It’s the perfect time to evaluate your payment integrity technology

For many health plans, payment integrity is able to influence the bottom line in powerful ways. For payment integrity organizations (sometimes called cost containment), the new year is the perfect time to evaluate what has been working well and what can be done better and more efficiently. And often payment integrity technology is one of the areas that could use improvement. Payment integrity is traditionally a lower priority for IT support than core groups like Claims and Finance and as a result technology challenges arise including multiple sources of data, conflicting or inaccurate data, data integration challenges, manual workflows, multiple reporting systems, and on and on.

But creating a technology environment that can support payment integrity functions, whether that is claims recovery, subrogation, coordination of benefits, DRG, or others can bring IT and business managers together in their thinking. I recommend a “Payment Integrity Reference Architecture” that shows how payment integrity systems (such as recovery, case management, and reporting tools) integrate with enterprise IT to provide the backbone of a technology-enabled, data-driven payment integrity organization.

In a later piece I will describe this architecture more in-depth, but as you reconsider your technology environment and consider adopting a new Payment Integrity Reference Architecture, you will see  four specific layers of payment integrity technology emerge: Payment Integrity Services, Data and Analytics Services, Database Management Services, and Infrastructure Services.

The Infrastructure Services layer consists of foundational technology components that support all areas of the business and that are managed by corporate IT (includes networking, security, archiving, storage, and more). It’s important that this layer exists, but it is not directly relevant to the payment integrity discussion.

The next layer of our recommended Payment Integrity Reference Architecture is the Database Management Services layer. This layer contains data from internal groups and external partners – data that payment integrity groups need to use for their business processes. Some of this data will reside in core health plan systems, such as Finance, Claims, Enrollment, Pharmacy, and others. This layer usually consists of a corporate data warehouse that makes this core data available for all areas of the enterprise. From there, the data may flow into functional data marts, which allow for more flexibility to slice and dice data for functional analyses. As payment integrity functions mature within some plans, this layer may also include a Payment Integrity Hub, which establishes a system to coordinate recovery services across internal departments and external vendors in real-time.  The hub also provides visibility into work-in-progress for operations and forecasting.

Data and Analytics Services follows Database Management Services and refers to the technologies that help analyze, share, and report data. Within this layer are the analytics used to identify potential overpayments, duplicate payments, other party liability, other health insurance, etc. – opportunities to avoid or recover costs. In more mature organizations, this will include advanced analytic tools that look across diagnosis codes, dollar amounts, member histories, and many other data points to identify more potential recovery and savings opportunities.  This layer should also have reporting functionality.

The Payment Integrity Services layer includes the technologies that are specific to payment integrity functions.  Ideally, these tools should be relevant and useful across any area of payment integrity, whether coordination of benefits, subrogation, overpayment recovery, or others.  These are the tools that help automate some of the tedious or difficult tasks involved in payment integrity (for example, case identification, work assignments, work prioritization, and letter generation). They bring the automation, consistency, efficiency, and transparency that are cornerstones of a mature payment integrity function.

Throughout the evaluation process, keep in mind that your enterprise payment integrity efforts will benefit from technologies that can be used across payment integrity functions. For example, most payment integrity activities hinge on member eligibility information.  The goal should be to capture this information once and use it across all areas of payment integrity (and even with other areas, such as Claims and Finance). Likewise, a single Case Management tool should be able to service coordination of benefits as well as subrogation and any other area of payment integrity, so there is no sense in building or buying multiple versions of this functionality. For more detailed information, watch for my next published article, “Enterprise Approach to Payment Integrity Technology: Reference Architecture.”  Additionally, if you would like to gauge where your organization falls on the technology and data maturity model, see our blog “Enterprise Approach to Payment Integrity Technology: Using A Payment Integrity Maturity Model.”





John BairIt’s the perfect time to evaluate your payment integrity technology
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Transforming payment integrity with transparency

As the healthcare industry continues to transform, it has become clear that the need for increased transparency is one of the critical drivers of change. Health plans are being asked to share more information with a broad range of stakeholders in an effort to control costs and drive improvements in efficiency. In the context of payment integrity, increased transparency will enable health plans to enhance processes, increase performance, and transition from recoveries to pre-payment cost avoidance.

