It's good to stay outside the lion

Can you imagine if every day you went to work and 20% of the time you screwed up?   I realize that this is how baseball players live their lives, with a batting average around .300 or less, but I’m talking about other people.  Say you’re Beyonce and 20% of the time, when you step up to the microphone, your voice cracks uncontrollably.  Or you’re a race car driver and 20% of the time you finish your day upside down with the wheels spinning.  Maybe you’re a lion tamer and in 1 out of every 5 circus performances you end up inside the lion. I’m guessing you would not be in business for long.  Or maybe you’re just a regular person, say a mailman, and you deliver 20% of the mail to the wrong address, or a Starbucks Barista and 20% of the time you make a latte when the customer asked for a Frappuccino, which is really bad when said customer needs their coffee STAT.

Now imagine you’re in a job that fundamentally affects other people’s lives, like say healthcare.  What if people in the healthcare field made mistakes 1 out of every 5 times they performed their particular function?  I have already written elsewhere about how that is actually the case in the administration of medicines in hospitals (about 19% are given in error).  Today, for a change of pace, I am focusing on the administrative side of healthcare because I saw a report that made me hit my forehead with my hand yet again. Oy vey!

According to the American Medical Association’s (AMA’s) latest findings, commercial health insurers have an average claims-processing error rate of 19.3%, an increase of 2% compared to last year.  Only UnitedHealthcare demonstrated an improvement in claims processing accuracy over last year; one of the other large insurers scored an accuracy rating of 61.05%. As Eric Cartman would say, “Dude, super weak.”

Why has the rate of error, which was bad enough at over 17%, gone up?  Who knows, maybe the dog ate their homework; maybe it’s negative ions in the air; maybe it’s all traceable back to Saddam Hussein. Whatever it is,  the increase in overall inaccuracy represents an extra 3.6 million in erroneous claims payments compared to last year and added an estimated $1.5 billion in unnecessary administrative costs to the health system, according to the AMA. The AMA also estimates that eliminating health insurer claim payment errors would save the healthcare system, and thus you the taxpayer and/or insurance payer, $17 billion.  $17 billion would buy a lot of Frappuccinos.

$17 billion would buy a lot of these

Ok, try to stay with me.  I know this claims payment stuff is about as exciting as watching paint dry, but this is a serious problem that, when it happens to you as a patient, is enough to send you right back to the doctor for rapidly rising blood pressure. 

When the AMA looked more deeply into where things go wrong with claims payment, they found a multiplicity of problems.  Errors result from everything from the claim being paid wrong due to the system being programmed improperly, to the claim being delayed inappropriately, to the claim getting hung up in the pre-authorization process. in 23% of cases the claim got no response at all.  Knock, knock! Who’s there? Claim submission! (sound of crickets…..).

Dude, Super Weak

It is for that reason that Psilos invested in HealthEdge, a software company that provides a next-generation  claim system that is generating some significant buzz in the market.  I know what you’re thinking, claim system buzz has to be an oxymoron, but seriously,  HealthEdge has managed to do what some thought impossible:  actually pay claims correctly virtually all of the time. 

The HealthEdge system was designed to allow for maximum personalization/customization of benefits and to enable proper administration of those claims despite the intricacies of all that this entails.  In fact, they have discovered an interesting situation at every one of their client sites.  As they near the end of the implementation cycle for each line of business (HealthEdge uses an Agile implementation methodology that allows them to roll out the system in multiple phases), their clients are finding that the parallel tests between HealthEdge’s HealthRules platform and their own existing legacy systems are producing differences in how each system pays the same claim 10%-25% of the time.  They usually assume that HealthRules is misconfigured and ask HealthEdge to help find the errors in the set-up so it can be “corrected” before the HealthRules system goes live.

A billion here and a billion there and soon we're talking real money

Since HealthRules is configured using a unique, patented English-like language (as opposed to the Klingon-like language used for legacy systems), HealthEdge has been able to quickly show exactly how each of the benefit plans and provider contracts have been configured.  In every case so far, further investigation by the clients, and lots of digging through the ancient, hard-to-read configuration that drives their legacy systems, has revealed that the legacy systems have been paying claims wrong for years, resulting in losses of millions of dollars (it kills me to think of that in frappuccinos). Since providers almost always call to report under-payments, most of these situations were found to be long-term over-payments.  Um….oops.  I’m guessing the providers don’t often send back the over-payments with a nice note pointing out the error.

In a world where health insurers are now going to be held, by law, to fixed administrative cost maximums (one of the provisions of the PPACA health reform bill), those extra pennies are going to add up pretty darn fast.  Insurers are going to find it harder and harder to pass their excess costs off to customers and patients.  Much energy has, appropriately, been spent thinking about how to fix the problems of delivering clinical services, which do make up the vast majority of costs in the healthcare system.  But attending to productivity, efficiency and accuracy on the administrative side is going to get more and more important when insurers have to keep those expenses to 15-20% of the total spend.  A billion here and a billion there in waste and soon we’re talking real money.