'Pay and chase' fades as insurers seek revenue integrity

With about seven percent of all public and private health insurance claims paid incorrectly, insurers have a ways to go, beyond traditional models, if the healthcare spending crisis is to be reined in.

Private insurers historically were apt to raise premiums to cover rising healthcare inflation and, like Medicare, to "pay and chase" incorrect claims. But that may not be sustainable for much longer.

One sign that insurers are trying to tackle both high healthcare costs and improper claims is the rise of directors or vice presidents of cost containment, as Paul Vosters, COO of the consultancy Discovery Health Partners, pointed out.

"You didn't see that five to seven years ago," said Vosters, the co-founder of Discovery Health's parent company, LaunchPoint.

Healthcare cost inflation is a national problem, shared by everyone in the industry and those being served by it, patients and consumers, and thus it's a shared responsibility in terms of solving it in the long-term.

But incorrect payments are largely confined to insurers, who suffer the consequences of lost revenue by paying claims that, say, should have been covered by auto insurance, or by losing Medicare Advantage reimbursement due to erroneous eligibility information with the Centers for Medicare & Medicaid Services' mandatory insurer reporting (or section 111) files.

Rise of 'payment integrity'

With provider upcoding and demand for healthcare services bound to continue, Vosters argues, payment integrity is one area where insurers can start to make a large difference.

To do that, some new information technology approaches, if not all out upgrades, may be in store.

"Most large payers are using legacy claims systems and have more than one," Vosters said, recalling one large national plan that's using 36 different claims software systems.

"The massive data integration challenges that there are are always going to create payment integrity issues," said Vosters, a native of Belgium who has spent much of his career in the U.S. working on data warehousing and claims analytics for Blues and large national plans.

Discovery Health Partners' payer clients still rely on pay and chase for a while before being able to put in pre-review and automated adjudication systems, Vosters said.

Auto-adjudication is still very much in its infancy for health insurers, though.

"When people say auto-adjudication, it can be very different," Vosters said. "One payer said they had 98 percent auto-adjudication, but when I looked, they had a manual process to clean the claims up first."

Industry-wide, Vosters estimates that about 80 percent of claims are automatically adjudicated, while 20 percent still require manual adjustments before they can be useful.

Still, some automated adjudication systems can also bring errors that claims adjusters can spot, Vosters said. "I've seen numbers as high as 12 percent of the auto-adjudication claims paid incorrectly."

To get to accurate auto-adjudication that can reduce the need for recoupments, a system-wide review of internal claims data and CMS's section 111 files can help spot errors, especially erroneous or incomplete Medicare eligibility data, that can make the data ready automation.

Commercial plan data is usually quite accurate, Vosters said. Most of the problematic data are from Medicaid beneficiaries, who may often fluctuate between eligibility, and especially from Medicare.

"Section 111 files are loaded with errors, but CMS accepts that," Vosters said. "If there is something that should be done, it's more around CMS putting in controls on how eligibility can be changed. Also CMS should maybe not use Section 111 as the real eligibility," he argued.

Until that happens, pay and chase may remain as a main mountain insurers have to summit before moving onto other heights of reform and innovation.