Payment integrity has traditionally lagged behind other areas of health plan operations because of the complex mix of internal teams and vendors supporting payment integrity initiatives. With no single owner of these programs, it is difficult to identify common data standards and metrics. This situation leads to a fragmented and inconsistent reporting environment, which limits visibility into program delivery and performance across the organization.

Discovery Health Partners not only embraces this trend toward transparency, we’re developing solutions that lead it.  We view transparency as a cornerstone of our solutions and a central component of both our product strategy and client delivery. We are committed to providing our clients with tools to analyze, evaluate, and manage the delivery of their payment integrity solutions. The key to our strategy is the Discovery Dashboard, a powerful reporting and analysis solution that puts meaningful information at our clients’ fingertips.

We believe the right dashboard solution will give health plans transparency and visibility into their complex payment integrity ecosystem via an integrated web-based solution. It must be able to:

  • Rapidly incorporate data from third-party vendors or internal systems
  • Utilize terminology and data elements that are consistent across solutions
  • Apply the clients’ own language and business structure

A dashboard should also give business users the ability to define their own information perspective and organize data by business unit, funding source, division, or region.

Of course, the best solution will complement technology with deep experience and expertise in payment integrity – taking payment integrity data, reporting, best practices, and metrics, and incorporating them into reporting templates.

To build the Discovery Dashboard, we have worked closely with our clients to identify what is important to them and their organizations. The Dashboard includes a suite of pre-defined standard reports for each solution area, as well as a report-writing tool for generating custom reporting. With our Dashboard, the previously opaque process of payment integrity solution delivery is now visible in detail. Business users are able to evaluate the performance of their payment integrity initiatives, monitor trends, identify outliers and root causes, and take corrective action. Users can also easily drill down from high-level performance analysis to examine case-level detail. Most importantly, health plans have the power to evaluate all of their payment integrity initiatives and drive real improvements in performance.


Paul VostersTransforming payment integrity with transparency
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The right eligibility data management solution

Last month, we identified how eligibility data errors may be undermining your health plan’s payment integrity efforts. Certainly there are many factors to consider when correcting erroneous eligibility data, but the bottom line is this: in order to maximize payment integrity outcomes, health plans need a single, accurate, trusted source of eligibility data.

It sounds simple enough, but, like many health plans, you may be left wondering how to begin addressing this issue.  Although you may already have a team of talented, hard-working individuals, navigating the complex world of eligibility data can be much easier with an experienced partner and a proven service solution.

Let’s take a look at some of the critical components an eligibility data management service solution must have to help maximize recoveries and drive ongoing cost avoidance.

Comprehensive data mining

Accurate eligibility determinations require the seamless integration of data from multiple resources, along with powerful data mining capabilities to identify potential issues. This means your vendor will help you proactively identify more instances of other coverage by utilizing every available, relevant data resource.

  • Examine your health plan’s commercial coverage claims and eligibility information
  • Validate leads, determine primacy, and update eligibility for all other data sources including data-match vendors, Section 111 reporting, MSP files, and provider bills

A proven process

The right solution leverages a proven process to identify potential cases, investigate the appropriate data sources, and correctly apply the NAIC rules to determine primacy. The process should be built on transparency between you and your vendor so that you have insight into each step and a clear understanding of the expected and actual results.

Superior analytics

The right solution relies heavily on advanced analytics to determine primacy and make eligibility decisions. However, the analytics engine needs to be flexible enough to accommodate your plan’s specific data sets and needs. Your vendor should work with you to understand your current data, identify the largest opportunities, and create a strategy and approach that address your plan’s specific priorities.

Transparent reporting

The right solution isn’t a black box. You and your team should have full visibility into your vendor’s performance. A standard report package should include eligibility update and inventory reports that allow you to see progress on a weekly and monthly basis. But, you should also have the ability to customize report content and frequency to meet your plan’s specific needs.

Dedicated partnership

The right solution isn’t from a vendor at all, it’s from a partner. Align your plan with a partner that is dedicated to improving your busi­ness processes and your bottom line. Their team should complement yours in their knowledge, approach, and experience. And their results should be proven, referenceable, and demonstrable.

