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From the June 2004 Issue |
Bridging the Gap Major Michigan providers team up with the Detroit area’s largest health plan to reduce claims denials and identify other ways each side can save time and money. By Karin Lillis, Managing Editor Hospital CFOs continually feel the pinch of shrinking healthcare dollars and the pressure from tight operating budgets. A group of chief financial officers from seven major Detroit area healthcare systems knows this especially well. Constantly driven by the need to thicken the bottom line, the CFOs began to examine areas where their systems were losing money. They didn’t want to significantly change existing technology structures or allocate more resources to IT equipment. Rather, they searched for ways that minor adjustments in practice, policy or technology could free funding for their hospitals.
What started as an informal sit-down among area CFOs soon turned into a major collaborative. The CFOs quickly identified that claims denials sidelined dollars that the healthcare systems could allocate for other resources. Management of rejected claims became the first challenge the group would tackle. It then enlisted the aid of Capgemini, a New York City-based healthcare and technology consulting firm, and eventually approached Blue Cross Blue Shield of Michigan (BCBSM) to participate in a revolutionary initiative. Capgemini Vice President Stanley Sleight and Tom Biggs, senior associate director of operations and support services at the University of Michigan Health Systems, met with senior-level executives from BCBSM and gained their endorsement. “At first they were hesitant. The hospital CFOs weren’t sure whether it would work because they couldn’t quantify the cost to them to rework a claim. They challenged Capgemini to do a cost analysis of what it really cost the hospital to work rejected claims,” says Biggs, one of the collaborative’s founding members. “Once the data analysis and quantification of opportunities was completed, all parties became completely engaged in the process.”
Expanded Boundaries
For the provider, the loss from claims denial is evident: Every dollar hung up in the submission process means less tangible revenue for the hospital. For the payer, the drawbacks might initially be harder to spot, but they do exist in provider/member inquiries and reprocessing costs. While it costs virtually nothing for the health plan to reject the claim, subsequent inquiries do result in tangible costs on the payer side. “Any time a patient gets a claim denied, the hospital may bill the patient, causing inquiries to the payer and additional hassle for the patient. The insurance company then has to handle more calls from patients and providers,” Sleight says.
For instance, the original seven-member hospital group indicated that it had some 2 million in claims billed in 2001 and 340,000 of those rejected—17 percent of total claims sent to BCBSM by the member hospitals. According to the hospitals, approximately 100,000 (or 30 percent of the denied claim volumes) eventually were paid by BCBSM; however, it cost the hospitals $2.7 million to rework these claims. The remaining 240,000 of those claims were reimbursed by other payers or not at all. Individually, it costs a hospital $27 to rework a denied claim, according to the collaborative’s estimates. Neither side wanted to launch any initiatives that would require major information systems reprogramming or other significant changes, Sleight says. Rather, efforts focused on policy and procedure adjustments, and minor technology changes. “The gold mines to go after were coordination of benefits (COB), benefit policy and eligibility, which account for approximately 50 percent of all denials,” he notes. One of the key objectives behind the payer/provider collaborative was to expand the boundaries of what the payer could control to reduce denials, adds Chris Maier, BCBSM’s director of business analysis and improvement. “If we didn’t have a collaborative effort with the hospitals, it would limit what we could control to reduce denials,” he notes. “With access to the hospitals and their willing participation, we’re able to expand our ability to reduce denial rates.”
Drilling for Data
When BCBSM joined the payer/provider collaborative, the ultimate objective of denial management analysis was to identify which factors drove claim denials for specific hospitals. The health plan tweaked the system it used internally and added a provider dimension to the data collected. “We built into the tools we were already using data that would allow us to see denial rates across each participating hospital system and denial rates within each system,” Maier says. The revamped denial management tool allows payers and providers to view rejection data by individual hospital, by system and across all systems. It also identifies variations among hospitals within systems, allows users to compare those variations to other hospital networks, and can compare denial or rejection rates of individual hospitals or systems to norms. Hospitals can benchmark themselves against others involved in the project. To protect each healthcare system’s identity, each participant is identified only by a letter. “It helps the hospital monitor its success rate by bringing denials down,” Sleight says. “If denial is high across the board at your facility—say, 10 percent—but other hospitals are in the 1 percent to 2 percent range, then it’s probably your issue. It helps to be able to pinpoint where the denials stem from: the emergency department, the laboratory or another area.” “We provide the same summarized data to each hospital that participated, and they can analyze monthly the same information,” says Maier, a co-leader on the collaborative’s original denial management task force. “We also used this same information to do monthly monitoring and investigate things that cause problems in any given month.” Regardless of what the hospitals are doing, Maier says, BCBSM continues to use the tools to reduce problems with policies or billing practices that can drive denial or adjustment of claims.
