Reimbursements and the payer–provider relationship

Healthcare is a complex, multi-trillion dollar industry that is projected to account for as much as 34 percent of the nation's gross domestic product by 2040. It involves numerous stakeholders all grappling with rising expenses, as well as issues stemming from current reimbursement processes.

Consequently, payers have started shifting from fee-for-service (FFS) to fee-for-value reimbursement models to strategically manage costs while also calling for improvements in care quality.

In this new paradigm, providers and payers will have shifting accountability—and more potential for risk. As a result, they will need to better align themselves to save overall costs and ensure more accurate and timely reimbursements. Through collaborative efforts, all stakeholders—providers, payers and patients—will have more opportunities to improve the reimbursement process and overcome many of the challenges that currently impede timely and accurate payment.

The Current Reimbursement Process

The FFS payment model has been used in healthcare for decades. At first glance it seems rather simple: The patient visits a provider; the provider offers care; the provider submits a claim to the payer; the payer remits reimbursement. Look deeper, however, and you'll find that providers commonly experience obstacles that delay proper reimbursement.

For instance, if information is inaccurate or completely missing on a claim, the provider must then submit additional or corrected information to the payer. This means the provider often waits an additional cycle to receive payment. Likewise, the appeal process to overturn a denied claim is often lengthy, delaying payment further.

Another problem is over- or under-charging for services. This can occur because providers inaccurately report the level of care for appointments in their evaluation and management (E & M) coding or do not apply their negotiated rates for respective payers. Whether intentional or not, this can be a costly and fraudulent mistake. If inaccuracies like these persist over multiple cycles, it can cause organizations to be performance outliers compared to their peers, making expenses increasingly difficult to recover.

From the payer's perspective, systematic difficulties and inefficiencies can cause inaccurate or delayed payments. For example, although likely a temporary hiccup, the recent shift to ICD-10 has created a few bottlenecks for payers and providers. Plus, because the payer environment is still largely dependent on legacy platforms designed to support FFS payment models, many systems don't have proper mechanisms in place to process today's claims efficiently.

In addition, unlike FFS, fee-for-value reimbursement models require more thorough clinical documentation of care over the long term, thus producing more work and contributing to reimbursement delays and complexity.

The Impact: Providers vs. Payers

For providers and payers alike, mitigating incomplete or inaccurate claims is costly as it requires additional, labor-intensive work on both ends. For instance, a study by the Medical Group Management Association found that it can cost as much as $25–30 to rework a single claim, translating to $13,200 per year for some hospitals.

From a provider's perspective, however, when payers don't remit accurate payments in a timely fashion, providers lose that revenue and experience significant disruptions in their cash flow. If payment inaccuracies or delays are excessive or recur, it can greatly impact a provider's viability over time.

Yet, there is even more at stake. For instance, consider the significant impact that reimbursement issues can have on patient satisfaction. When claims are delayed or denied, and the patient has to follow up with either the provider or payer, it can be extremely frustrating and reflect poorly on both parties.

With all of the complexities involved, each stakeholder must consider adopting strategies and best practices to help eliminate unnecessary costs, protect revenue and enhance patient satisfaction.

Strategies for Providers

Providers can begin by adopting revenue cycle management (RCM) tools that leverage predictive analytics to improve their financial clearance. More specifically, they must use analytics to proactively manage claims that are likely to be denied and make corrections to inaccurate or incomplete claims before they're submitted to payers.

They can also use predictive analytics to evaluate and improve their coding practices, ensuring charges accurately capture the care provided, including not just ICD-10 specificity, but also levels of care in E&M coding that appropriately reflect exams performed or treatment provided. Where gaps are identified, billing staff should be educated so they are aware of appropriate codes and use them consistently.

Providers can also use data, benchmarks and feedback provided from payers to change behavior within their organizations and avoid being outliers.
By being proactive and using data to drive behavior changes, providers can make it easier for payers to remit expeditious payment by submitting accurate and complete information.

Strategies for Payers

From the opposite end, payers can leverage RCM applications using providers' data to predict how claims may be submitted. This enables them to be transparent with providers by sharing this information and allowing them to see how they're performing compared to their peers.

Payers can also proactively help providers identify specific behaviors and patterns, particularly in areas where they are outliers, and prescribe solutions to resolve potential issues prior to reaching the adjudication process.

For example, a large national payer recently focused on mitigating excessive or abusive coding practices for Evaluation & Management levels of care. The payer identified approximately 17,000 physicians that were possible outliers among its 240,000 providers. These providers were coding at levels 4 or 5 in 80 percent or more of their office visits. Leveraging analytics and targeted communications the payer was able to pinpoint and highlight aberrant coding practices within this subset of physicians. Instead of using costly investigation and audit resources, the payer communicated directly with affected providers via phone and mail to inform the provider of their outlier coding practices. Using a collaborative approach, the payer saw over 99% of the 17,000 providers positively modifying their coding practices, generating significant savings for the payer and reducing cash-flow and administrative burdens for the provider.

Take a Collaborative Approach

As the healthcare industry continues to grow in complexity, costs are expected to rise accordingly. A true collaboration between all stakeholders is necessary in order to develop a long-term strategy for success.

Although providers and payers traditionally have not seen eye-to-eye, by adopting and leveraging RCM technology, data analytics and new methodologies as part of a cooperative approach, providers and payers can collaboratively help reduce costs and unnecessary rework by correcting mistakes before they reach the adjudication process. In turn, these strategies can help accelerate payments while providing valuable transparency between segments—ultimately improving the patient experience while protecting the bottom line.

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.​

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