Addressing eligibility data management can seem like an overwhelming or impossible task among all of your other competing priorities. However, fixing these data errors can eliminate downstream impacts to your payment integrity programs that are likely costing your plan millions of dollars. Next month, we’ll show you just how big those impacts can be in our blog post that will highlight the results of implementing a service solution like the one we’ve described above.


For more information…

Would you like to learn more about Discovery’s payment integrity solutions and how they can help you improve recoveries and premium restoration? Just complete the quick survey below for more information and custom demos.



Paul VostersThe right eligibility data management solution
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The eligibility impact: How and why eligibility data issues affect payment integrity

Over the last two months, we’ve examined how organizational and technology structures can keep health plans from recognizing, understanding, and resolving their payment integrity challenges. This month, we want to spend a little time examining one thing that can be at the root cause of some of those challenges: eligibility.

Eligibility issues impact a multitude of payment integrity areas, including Coordination of Benefits and Medicare Secondary Payer validation, and, to a lesser extent, Workers’ Compensation, Other-Party Liability, and Subrogation. In fact, Discovery Health Partners’ research indicates that approximately 30% of payment integrity costs are driven by eligibility errors. In addition to the financial cost of payment integrity errors, eligibility issues can also have a direct effect on member satisfaction. Claims that are declined due to inaccurate or out-of-date eligibility data can lead to member abrasion and lost market share.

At their core, these issues all stem from the fact that health plans lack a single, definitive resource for making eligibility status determinations prior to paying a claim. This creates tremendous downstream issues as health plans make business decisions and pay claims based on flawed data.

The complex structure of health plans means that member eligibility is updated at multiple points in the claims payment process and is managed by multiple departments across the organization. As a result, it’s often inconsistent, outdated, or inaccurate, and leads to improper claims payments. Until plans are able to establish a single source of the truth for eligibility, these inaccuracies can cost plans millions of dollars. Let’s examine a few of these challenges more closely:

Multiple data sources

The sheer number of data sources feeding the master eligibility file has a significant impact on accuracy. Information comes from the members, providers, CMS, data-match vendors, and other data sources. These feeds are all subject to their own timelines, standards, and information challenges. In addition, these external feeds to eligibility status have a high rate of change, creating a complex hierarchy of overlapping status updates. Plans are challenged to manage these work processes and make a clear determination of primacy and eligibility that can support all of the transactions that rely on this data.

Organizational challenges

The eligibility challenge isn’t just technical, it is also frequently organizational. Eligibility is commonly managed by line of business, meaning that status updates made by one group are not necessarily shared across the organization. For example, changes in a member’s eligibility status might not be effectively communicated between the commercial and government lines of business as the member moves from commercial to Medicare Advantage coverage. With no clear owner of the member eligibility status, managing the data across departments adds an additional level of complexity.

Existing solutions

In addition to being spread out across different departments, responsibility for managing eligibility status is shared by several administrative systems. Plans often make the mistake of addressing eligibility in a single point solution, rather than taking an enterprise view of member eligibility management. Claims and enrollment systems often fail to address eligibility on a consistent transactional basis, and frequently capture crucial updates in notes or text format. Eligibility data is rarely shared between systems, and because there is no single data master, the priority of status changes is unclear.

Looking to the future…

Health plans have the opportunity to dramatically improve their payment integrity performance and member retention by managing member eligibility as a business asset. The ideal solution will provide a complete and integrated picture of eligibility status across membership types and lines of business, while providing validated data for downstream applications. Doing so will require a shift in culture, as well as new technologies. Nonetheless, there are strategies that let you achieve progress in a staged progression, which we will explore in future posts. Managing eligibility data as a strategic asset is worth the effort, as it will result in millions of dollars in recoveries and cost avoidance.



For more information…

Would you like to learn more about Discovery’s payment integrity solutions and how they can help you improve recoveries and premium restoration? Just complete the quick survey below for more information and custom demos.



