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CAQH Study Shows CORE Phase I Certification Accelerates IT Adoption by Providers and Health Plans, Cuts Administrative Costs

Industry-Wide Use of CORE Rules Could Yield $3 Billion of Savings in Three Years

Accelerated use of real-time electronic transactions, improved claims verifications, reduced claims denials and significant cost savings can be achieved by both healthcare provider organizations and health plans certified to use the Committee on Operating Rules for Information Exchange (CORE) Phase I rules. Those are the findings from a study recently completed by CAQH, a non-profit alliance of health plans and trade associations. 

Conducted for CAQH by IBM’s Global Business Services, the study assessed six CORE-certified health plans (representing 33 million covered lives) and leading provider groups and health IT vendors using the CORE Phase I rules. Key findings include:

• Health IT vendors and clearinghouses play a crucial role in accelerating adoption of electronic transactions
• Electronic verifications by providers took about seven minutes less than telephone verifications, saving about $2.10 per verification
• Provider groups working with CORE participating health plans saw 10-12 percent fewer claim denials, a 20 percent increase of patients verified prior to a visit, and higher rates of paid accounts
• Average annual reduction in administrative costs can be over $2.5 million per health plan

“As the federal stimulus seeks to be a catalyst to fund workable health IT solutions that benefit all stakeholders, CORE is a model for the real results that can be achieved by streamlining routine administrative tasks and promoting interoperability,” said Ronald A. Williams, chairman and CEO of Aetna Inc., an early adopter of CORE. “The results demonstrate that CORE is a practical solution that is already paying dividends.”

Click here to download the study's executive summary.

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RAC Claim Reviews in Healthcare—How Providers Can Prepare

By Thompson H. Boyd III, MD, FAIHQ, CHCQM, CPUR, CPHIMS

Thompson H. Boyd

Over the last 10 years, policy makers in Washington, DC have been especially challenged by soaring healthcare costs, now about 16 percent of the GNP.  

The Medicare Fee for Service Program processes over 1.2 billion claims each year.  The Office of Management and Budget in 2008 estimated there were $10.8 billion in improper payments. These were overpayments and underpayments (4 percent) involving the Medicare Program. Such calculations or error rates started as early at 2003 with the Comprehensive Error Tacking Program (CERT). 

In Section 306 of the Medicare Modernization Act of 2003, Congress authorized CMS to conduct a demonstration project, with the Recovery Audit Contractor (RAC), commencing in March 2005. The RAC retrospectively audited paid claims for a three year period. The three-year demonstration project ended in March 27, 2008 and proved to be highly successful, with $1.017 billion improper payments being corrected. The cost of the program was $201.3 million, representing an expenditure of $0.20 for every dollar collected. The RAC is paid on a contingency basis. The success of this program led to Section 302 of the Tax Relief and Health Care Act of 2006 making the RAC program permanent, throughout the United States, no later than January 2010.

Representing areas of high Medicare utilization, there were three Claim RACs: PRG-Schultz (California, then later Arizona); HealthDataInsights (Florida, then later South Carolina); and Connolly Consulting (New York, then later Massachusetts). There were two Medicare Secondary Payer (MSP) RACs: Health Management Systems (Florida and New York) and Diversified Collection Services (California).

Econometrica Inc. supported the quality assurance efforts of CMS, by assessing the completeness of data entered into the RAC data warehouse and reconciling claims with invoice and transaction data.  Sampling techniques were developed as part of the validation work. AdvanceMed Corp., serviced as the RAC Validation Contractor (RVC) and reviewed claims identified by the RAC as overpayments. Accuracy reports were issued for each RAC. User satisfaction was surveyed by the Gallup Organization in 2007 regarding the operation of the RAC during the demonstration period. Seventy-four percent of respondents found the efforts to recoup overpayments were fair.

Changes were made to the permanent RAC program. The look-back period cannot be any earlier than Oct. 1, 2007. The look-back period is not more than three years (as opposed to four years in the demonstration). All new issues a RAC wishes to pursue will require validation by a CMS review panel. To increase transparency new issues must be posted on a Web site. Each of the four permanent RACs will have a minimum of one FTE contractor medical director (CMD), coders must be certified. RACs will have to pay back contingency fees collected for denials, which are later overturned on appeal. A Web-based tool will be available for hospitals and physicians to review the status of an appeal. Annual review requests will be limited for providers. MSP reviews are not planned.

Click here to read the complete article.

And for more on RACs, see Viewpoint in this issue of Financial Edge.

