How Payment Accuracy Enables the Transition to VBC


Payment Accuracy is essential to reducing administrative costs, optimizing fee for service, and enabling the transition to value-based care.

Perspective | Amy Larsson
VP Clinical Claims Management Solutions


We’ve all seen the trends that describe the rising costs of healthcare; we’re all interested in reducing these costs, while at the same time improving the quality of care.

Promoting payment accuracy is one of the most important strategies that providers and payers can take to help rein in costs and increase consumer satisfaction. The fewer the number of claims to be analyzed, audited and reworked, the lower the administrative cost for the entire healthcare system, and the less friction there is among providers, payers, and consumers.

This approach is more important than ever. Today’s healthcare consumers are being asked to take on new and increasing levels of financial burden and participate as true partners in their care—a task for which they may not be prepared. According to research conducted by Change Healthcare, we’ve seen an 11% rise in out-of-pocket costs in 2017 alone. One in six Americans have past due medical bills, 27% of families delay care due to cost, one in three GoFundMe campaigns are for medical bills, and three in 10 consumers report having been sent to collections due to unpaid medical bills.1

The question is: how can we make the whole process more accurate and efficient—especially as the industry continues to move toward value-based care and outcome-based payment models?

Inaccuracy is driving costs up for everyone involved. Rework for a single claim can cost the payer, provider, and hospital. Waste exists at every step of the payment cycle, but significant leakage occurs upstream. The earlier you can catch leakage in the payment cycle, the more cost that can be driven completely out of the system. As a result, payment accuracy strategies need to evolve.

Past approaches have focused on retrospective, post-payment audits of leakage that recoup the overpayment, but at a high administrative cost that dilutes the savings. Additionally, provider abrasion is high as payments are taken back. Recent approaches focus on prospective, pre-payment detection and prevention, which address the leakage prior to payment and thus, reduces the rework and cost associated with post-pay audits. When this approach provides transparency and defensible denials/adjustments, provider abrasion is reduced.

However, modern approaches focus not just on catching the leakage. Rather, the focus is on preventing leakage altogether with pre-emptive, pre-claim submission prevention. This approach seeks to avoid denials/adjustments and can significantly reduce the provider friction. Additionally, when pre-emptive, prospective detection, and retrospective audit processes are in place working in tandem, administrative costs are minimized and fee for service payment accuracy is optimized.

In addition to reducing administrative costs and provider friction, payment accuracy strategies that optimize fee for service can pave the way to valuebased care. Insights garnered throughout the payment cycle aid in the process of identifying opportunities for and operationalizing value-based care.

Let’s take a closer look.

The History of Coding

History provides insight. The coding system for medical procedures that providers use today to submit claims has its roots in what originally was a simpler reporting system. Procedural-based coding wasn’t invented to be the basis of a payment system; it was originally introduced to standardize terminology and reporting. In 1983, the HealthCare Financing Administration (HCFA), now CMS, adopted Current Procedural Terminology (CPT) the reporting standard for physician services for Part B Medicare claims, which has become the industry standard under the Health Insurance Portability and Accountability Act (HIPAA).

It’s the main source of communication between providers and payers as providers for medical claims payment.

That worked, to some degree, when healthcare services were based solely on fee-for-service models. But in the last few years, additional factors have come into play in terms of value-based and bundled services—and payment.

Take the example of a knee replacement. A physical therapist may submit a claim for physical therapy services and would expect a payment for the services from the payer. However, if the member was being managed under a bundled payment arrangement, the physical therapy services were included as part of the comprehensive bundled payment arrangement that went to the administrator of the program. From the payer’s perspective, they need to avoid paying for the same service twice, one under the FFS arrangement and again within the bundled payment. If an audit reveals that discrepancy, the payer may ask for some of the money to be returned. And that leads to friction between the two parties.

Avoiding Abrasion

A system that promotes automation and transparency would avoid the knee-replacement individual service double-payment in the first place. The more providers and payers are aligned on policies and contract terms, the fewer the number of payment inaccuracies–and the fewer the number of audits that inevitably follow. Paying the claim accurately the first time through the provider and payer systems will avoid the rework and create timely payment for providers and consumers.