Paul VostersThe eligibility impact: How and why eligibility data issues affect payment integrity
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Discovery discuss payment integrity solutions at ACAP CEO Summit

Annual gathering addresses challenges facing Medicaid managed care plans

ITASCA, IL (June 8, 2015) – Discovery Health Partners, a division of LaunchPoint, will participate in the annual Association for Community Affiliated Plans (ACAP) CEO Summit June 15 – 16 in Washington, D.C.  The annual invitation-only meeting of community health plan executives is ACAP’s signature event for Medicaid-focused health plans. It brings together leaders of Medicaid managed care plans, policymakers, and other thought leaders in healthcare to discuss common challenges and highlight best practices in Medicaid.  Discovery Health Partners, an ACAP Preferred Vendor, offers solutions to help health plans, including commercial, Medicare and Medicaid plans, achieve control and transparency over their claims payment integrity operations.

“Achieving and growing profitability is becoming increasingly challenging for Medicaid and Medicare plans today,” said Paul Vosters, president and chief operating officer, Discovery Health Partners. “We are pleased to discuss best practices with ACAP and its members for tackling the payment integrity challenge. By helping plans look across their payment integrity activities, we can identify opportunities to maximize recoveries and revenue through improved payment integrity processes, such as subrogation, Medicare Secondary Payer, and other cost containment practices.”

ACAP is a national trade association representing 59 not-for-profit Safety Net Health Plans in 24 states. Collectively, ACAP plans serve more than twelve million enrollees, representing more than 50 percent of individuals enrolled in Medicaid-focused health plans.

About Discovery Health Partners

Discovery Health Partners offers the Discovery Payment Integrity SuiteTM of software and solutions to help health plans and other healthcare organizations improve recoveries, avoid costs, and optimize revenue. We offer a unique combination of deep healthcare expertise and powerful technology solutions to help our clients drive improved payment integrity and generate measurable results. Discovery Health Partners is a division of LaunchPoint, named the 100th fastest-growing company on the 2014 Inc. 500 list and #14 in Healthcare. LaunchPoint operates businesses that provide cloud-based analytic solutions, software, and services for healthcare organizations.


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To learn more about Discovery Health Partners and our solutions, please visit one of our resource pages or complete our contact request form to speak with a Business Development Director.

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Discovery Health PartnersDiscovery discuss payment integrity solutions at ACAP CEO Summit
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Lack of information transparency and benchmarks hampers the payment integrity organization

By Bill Whittemore, vice president of Ajilitee, Discovery Health Partners’ sister division


In my last blog post,  I discussed some of the challenges healthcare payers face related to their lack of transparency into recovery performance results at a program level. In this post, I’d like to dive deeper into the problems caused by lack of transparency into payment integrity performance and how we have seen organizations successfully deal with these challenges. If your payment integrity organization is plagued by manual reporting processes, multiple versions of the truth, and analysts spending the majority of their time gathering data versus performing value added analysis, then this post is for you.

Insufficient transparency and recovery performance reporting

Transparency is rapidly emerging as a key issue for healthcare payers. Internal payment integrity stakeholders require transparency related to payment integrity recovery performance results in order to be successful.

Healthcare payers frequently rely on manual reporting to manage payment integrity, using tools like Excel and Access, which don’t provide automated reports or interactive dashboards that allow them to see recovery performance by recovery area and vendor on a timely basis. This situation often leads to issues including multiple versions of the truth, difficulty in forecasting future recoveries accurately, and decisions based on intuition versus facts. In addition, there are no widely accepted industry benchmarks available by recovery area, which makes it difficult for payers to know how they are performing related to their peers.

As part of payment integrity performance reporting, comparisons of actual to target recovery performance by recovery area is needed (e.g. COB, subrogation, provider audit, Medicare Secondary Payer, etc.). Target recoveries by area should be based on well-established industry benchmarks that consider the line of business along with state and federal laws. Industry benchmarks should provide recovery targets as a percentage of the total medical claims expense along with year-over-year trends over a minimum period of several years.

