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6 Worst Payer Trends That Impede Electronic Medical Billing Software and Service Performance
Healthcare insurance business continued to boom in 2006, mostly at the expense of both providers and patients. A review of recent healthcare insurance industry trends help identification of six payer activities that will impact medical billing and healthcare providers revenue in 2007.
Two key aspects dominated business background for insurers in 2006. They
- Must meet tougher profit margin benchmarks. For instance, United Healthcare saw its earnings rise 38% in the 3rd quarter of 2006 alone. To keep its share value growing, United Healthcare will have to demonstrate still better performance in the 3rd quarter of 2007.
- Approach the limit of their ability to grow premiums. Premiums increased significantly beyond inflation and workers’ earnings growth in 2001-2006. For instance, health insurance premiums increased 65.8% between 2001 and 2006 while inflation grew 16.4% and workers’ earnings increased 18.2% during the same period.
Therefore, in 2007, insurance companies will continue to pay less using the following six key strategies:
Add new denial reasons and increase costs of medical billing service and software because of growing complexity. In January 2007, thousands of physicians discovered they were having trouble getting Medicare to pay for services billed under the codes 99303 and 99333. The reason for denial was simple: Medicare deleted codes 99301-99303 from CPT in 2007, forcing the physicians to review the new 99304-99306 codes in an up-to-date CPT code book. The 99331-99333 codes also were deleted in 2007. Review the new codes, 99324-99328.
The payer-related component of the medical billing process costs an average 8% to 10% of providers collections. It includes claim generation, scrubbing, electronic submission to payers, payment posting, denial identification, follow up, and appeal. By complicating the process, payers increase the likelihood of failing the payment and winning the subsequent appeal process. Providers face the lose-lose choice of expensive medical billing process upgrades or forfeiting denied payments.
- Reduce allowed fees. Average physician reimbursement from billing Medicare and commercial payers dropped 17% in 2002-2006. From 2005 to 2006, allowed amounts for E&M visits alone dropped 10% nationally, 27% in the Northeast, and 20% in Northwest.
- Underpay. Partial denials cause the average medical practice lose as much as 11% of its revenue. Denial management is difficult because of complexity of denial causes, payer variety, and claim volume. For complex claims, most payers pay full amount for one line item but only a percentage of the remaining items. This payment approach creates two opportunities for underpayment: the order of paid items and payment percentage of remaining items. Additionally, temporary constraints often cause payment errors because of misapplication of constraints. For instance, claims submitted during the global period for services unrelated to global period are often denied. Similar mistakes may occur at the start of the fiscal year because of misapplication of rules for deductibles or outdated fee schedules. Payers also vary in their interpretations of CCI bundling rules or coverage of certain services.
- Increase leverage over providers through consolidation. It is harder to drop a contract with low allowed amounts when there are fewer remaining payers. Consolidation in the insurance industry reduces competition among payers for physician’s services, allowing payers pay less to providers. Today, 73% of insured population are covered by 3 plans alone: the top ten health plans cover 106 million lives, while three plans, namely, United, WellPoint, and Aetna together cover 77.7 million lives. In 2006, consolidation rate accelerated. For instance, United Healthcare Group purchased 11 plans in 2006, including MetLife, PacifiCare, and Oxford. Turning down a contract offered by a payer that controls such a large portion of population results in giving up significant revenue from medical billing. Providers face the lose-lose choice of seeing fewer patients or accepting lower rates.
- Drive providers into networks (which offer lower allowed amounts). United Healthcare has announced a new national policy to discontinue direct payment of medical billing to out of network providers. Effective July 1, 2007, under the “pay the enrollee program,” United Healthcare will direct out-of-network benefit checks to the insured member rather then non-participating providers. This policy forces the providers to choose between chasing the patients for payments or joining the payer’s network. In any case, provider loses some of earned revenue. Oxford Health Plans, a United Healthcare Company, implemented the Pay the Enrollee policy on April 1, 2006. According to the Oxford web site announcement, Oxford may refuse to honor the assignment of benefits for claims from non participating providers pursuant to language in the Certificate of Coverage. If enrollees choose to receive treatment out-of-network, the claim reimbursement may be sent directly to the enrollee. In such cases, the non-participating provider will be instructed to bill the covered patient for services rendered.
Return for refunds and penalties. Justice Department recovered a record of $3.1 billion in refunds and penalties in 2006. It is the largest amount ever recovered in a single year. Invariably, providers are in denial about their exposure, and insurers are quick to comfort them. They will tell you that medical billing audits are an unfortunate but necessary tactic for keeping fraud in check, implying that honest providers have nothing to worry about. But insurers are not crusaders for truth and justice. Providers need to understand that payer’s motive is money, the means is a gargantuan statistical database, and that every provider is an opportunity. Healthcare finance insiders call this a Big Brother system and, setting aside the melodramatic implications of such a name, it is easy to see why. While executives have a soft spot for pretty charts, the true power of such a system is its ability to drill into the data and find outliers (when they talk about this type of tool, Information Systems specialists use jargon like data mining and On Line Analytical Processing, or OLAP for short). The system automatically pinpoints providers that are “easy audit targets: because they are:
- Doing something differently from the pack,
- Lacking infrastructure for systematic denial follow up,
- Lacking compliant medical notes.
Having acquired the means to cost-effectively target providers, insurers have begun the hunt. It behooves providers to arm with powerful electronic medical billing software and fight back for improved revenue.
- Neil Weinberg, “Envy Engines,” Forbes, March 14, 2005
- “Fraud Statistics – October 1, 1986 – September 30, 2004”, Civil Division, U.S. Department of Justice, March 4, 2005
- Capra, Lirov, and Randolph, “The “Business” of Healthcare Provider Audits – How Payers Are Getting Away with Practice Murder,” Today’s Chiropractic, January 2007, pp. 60-62.
- P. Moore, “Power to the Payers – Consolidation Puts Insurers in Charge,” Physicians Practice, January 2007, pp. 23-30.
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