When you have a collaborative partnership between payers and providers, there are fewer inaccuracies. The result is less provider abrasion through lower administrative costs for both providers and payers. Payments to providers occur more quickly. The result: fewer delays all around.

With payment accuracy, there are fewer reconciliations of money paid to providers by payers then subsequently returned, and fewer reworkings of claim denials that ultimately get paid. Patients and members participate in a system with reduced costs and more timely reconciliation of the member’s financial responsibility–and with more time for better outcomes and less time focused on administration. This correlates directly with the goals of value-based care, which focuses on effectively linking payments to better outcomes.

Transparency Through Automated IT Systems

But how do we get there? The opportunity lies in promoting more automation and transparency through the use of automated healthcare IT systems that take into account business rules and contracts between payers and providers. These business rules include terms and conditions that exist to define the reimbursement approval process.

There are three best practices that underpin payment accuracy:

  1. Providers and payers must define and structure contract terms to facilitate automation
  2. The medical and payment policies must be transparent and structured for automation
  3. The revenue cycle and claims payment process should automate the contract and policy rules as early in the payment cycle as possible

Payers can employ automated systems that use business rules to apply, accurately, contract terms with providers. For their part, providers have information as early in the payment cycle as possible to apply the payer-specific rules. It’s all done in a more transparent manner within the providers’ and payers’ workflows.

So instead of denying the claim after it has been paid–often because of an audit–a more transparent system would guide the provider to alert them to a discrepancy within the coding guidelines or the contract: “Hey, you may want to look at this claim again because it may be inaccurately coded.” The process can fix inaccuracies and errors prior to claim submission.

Providers and payers could structure contract templates and payment policies in a way that the approval and payment process is automated as much as possible. This helps as payment systems increasingly are called upon to embrace valuebased models. Modern IT systems automate both value-based and fee-for-service payments. This, in turn, manages the increasing complexity of healthcare services.

The Role of Artificial Intelligence and Machine Learning

The entire provider-payer process becomes even more accurate as the industry adds innovative technologies like artificial intelligence (AI) and machine learning to payment systems. With AI, payers and providers learn about the trends that lead to inaccurate claims and payments.

When information goes back to the provider–based on large data sets about trends in procedures, coding, or payments-there’s a greater push toward more accurate claim filing and payment. When the payer educates the provider about a particular trend, more information for each individual claim is exchanged up front, far earlier in the cycle. This intelligence can alert providers that there is a potential for a claim denial and giving them the opportunity to correct the claim prior to submission.

For instance, AI and machine learning might point out inconsistencies in the way a chart or a claim was coded. Or the two technologies might help by focusing on at-claims, in order to reduce the volume of record requests so records are only requested where there is a high likelihood that there is an error on the claim.

The key is not to let the volume of data overwhelm providers or payers. The fact that there is so much information can be viewed not as a burden, but as an opportunity. Using AI and Machine Learning to mine the data and leveraging the outcomes in the payer and provider workflows will work to increase the transparency between payers and providers, leading to more accurate claim submission and payment.

Education, Busting Silos, and Payment Accuracy

As the healthcare industry continues to embrace value-based models, education becomes a powerful tool. It’s a means of sharing results, outcomes, cost, and payment data. It’s being able to say: “Here are the potential opportunities where you can improve outcomes and reduce costs.” Payment incentives and outcomes become more aligned.

And that leads to an industry that’s less siloed than it is today. Payment accuracy leads to an industry with better connections and more alignment of benefit plans, clinical delivery, payment policies, payment arrangement, and payment systems. Today, most value-based payment systems still rely on the underpinnings of the fee-for-service systems. Provider budgets, incentive payments, and bonus structures are still based on the FFS claim-submission process. Accurately paying claims in the FFS services while coupling with new payment models creates integration needs between fee-for-service and value-based payment systems. New data elements including codified clinical results will need to be introduced into the payment process to pay based on outcomes. The more integrated and flexible– and the more accurate and up-to-date contract and policy business rules are within IT systems–the greater the opportunity.

The transition to value-based care becomes more seamless. And the provider-payer relationship is characterized by collaboration, rather than friction.

And most importantly, that means our industry can spend more resources on serving the healthcare consumer.

1 Change Healthcare, Healthcare Consumer Insights: Financial Care

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