Tipping Point

Until recently, the economics of revenue recovery for most physician groups has not been favorable. High volume, low dollar transactions with small variances are difficult to systematically identify, aggregate, and dispute in a manner that justifies the cost. The good news is that a confluence of factors in the market has created a ‘tipping point’ towards more effective audit and appeal. These include 1) the availability of the ANSI 835 claim payment advice, 2) recent state statutes and class action settlements that require full disclosure to physicians of the pricing rules used by health plans, and 3) lower cost information technology solutions that take advantage of both 1&2.

The typical physician practice will establish an appeal threshold based on the best management methods they have at their disposal. The MGMA has reported that per claim appeal costs are about $12. Average underpayments are less than $10 essentially creating a negative ROI for audit and appeal for all but the most sophisticated practices.

If you’re a health plan, small dollar underpayments are essentially a windfall. Unfortunately, current state regulations do not include large enough per occurrence penalties to discourage small dollar ‘mistakes’ by the payor. Similarly, the accumulation of damages and documentation by physicians has been equally cumbersome. The net result is a pervasive angst by medical providers fueled by the realization that you can never quite collect what’s legitimately owed to you.

The good news is that it is possible now to turn this systematic disadvantage upside down. It starts with the first of the three factors, namely the ANSI claim and remittance standards. These EDI files dramatically lower processing costs and provide for the best audit practice by using the physician and payor’s source files. Practice management system ‘exports’ of manually keyed remittance data is problematic give the 1% data entry error rate. The appeal rate is about 8% of paid claims, thus the likelihood of a false positive or false negative appeal increases for manually keyed in remittance data.

Additionally, the ANSI 835 simply contains more information and must balance at the file and claim level - a standard not required of the paper EOB. The claim receive date is a required field in the 835 and makes the audit for late payment interest a simple affair. Not so with the paper EOB. More importantly, the 835 requires procedure code, modifier, and units at the line level and if bundling logic is applied the original code. Some or all of these could be missing on a paper EOB. Even if the physician’s practice management system is not 835 ready, the practice should enroll in the payor’s 835 service and use one of the low cost view/print solutions for the 835 currently available. The hard copies would be used for data entry and the EDI files could be used to perform the audit.

The second factor contributing to lower appeal thresholds are the disclosure statutes and recent class action settlements. The Texas regulation states that the health plan must disclose “all payment and reimbursement methodologies that will be used to pay claims submitted by the preferred provider.” This includes all claim edit logic along with the additional requirement that it be in an electronic format. California, Georgia and other states have similar requirements. These statues provide the opportunity to “get in the game” so to speak. With no less than 3 – 5 million edits used by the typical commercial payor, full disclosure is required in order to avoid both false positive and false negative appeals.

The third factor is the ability to batch process claims using the EDI standards and edit disclosures. The cost of technology today further reduces the appeal threshold. It is now practical to find and appeal an underpayment as low as 1¢. Whereas historically underpayments of less than $15 were not cost effective to appeal (except on the basis of principal), it is now possible to easily identify and appeal an underpayment of any amount. In fact the nature of dispute resolution with its tendency to ‘split the difference’ requires that the broadest criteria be used to aggregate the variance.

Continued..