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Healthcare Payer Audits: How Accurate Are Claim Payments Processed by Your Organization?

Beau Fidler, Managing Director Healthcare Payer Practice Leader
Whitney Kingsolver, Associate Director Business Process Improvement Healthcare Payer Lead

Each year, healthcare payers spend untold hours correcting errant claims, draining critical resources that could be used more profitably elsewhere. While payer organizations may be conducting reviews and employing payment integrity vendors to solve pieces of the problem, many are still falling short, as improper payments in the aggregate have not significantly improved over time. In fiscal year 2022, for example, the Centers for Medicare & Medicaid Services (CMS) calculated more than 5 percent of Medicare Part C, or some $11.4 billion, were improper.

Beyond the extra cost and time associated with reworking claims, improper payments increase the risk of creating abrasion among healthcare entities – from payer organizations upstream to the provider and, ultimately, the patient downstream. Since healthcare is highly regulated by both state and federal agencies, improperly processed claims or failure to pay them in a timely manner may invite unwanted scrutiny, fines and other non-compliance penalties levied by CMS and other regulators.

Audit solution

For payer organizations that want to reduce or avoid claim rework, provider abrasion and fines or increased regulatory scrutiny, the solution seems easy enough – simply pay claims correctly. But getting to that point is difficult. Payers must first identify errors, track them to the root cause and implement an effective solution to prevent future errors. That requires a periodic and detailed audit of the claims process, whether it is a relatively straightforward professional claim or a more complex institutional claim.

Performed correctly, audits provide payer organizations with valuable insights into the quality of their claims process. Depending on how they are administered, audits can review claims processes broadly or can be customized to test specific claim populations and attributes. They also can evaluate and identify claims adjudication problems prior to issuing payments to prevent mistakes and minimize pay-and-chase efforts.

Formulate an audit strategy

When developing an audit strategy, payer organizations should pursue a holistic approach that is timely and ensures accuracy. That means focusing on the entire payment continuum beginning with the date a member enrolls in a plan and walking through the entire upstream-to-downstream claims process to identify gaps.

Payer organizations that fail to collect the right data to audit against will fail to audit the claim correctly. Thus, any testing strategy must begin with provider contracts, benefit plans, government agency contracts and other source documents to provide the audit foundation.

Initial audits typically uncover and remediate numerous shortfalls. But the testing process should not be considered a one-and-done event. Ideally, audits should be conducted periodically throughout the year. For example, it is important to test claim processes with each new plan year, when benefits have likely changed, to minimize financial impact and provider/patient abrasion.

As audit procedures mature and the more easy-to-resolve errors dwindle, payer organizations can refine their audits to target more complex or specific claim oversights.

While many payer organizations depend on payment integrity vendors to find specific claim errors, the scope of these service providers is typically focused on maximizing contingency fees. Unlike a holistic audit approach that emphasizes accuracy, payment integrity services do not dig into configuration errors, business decisions, provider contracts, regulatory requirements or the nuances of customized benefit plans.

Audit techniques

Crafting an audit strategy culminates with choosing testing methodologies, any of which will be dictated by a payer’s needs, circumstances and goals. The following strategies provide payer organizations with flexible and robust testing capacity.

Data analytics

Data analytics allows payer organizations to scale testing from a sample of claims to an entire dataset for one or more products, such as Medicare Advantage and commercial plans, to identify trends and anomalies and then pinpoint root causes more prospectively. This method is particularly effective in testing claims that are auto-adjudicated. It includes discovering and resolving configuration errors that often arise beginning on a specific date when new fee schedules or federal rules are issued, as well as uncovering and resolving training or performance issues that produce errors in manually processed claims.

Robotic process automation (RPA)

Integrating RPA within claim auditing or claim quality can enable a higher magnitude of claim process coverage and produce high-quality results by reducing potential for human error. These “bots” are specifically built to significantly speed up repetitive, time-consuming processes normally tasked to employees. Bots can quickly audit thousands of healthcare claims by verifying allowed benefits against the Medicare or Medicaid logic, extracting fragments of claim details from various sources for consolidation into a single output file, and compiling claim metric information from web-based dashboards. Overall, the reduction in labor delivered by RPA not only accrues directly to return on investment, but also increases operational efficiency by freeing up staff to work on tasks that add more value to the organization.

Manual audit

Given the complex nature of the healthcare industry, manual audits are required in cases where the complexity of the claim is outside the scope of what data analytics and RPA can reveal. Manual audits are most suited for end-to-end testing of a select population sample, but they also can be effective in identifying more cryptic errors.

In most cases, payer organizations will use all three of these methodologies to conduct claim audits, sometimes in combination. Reporting tools like Microsoft Power BI and Tableau can be incorporated into the audit architecture to provide visualization of results and summarize findings.

Claim inefficiencies and errors across healthcare payer organizations is nothing new, as evidenced by CMS annual reviews. As the healthcare landscape continues to rapidly evolve, the frequency of improper claim payments will only increase, causing further costs to be incurred, regulatory scrutiny, and abrasion for providers and patients. For payer organizations seeking to enhance the quality of their claims process, audits can dramatically reduce error rates and create more efficient operations that will benefit all stakeholders.

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