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Focusing on Self-Pay Payments to Increase Revenue

By Douglas Braun

Douglas Braun

The self-payment process, covering the out-of-pocket payments for insured patients or the total payment for uninsured patients, is an area that is targeted for improvement in many healthcare organizations. By placing attention on this one area, healthcare providers can collect more payments and prevent many consumers from becoming delinquent on their medical bills.

Due to a desire to avoid offending repeat customers in good standing and a lack of payment acceptance tools, some healthcare providers quickly send 30-day and pre-collect accounts to third parties who manage both pre-collect and bad debt payments. Unfortunately, using an outside agency can increase the cost of recouping outstanding accounts.

Now, however, affordable payment tools have made it easier for healthcare providers to handle these accounts in house. These tools enable consumers to pay online on the hospital’s Web site or through customer service calls, in addition to establishing flexible payment plans. By tackling payments themselves, healthcare organizations can increase revenue by reducing expenses. Technology providers can create a customized system to fit the needs of healthcare providers who, for example, have multiple locations or want to offer point-of-service payments.

Many organizations are moving toward point-of-service payments in order to accelerate the collection of self-pay payments. While accepting co-pay at point-of-service is still popular, trends such as transparent pricing, real-time adjudication and a rise in uninsured patients create a need to accept the entire self-pay portion upfront as well. In this capacity, a point-of-service system acts like virtual cash receipts (or a cashiering service) that accepts cash, check, credit card or even payroll deductions. Attaching card swipe and check conversion readers to the cashiering service provides even more point-of-service payment efficiency. Having consumers pay in person at the time of treatment rather than billing them later makes it easier to work debt that will likely be paid before placing it with an outside collection agency.

Another innovative aspect to increasing self-pay payment collection is discounting. Discounting enables healthcare providers to offer a discount to those who pay in full and provides a financial incentive to consumers to fulfill their hospital bills in a timely manner and, like automatic payment plans, can prevent accounts from ending up in bad debt.

Using payment tools to collect more self-pay payments from consumers can help healthcare providers of all sizes—from the smallest regional hospitals to the largest multi-entity healthcare systems—to increase revenue and decrease collection expenditures.

Douglas Braun is the president and CEO of Toledo, Ohio-based Internet Payment Exchange Inc. (IPayX), a provider of electronic billing and payment (EBP) technology solutions to healthcare providers. Visit www.ipayx.com for more information.

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Automation Can Provide Relief to Slow Bleed of Issuing Checks

By Maureen Turo

The now-standard practice of collecting payments directly from patients at the time services are rendered is creating for healthcare a new and unprecedented roadblock to back office productivity and profitability: the highly manual and time-consuming issuing of refund checks.

The problem stems from today’s healthcare insurance environment, where varying co-pays; eligibility requirements; and primary, secondary and even tertiary insurance coverage combine to make it difficult to estimate patient liability upfront. As a result, duplicate payments and overpayments have become increasingly common, greatly increasing processing costs: statistics from the Healthcare Financial Management Association show that the typical “small- to medium-size hospital with annual revenues of $100 million, may generate $2 million in credit balances each year.¹ Yet, many healthcare organizations have been slow to diagnose this continual slow bleed to profitability and productivity.

While there is no way to completely eradicate the need to issue patient refunds, many of the pain points—fraud, customer confusion, exception processing—can be greatly reduced by outsourcing the process. The best solutions replace as many manual steps as possible with more efficient, repeatable and systemic electronic methods. And once an effective electronic workflow for the refund process is implemented, internal resources can be put to work on other more critical business tasks. In fact, a hospital that implements an effective automated refund process may significantly cut associated operating costs. For example, the average cost to process an invoice manually with no purchase order number is $20.39 versus $11.92 (40 percent savings) if that invoice is processed electronically, according to the Aberdeen Group.² A patient refund closely resembles a non-PO invoice.

While patient refunds are a fact of life—and will continue to be as the healthcare insurance system continues to evolve—an outsourced, automated solution can provide a workable and time-saving cure.

Maureen Turo is the healthcare market specialist within Bank of New York Mellon’s Treasury Services Department and is responsible for all aspects of product and market management within the healthcare industry. This includes ongoing market needs assessment; identifying, evaluating, and launching new products and services; and overseeing the development of appropriate marketing programs and materials to bring BNY Mellon’s healthcare solutions to the market. In addition, she has significant experience in project management and strategic planning. Ms. Turo also currently serves as president for the Medical Banking Institute's Council of The Medical Banking Project, an affiliate member of HIMSS.

References

1. Healthcare Financial Management Association, www.hfma.org, 2006.
2. AP Strategies for Success, Aberdeen Group, December 2006.