Payment integrity reporting should include additional reporting transparency in the following key areas:

  • Cost avoidance that includes tracking specific cost avoidance recoveries that includes COB, contractuals,  benefits, etc.
  • Work inventories by recovery area including current status, recovery value estimates, and prioritization
  • Revenue performance including expected versus received revenue
  • Internal staff and vendor performance tracking
  • Productivity reporting including updates, time in process, time to outcome, aging, and backlogs
  • Vendor performance including goals, cost, and service level agreement tracking

A comprehensive payment integrity dashboard will show the recovery results along with their respective targets with visual indicators to see how each measure is performing against their targets at-a-glance. There are filtering capabilities by line of business (e.g., Medicare Advantage, Commercial, Medicaid, etc.). The payment integrity dashboard should be designed to be used by the general workforce as effective dashboards should be easy to understand and use. The displayed data should be automatically updated without any assistance from the business user. The frequency of the update will vary by organization and by purpose, but operational payment integrity dashboards should have data updated on at least a daily basis.


The payment integrity organization frequently has many challenges related to the need for increased transparency. Transparency is required to understand the overall program level performance needed to make improved, fact-based decisions and to take the necessary actions needed to improve performance. To meet the reporting challenges, a self-service, interactive dashboard reporting environment should be created that will allow the payment integrity business users the ability to see how they are performing against industry benchmarks at-a-glance.


For more information…

Would you like to learn more about Discovery’s payment integrity solutions and how they can help you improve recoveries and premium restoration? Just complete the quick survey below for more information and custom demos.





Discovery Health PartnersLack of information transparency and benchmarks hampers the payment integrity organization
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Silos and insufficient technology challenge the payment integrity organization

By Bill Whittemore, vice president of Ajilitee, Discovery Health Partners’ sister division


Several months ago, I wrote a blog post discussing the challenges that cause health plans to lose money on their claims payment integrity programs. In this post, I’d like to dive deeper into the problems caused by insufficient technology and dispersed payment integrity operations.

If your organization is plagued by manual integration of recovery results and fragmented financial reporting, then this post is for you.

Technology and data silos

The “technology” supporting most claims payment integrity organizations is a proliferation of spreadsheets and local databases. Consider that often times, payment integrity groups in a health plan overlap by line of business (e.g., Commercial COB, Medicare COB, and Medicaid COB) with multiple payment integrity areas (e.g., coordination of benefits, subrogation, claims review, etc.) using multiple technologies and spreadsheets to execute their business processes and collect payment integrity data.

The variety and proliferation of payment integrity databases that are not integrated with one another causes expensive redundancy, inaccuracy, and data inconsistency issues, which lead to a lack of business trust in the data. No single operational or reporting database houses all of the enterprise-wide payment integrity information, including claims, member, eligibility, and provider data. As a result, there often is major confusion about “what the data means” – multiple answers to the same question. The business does not have access to business definitions for entities and attributes – this is an issue that needs to be addressed.

Fragmented member eligibility data

Dispersed eligibility data – an essential input for any payment integrity process – only exacerbates the problem. Healthcare payers receive data that impacts a member’s eligibility from multiple sources. This information is typically not well-organized, and it is not uncommon to see a payer with eligibility information stored in many different systems, which are often siloed by line of business. The challenge is there isn’t a single version of the truth for eligibility data, which is a requirement for making primacy and payment determinations. The eligibility data that is available is accessed via multiple business functions within the organization without regard to who owns the data. There is typically limited data governance and no evidence of active data quality management. Many payers don’t have enough time to proactively address these eligibility data issues, resulting in:

  • Excess costs from ad-hoc patient requests
  • Lower autoadjudication rates
  • Claims overpayment
  • Manual work associated with non-standardized appeal processes
  • Improper mandatory reporting

Manual processes

As a result of fragmented and prolific data sources, the volume of data and transactions is too great for the current payment integrity staff to manually synthesize data from reports, file extracts, spreadsheets, and other sources. Time that should be spent performing analysis is being consumed by manual data integration, reporting, and forecasting activities. Data is many times updated monthly or weekly versus daily. Additionally, payment integrity organizations frequently have many manual processes that they execute along with paper handling – with IQ letters for example. The ordering and coordination of processes across business departments that handle overpayments is difficult to keep up with on a manual basis using spreadsheets.

