In their ongoing efforts to manage costs and improve profits, many health plans are turning to the area of claims payment integrity, where plans are finding opportunities to reduce annual claims expense by millions of dollars. Despite the compelling business case for payment integrity, many health plans find that organizational challenges often mask these opportunities and limit their value.
Our nation’s claims payment system is highly complicated, which results in incorrectly paid claims and the need to spend more money and resources recovering those dollars. Over time, this has resulted in the growth of numerous groups to address issues such as subrogation, coordination of benefits, overpayments, etc. In many health plans, these groups operate completely independently of one another, which can lead to even more loss and inefficiency. Health plans that manage claims payment integrity at a more strategic level – looking across all payment integrity disciplines – are best suited to root out those inefficiencies and improve the bottom line.
Enterprise view of payment integrity yields big results
In a recent blog post, we discussed the real cost of the payment integrity challenge, which for payers, boils down to 3 – 7 percent of paid claims dollars at risk each year. Without a holistic view of payment integrity, a variety of problems persists, which for many plans, leads to a continued focus on claims recovery at the expense of cost avoidance.
Small improvements can make a big difference, but it requires a different vantage point than most health plans have today. Last year, a 2 million-member health plan set a goal of improving its claims expense from 1.4% of medical expense to 2.0% of medical expense – a small change, but one which resulted in a projected reduction in annual claims expense of $40 million. These savings were identified as part of a cross-functional review of all payment integrity areas to measure results and identify program improvements.
Similarly, a smaller health plan with about 130,000 members performed a cross-departmental examination, and discovered $2.1 million in additional recoveries from coordination of benefits and subrogation. In both cases, the charge was led by executive-level managers who were able to garner the required participation and support.
By shifting their view of payment integrity to an enterprise level, these plans discovered some very typical problems that negatively impacted their financial outcomes and required cross-functional oversight to resolve. Some of these include:
- Speed vs. accuracy: organizational focus on paying claims quickly rather than correctly results in a cycle of recovery.
- Incorrect eligibility: without a single, accurate source of eligibility data that can be shared across payment integrity disciplines, claims errors persist.
- Insufficient IT support: lack of IT support leads to proliferation of disparate systems, inconsistent data, manual processes, slower recoveries, and a lack of insight across payment integrity functions.
- Lack of transparency: inability to measure results and set enterprise-wide targets limit an organization’s ability to optimize recoveries and cost avoidance in the future.
Organizational considerations for payment integrity focus
The correct path to create an enterprise view of payment integrity depends on a number of factors, including the organization’s size and maturity. For smaller or newer health plans, a single executive with payment integrity oversight might make sense. We’ve seen this mainly with COOs and CFOs, and increasingly with directors of cost containment or payment integrity.
Naming a single executive in charge of payment integrity for a large health plan (for example, 3 million members or more) could be difficult because of the sheer scope of the task as well as long-standing organizational structures. In this case, a few executives may share the charge. Either way, collaboration across departments is key to success.
Regardless of the approach, the best strategy is to take the enterprise view and put in place the organizational structure to own it.