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Viewpoint: CMS’ Recovery Audit Contractor (RAC) Program

CMS continues to expand its Recovery Audit Program, which identifies improper payments (overpayments or underpayments) made on claims of healthcare services provided to Medicare beneficiaries. CMS previously awarded four Recovery Audit Contractor contracts. The four RACs are currently reviewing claims data and contracting with subcontractors to supplement their efforts. CMS recently implemented a phase-in strategy, by review type, for RAC reviews. CMS has confirmed that RACs will be operating in all 50 states by the end of this year and expects the first approved new issues to be posted this month.

We posed the following questions to our stakeholders: What challenges do healthcare providers/hospitals face through RAC claims review? How can providers/hospitals prepare for RAC audits? What are the key first steps when receiving a RAC medical request letter? How can providers/hospitals leverage their IT and software systems to support preparing for RAC audits and the auditing process?

Here are a few perspectives on the subject:

Auditing to ensure accurate reimbursement is not a new concept. Private insurers have done this for years, and there is a growing alphabet soup of Medicaid Integrity Contractors (MICs), Medicare Administrative Contractors (MACs), Zone Program Integrity Contractors (ZPICs), etc. The difference between these and Recovery Audit Contractors (RACs) is the RAC contingency fee, which incentivizes the auditors to search and identify errors.  

Errors should come as no surprise given the complexity of documentation and the shortage of qualified coders, which will be exacerbated by ICD-10. And since nearly all payment recoveries have been the result of errors, not fraud, is the program’s expansion just another reimbursement cut in sheep’s clothing? 

To avoid these cuts, hospitals should assess their RAC exposure and determine whether formal policies address the risks. Future payment criteria and screening procedures also must be in place to ensure accurate payments on a continued basis.

—Todd Halpin, Principal, Premier Consulting Solutions

From conversations we’ve had with our provider network, many are concerned about new regulations, including those imposed as part of the Recovery Audit Program. Claims processing and payment management continues to be a challenge for providers. 

While historically providers were held accountable for overpayment of claims, that responsibility will have far greater impact through RAC audits. Providers should look to technologies, some of which they may already have in place, to prevent and reconcile overpayment. Networks that facilitate real-time communication with payers arm providers with information about patients’ eligibility and benefits, payment rules and processes and can support authorization pre-certification at the time of or prior to care.

Despite best efforts, overpayments will still occur. Providers should turn to payer organizations and trusted technology partners for new solutions to track claim status and intervene in the process to reconcile incorrect claims even before they are paid.

—Peggy Denness, Director of Provider Advocacy, NaviNet

The RAC claims review process has a significant impact on staff productivity. Provider attendance at state outreach meetings will ensure accurate information. Suggested RAC process and staff roles include:

• Choosing your RAC team members
• Outlining the process, timelines and goals
• Determining elements to track and report
• Deciding how to evaluate denials and appeals

AHA surveys hospitals about their RAC experience and maintains a list of RAC solution vendors. RAC solutions for consideration should include these key capabilities:

• Gather and track all audit data
• Control and customize data fields
• Scan, store and retrieve RAC related documents
• View deadline indicators easily
• Record audited account status and changes
• Export data for use with other tools

Combining a solid plan with an effective tool will ensure a smooth RAC process.

—Kay Jackson, Financial Marketing Manager, Iatric Systems

Preparing for and responding to Recovery Audit Contractor (RAC) audits will present significant challenges for hospitals, in addition to the strain of potential fiscal losses resulting from penalties for overpayments and fraudulent claims. Given the short timeframes for responding to medical record requests and filing appeals, it is vital that hospitals proactively implement internal audits to identify high areas of risk and address potential coding and physician documentation deficiencies prior to the first RAC inquiry.

By leveraging RAC management and tracking software solutions, health systems can efficiently implement these self-audits, as well as manage the RAC audit, denial and appeal processes from end to end. An alternative for smaller facilities without internal health information management (HIM) resources is to use third-party supplemental resources to address their RAC efforts. Larger facilities may follow suit to ensure timely management of RAC inquiries, which typically correspond to the volume of patients discharged.

—Elaine P. King, Product Manager, and Mary Bessinger, Product Consultant Manager, QuadraMed Corp.

To effectively respond to and defend RAC claims within the limited timeframes allowed, many healthcare providers are turning to professional revenue cycle management (RCM) providers to locate, review and reconcile all required documentation.

To prepare for a RAC audit, organizations should appoint an in-house or outsourced response team and RAC response manager that will use a response management system with a linked document management system to handle RAC information requests, responses and deadlines. Facilities should perform preemptive internal audits with primarily rules-based engines that mimic those used by RAC to identify their high risk areas and focus on areas in need of improved clinical documentation. Also important is a deep knowledge of the complex appeals process; without this oversight mechanism, they could lose the opportunity to reverse improper RAC actions.