Insufficient transparency and financial reporting

Likewise, payment integrity organizations frequently rely on manual reporting using tools like Excel and don’t have automated reports or self-service interactive dashboards that will allow them to see recovery performance by recovery area and by vendor on a timely basis. This situation also makes it difficult to capture and track productivity metrics related to how the payer’s internal recovery teams are performing.  The reporting that is available as a rule is oriented more towards the payer executives and perhaps middle management versus what is needed on a day-to-day basis to run an efficient payment integrity organization.

Payment integrity forecasting, like reporting, is also typically done on a manual basis using spreadsheets. Trusted historic data that is needed to develop an accurate forecast may not be available, making it very difficult to forecast accurately based on historic results and trends.


In the throes of healthcare reform, health plans are being asked to do more with less – to work smarter and more efficiently across all functions of the organization. The current situation for many payers leads to an unnecessary reliance on claims recovery – which creates more work and more cost. Payers that manage payment integrity-related data more strategically across their organizations will be in a stronger position to understand the overall performance of payment integrity operations and to improve the outcomes of those operations. In upcoming blog posts, we’ll discuss technology and solutions to help payers overcome these challenges.


For more information…

Would you like to learn more about Discovery’s payment integrity solutions and how they can help you improve recoveries and premium restoration? Just complete the quick survey below for more information and custom demos.





Discovery Health PartnersSilos and insufficient technology challenge the payment integrity organization
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Organizational complexity within health plans leads to claims payment integrity challenges


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.















Discovery Health PartnersOrganizational complexity within health plans leads to claims payment integrity challenges
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The real cost of the payment integrity challenge

Clearly healthcare is the most interesting and dynamic sector in the U.S. today. We are witness to an unprecedented transformation as healthcare stakeholders embrace new delivery entities and new reimbursement models, shift attention to building relationships with members, and explore new markets. There will be winners and losers in this game, and everyone is placing their bets.

The transformation underway is also forcing payers to prioritize where they are spending their money, and more attention is shifting to a corner of the ecosystem that has been neglected:  the efficiency of the billing transaction process between payer and provider, what we term healthcare “payment integrity,” or to state it more accurately, the lack thereof. As one speaker at AHIP Institute said, “there’s a lot of money changing hands for no apparent reason.”

Payment integrity ensures that a health claim is paid correctly—by the responsible party, for eligible members, according to contractual terms, not in error, and free of wasteful or abusive practices. As every payer and provider knows, determining whether a claim has been paid correctly requires departments full of claims analysts, auditors, and investigators.  And that’s the problem!

What is the cost of this waste and inefficiency?  The Institute of Medicine, a well-respected independent think tank, estimated that 30% of health spending in 2009—$750 billion—was wasted on unnecessary services and care coordination problems, excessive administrative costs, fraud, and other failures.  Focusing on payment integrity specifically, this included $190 billion in wasted administrative cost and $75 billion in fraud.  Earning wide coverage in media such as the NY Times and elsewhere, this report called for a system-wide reform.

More recently, an April 2012 study by Donald M. Berwick, former administrator for the Centers for Medicare and Medicaid Services (CMS), and RAND Corporation analyst Andrew D. Hackbarth estimated that five categories of waste consumed $476 billion to $992 billion, or 18 percent to 37 percent of the approximately $2.6 trillion annual total of all health spending in 2011.  This data suggests a problem of staggering proportions.

We estimate for healthcare payers that payment integrity problems cost them 3-7 percent of their paid claim dollars every year. That means, for example, a 500,000-member health plan with costs averaging $3,600 per member per year will pay $1.8 billion in claims, of which $56-131 MM will be wasted expense.  This hidden leakage is a problem not just for the payers (and their providers) who bear the direct cost of this administrative inefficiency.   It impacts the employers who underwrite the cost of group insurance, members who now shoulder more of the cost of care, and the economy at large as healthcare costs continue to consume more of our GNP.

Improved payment integrity is essential to a real healthcare transformation.   It is also a hidden source of funding for payers that could be put to work to enter new markets, engage with members, and tackle the challenges of reform.   It won’t be easy, and it won’t happen fast, but it is possible, as we’ll explore in future posts. We’ll examine how everything from technology to organizational structure can have a positive impact on payment integrity as we explore best practices, client case studies, and proven solutions. Stay tuned!













Discovery Health PartnersThe real cost of the payment integrity challenge
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