular basis, and constantly changing the rules by which they decide if claims are actually payable. If the provider’s medical billing process is not technology savvy, well designed and properly staffed then over 20% of the practice’s revenue can easily be lost to these tactics.
Payers have strong incentives to utilize these tactics to lower their costs. More than 50% of the claims that are underpaid or lost by payers are never pursued by physicians and facilities. Since the payers can save significant money by losing claims and accidently underpaying they have strong motivation to make the billing process difficult.
The payers ultimately lose money on providers that catch the payer’s mistakes and pursue the claim. It cost the payers about $25 each time one of these watchful provider’s medical billing specialist calls the payer and speaks to a live person. To mange this cost, they payers have a system in place to make sure they pay the diligent practices properly while continuing to lose claims and underpay less watchful practices. They payers do this by grading each practice. If you are watchful you receive an A. If you are not catching the payer’s errors you receive a F. A’s are paid well. F’s are not paid well.
So, how do all of these facts tie lead to the conclusion that better medical billing processes can lowering the cost of healthcare? If each and every underpaid or lost claim is pursued (which is what a well-designed medical billing process should do) then eventually payers will lose all economic incentive to play games and make the medical billing process complicated and expensive.
If every medical billing company and every billing department relentlessly pursued each claim then the insurance companies would see their costs rise and be forced to revisit their strategy. They would be hit by the double sided sword of increased payouts to providers (since the tactics would only slow down payments not eliminate them) and increased cost of adjudicating claims (since all of those medical billing specialists are sitting on the phone costing the payers $25 per call).
Real-time claim adjudication, where a payer adjudicates the claim while the patient is in the physician’s office, is a goal that has been frequently described as being “just around the corner.” This goal will never be reached while the balance of power between payers and providers is so skewed in the favor of the payers. Once each provider is rated an “A” and the payers are no longer able to use their superior size and technology to under pay providers, a truce can be achieved. It is from this truce that a true real-time, low cost medical billing system can emerge.
Copyright 2008 by Carl Mays II
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