Finally, organizations should perfect their claims processes and ensure that their RCM partner will guarantee their RAC audit management services.

—Geoff Smyth, President, e4e Healthcare Services

Four Actions to Prepare for RAC Audits
Acute care providers can prepare themselves for RAC audits by instituting four key actions:

1. Form a RAC team. Led by the appointment of a RAC coordinator, the team will represent HIM & Coding, Patient Accounts, Utilization Review, Medical Director and Nursing.
2. Refine process and procedures. Enact the ability to find and send records in case of an audit, to find and edit claims pre-submission, and to correct procedures related to Medicare billing and coding errors. Build in remittance processing.
3. Deploy technology to manage audits. Use technology to: set up alerts and reminders of the hospital’s actions throughout the appeal process to ensure compliance and mitigate risk of future audits; keep a record of responses to the RAC auditor; perform remittance tracking, and invoice the RAC for expenses incurred for medical records.
4. Deploy proactive auditing onsite to ensure continued compliance.

— Dave Mason, Vice President and General Manager of Provider Solutions, RelayHealth

With RAC audits scheduled to be fully implemented throughout all 50 states by Jan. 1, 2010, hospitals must move quickly to begin their self-auditing process to limit the disruption and potential financial losses they will soon face. By integrating clinical, administrative and financial information systems, providers will be best able to implement an effective self-audit process that can efficiently gather, aggregate and analyze data stored in multiple locations.

This interoperability will enable them to respond to RAC demand letters and to successfully appeal negative findings within the very short timeframes allowed. Additionally, they will be able to proactively monitor coding and medical necessity compliance, reducing the likelihood that claims will be flagged for audit. Facilities should also designate a central point of contact to ensure coordination of all RAC audit-related activities.

This proactive strategy will position hospitals to minimize the RAC audit’s impact on organizational resources—both human and financial.

— Bradley Tinnermon, Director of Revenue Cycle Solutions, Eclipsys Corp.

We would like to hear your perspectives on RAC audits. Please submit your comments to Nancy Vitucci, manager, publications, HIMSS.

The inclusion of an organization name, product or service in Viewpoint should not be construed as a HIMSS endorsement of such organization, product or service, nor is the failure to include an organization name, product or service to be construed as disapproval. The views expressed in Viewpoint are those of the author and do not necessarily reflect the views of HIMSS.

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Advocacy Update: 8th Annual Policy Summit Highlights National Health IT Week

The nationwide emphasis on the role of information technology in healthcare transformation and the American Recovery and Reinvestment Act of 2009 makes this a critical time to become involved in advocating for health IT policy. Health IT advocates from across the nation will descend on the nation’s capital for National Health IT Week 2009, Sept. 21-25. Events during National Health IT Week, now in its fourth year, promote widespread adoption of health IT to improve patient safety and healthcare quality.  

The cornerstone event during National Health IT Week is the highly-anticipated HIMSS 8th Annual Policy Summit, Sept. 22-23 at the Renaissance Hotel in Washington, DC. This year’s Policy Summit features a new HIMSS Health IT “Prep Rally” on Sept. 22; participants will hear how the background of public policy initiatives has led the health IT industry to this point in the legislative process, as well as enjoy a comical sketch involving HIMSS volunteers and a networking reception. The next day during HIMSS Health IT Advocacy on the Hill and Reception, participants will put their knowledge and skills to use as they travel to Capitol Hill for prearranged meetings with their members of Congress and staff. At the conclusion of Hill visits, participants and legislators will gather for the National Health IT Week Reception, where HIMSS will present its 2009 Federal Leadership Awards.

Webinar to Prepare Participants for Events
To learn firsthand what to expect during National Health IT Week 2009 and HIMSS 8th Annual Policy Summit, sign up today for the Webinar A Mix of All the Right Ingredients: ARRA, Healthcare Reform, National Health IT Week and YOU!. This complimentary Webinar will be held Friday, July 31, from 12 – 1 pm EDT.

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Now Accepting Nominations for Board and Nominating Committee Positions

Nominations are now being accepted for positions on the HIMSS Board of Directors and the Nominating Committee. Nominees must be a Regular or Life Members or the senior executive representative of an Organizational Member who has achieved and maintained advanced membership status. Nominations must be received by Aug. 1.

H. Stephen Lieber, President and CEO
HIMSS
230 East Ohio Street, Suite 500
Chicago, IL 60611-3269
executive@himss.org

Click here to obtain further information on the advancement process and/or access the application.

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