Reimagining Post-Payment Audit and Recovery

Summary 

Discover how advanced analytics can identify claims most likely to have been paid erroneously, helping to reduce audits and maximize recoveries. 

Whitepaper | Dave Cardelle, RPh, VP,
Payment Integrity, Change Healthcare

Whitepaper | Kathy Turnell, RHIT, Senior Director,
Payment Accuracy, Change Healthcare

Claims Audits Evolution

Before addressing the problem, it's helpful to look back on how the industry got here. In the 1970s, hospital bill audits were the primary type of audit conducted by payers to recover overpayments and drive better payment accuracy. But such audits then were just a peripheral process in the healthcare industry. There were no audit experts, and there was no automation or formal technology. Audits were conducted primarily by nurses with a compliance or utilization-review focus.

And as each decade passed, healthcare reimbursement contracts and reimbursement methodologies, along with the procedures being billed, all have become more complex. Such changes have come about largely due to technological advancements in treating patients. As a result, payment errors have multiplied.

The types of audits required to ensure reimbursement accuracy has expanded in tandem with these technological advancements, reimbursement complexities, compliance or regulatory requirements, and the overall increase in the utilization of all healthcare services.

The Centers for Medicare and Medicaid Services (CMS) is the largest payer in the country. As such, commercial payers often follow the leader when determining how to focus their audit and recovery efforts.

These changes have created the audit industry we have today, one that is required to cover a wide variety of new payment methodologies. Those methodologies include fee-for-service discounts off billed charges, DRG reimbursement, case rates, per diems, exclusions terms, pass-through terms, and unique contractual carve-out agreements.

An academic level 1 trauma center with 500+ staffed and licensed beds increased its MVA collections by partnering with a vendor for third-party coverage advocacy. The center reduced its average billing cycle time for these claims by more than 21 days, and realized $7 million in annual savings.

Complexity Rising

These new, more complex reimbursement methodologies, negotiated between providers and payers, necessitate the need for payers, or their auditing agents, to use dedicated clinical and coding experts to evaluate and regulate the new level of payment accuracy the methodologies require.

In addition to the contractual changes that led to the more complex reimbursement methodologies, the healthcare industry also went through a major change in how the diagnosis and procedure codes tied to reimbursement would be reported. For provider billing, the ICD-10 codes are assigned by a coder, who reviews the physician documentation within the medical record for each diagnosis or procedure during a patient’s visit or hospital stay.

ICD-10 enables greater precision but also adds complexity. One wrong digit can cost a provider or payer tens of thousands of dollars. As we approach the 2020s, the stakes continue to rise. Of the $390 billion in claims that CMS paid in fiscal year 2017, $36 billion was remitted in error, according to RAC Monitor.

Seeing the potential to recoup more overpayments, commercial payers augmented their auditing operations by hiring more audit vendors. Payers even began building expected recoveries into their financial projections, creating pressure to increase payment recoveries.

Going further in efforts to increase recoveries, many payers stack audit solutions and use five or six vendors to help identify overpayments among the same batch of claims. Each audit vendor may quickly flag for audit numerous claims from a given provider, leading to a deluge of medical records requests.

Of the $390 billion in claims that CMS paid in fiscal year 2017, $36 billion was remitted in error, according to RAC Monitor.

Costly and Abrasive

Providers then find themselves devoting more and more time and staff resources to internal audits, and to managing and responding to external audits.

These trends generate towering waves of post-payment audits and recoveries—waves that ultimately inundate the inboxes of dismayed providers. Whether medical records are on paper, or on CD or in electronic form, it’s expensive for providers to retrieve and transmit them to fulfill what is often a multitude of payer requests.

The administrative burden is doubled when a provider must review and potentially dispute audit results. The inevitable consequence is further provider discontent, which can make future contract negotiations more difficult.

“When audits reveal a pattern of high-cost outliers or noncompliant billing, providers are at a bargaining disadvantage,” writes Lisa Eramo in AHIMA Journal.

An experienced health IT vendor focuses on developing a payment accuracy strategy that leverages a cohesive set of solutions targeting each phase of the payment process. Solutions that help to identify and rectify errors before, during, and after the claims process are key.

But we know that no matter how effective we can be early in the payment process, there will always be claims that require auditing—and incorrect payments that need to be recovered.

Current trends generate towering waves of post-payment audits and recoveries—waves that ultimately inundate the inboxes of dismayed providers.

A Collaborative Approach is Needed

Other audit approaches rely on examining a vast array of medical records, expending cost and effort that result in minimal savings. Using innovative and proprietary technologies can help payers quickly and efficiently hone in on the highest potential cases to audit. This means fewer audits for providers, while still maximizing savings on incorrectly paid claims.

In addition, working collaboratively with providers to address the audit and recovery process can help to protect the important payer-provider relationships.

For example, when it is necessary to review medical records, sending the requests to the provider in consumable volumes and in a more predictable and consistent cadence makes it much easier for providers to handle.

Providing audit results and details that are clearly stated and specific to each finding, including appropriate references and supporting rationale, can help the internal auditor more quickly validate the audit findings. It also is helpful when the provider is offered an opportunity to respond to the audit and engage in the process—in advance of any recovery or financial offset being initiated.

Providing audit results and details that are clearly stated and specific to each finding, including appropriate references and supporting rationale, can help the internal auditor more quickly validate the audit findings.

A Next-Generation Approach

The claims continuum is dynamic and influenced by a variety of factors. An audit vendor that is expert at gathering and analyzing the data to uncover insights from the post-pay environment can help to facilitate process improvements earlier in the cycle, resulting in increased savings, maximized effectiveness and reduced risk of provider abrasion.

With advances in technology, advanced analytics and machine learning now can be used to alert providers to potential audit claims. Importantly, this gives them the opportunity to review the claim and make corrections in the pre-submission phase and avoid many audits.

Extending the opportunity for providers to review potential errors within their billing workflow, before an audit is initiated, is a compelling new option that many providers have appreciated. It has helped them restore some control over the volumes of traditional audits they are challenged with every day.

Ultimately, payers are driven by the need to ensure better payment accuracy, but they also acknowledge that there is an important need to reduce the total number of audits required. The goal for payers is to perform necessary audits and recover overpayments as efficiently as possible, with minimal provider abrasion.

Working with an experienced and respected technology vendor (like Change Healthcare) can help payers find comprehensive payment accuracy solutions that are right for them to help meet all the increasing demands of the payment process.

The goal is for payers to perform necessary audits and resolve overpayments as efficiently as possible, with minimal provider abrasion.

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