Realizing Results Hospitals that are active users of the denial management information have shown a 15 percent drop in overall denial rates from 2002 to 2004. These hospitals also have aggressively implemented other task force recommendations and solutions. Other hospital participants that could be considered nonactive users have shown little to no improvement in denial rates. For instance, obtaining COB information at the point of admission for treatment helps avoid claims that are rejected because BCBSM does not have the necessary information. Health plans traditionally send letters of inquiry to members requesting information on other types of coverage the patient might have. Typically, patients do not respond to these requests, resulting in outdated or missing information in the payer’s files. As such, the payer will likely deny a claim filed on behalf of that patient. BCBSM and the participating providers have an arrangement that allows the provider to see immediately whether the patient’s COB information is up-to-date. If not, the member can fill that information out at the point of service and the information is transmitted electronically to BCBSM. A flag appears on the BCBSM screen when a patient registers for treatment, telling the admissions staff whether the payer has a letter of inquiry on file for that patient. The provider submits the claim, and it gets processed appropriately because the letter of inquiry is on file. Without that letter, the claim is pended until the payer gets the appropriate information, Maier says. A particularly thorny issue, collaborative leaders note, arises with the working senior population. Depending on the size of the employer group, Medicare may or may not be the primary insurer. When it is discovered retroactively that BCBSM has paid a claim inappropriately, this results in a recovery that impacts provider accounts receivable. The collaborative initiative focused a task force specifically to address this and other recovery issues.
Focusing on Physicians
But the effort will likely prove more challenging than breaking down the data among health systems. With hospitals and health systems, the collaborative had to extract data for fewer entities that produce higher volumes of claims. With physicians, however, the system will have to account for many entities, each producing lower volumes of claims. “Instead of looking for variations among a few hospitals, you’re looking for variations among thousands of physicians,” Maier says. “Each of those variations, if corrected, may have a minimal impact on the big picture.” The collaborative says it will identify the major causes of claims denial among participating physicians. If the analysis, for example, finds physicians that appear to be way out of line compared to the norm, it’s more difficult to produce large-scale results by resolving those physicians’ specific issues, Maier says. Also, Maier adds, there is inconsistency among hospitals and how they partner with physicians. Some have staff physicians, while others have informal arrangements with group practices. One physician or practice might have affiliations with many hospitals. An exploratory task force has been formed comprised of CFOs from hospitals, physician groups and BCBSM. Data is currently being analyzed by BCBSM to ascertain trends in rejections and root causes. The improvement effort is expected to be launched in the summer of 2004.
Building Camaraderie
The CFO group also agreed that what was discussed in committee meetings goes no further than the members. That trust was an important factor in its success, Biggs says. A condition of joining the denial database is maintaining confidentiality. Once off the ground, the initiative has offered opportunities to break some of the typical barriers between payers and providers. Each side gained more awareness of how decisions can impact the other. “The biggest surprise was the camaraderie that was developed among all the hospitals that participated,” Biggs says. “There is also a wonderful camaraderie between payer and hospital staff.” “Without collaboration, we would not have been successful. We can contact a hospital to understand what their perspective might be on a certain issue,” Maier says. “And sometimes I get calls from a hospital representative. It might be about something I have no involvement in, but he or she feels comfortable enough to call me and say, ‘Chris, I have a problem. Who at BCBSM can we talk to?’”
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“The
biggest surprise was the camaraderie that was developed among all
the hospitals that participated. … There is also a wonderful
camaraderie between payer and hospital staff.”
Sleight then coordinated a brainstorming session at the consulting firm’s
Detroit facility. Providers and BCBSM heard each other’s concerns firsthand
and barriers disintegrated. “People started understanding that solving the
problems required open minds and give and take from both sides,” Biggs says.
“If
we didn’t have a collaborative effort with the hospitals, it would
limit what we could control to reduce denials.”
“You
had two sizeable forces—providers and a major payer—coming together
for a common goal: to reduce the number of claims denials.”