90% of claim denials are avoidable with help of tech tools

When a provider contacts a payer to check a claim status, it takes an average of 14 minutes and costs the provider $7.12.

While this amount may not be big on its own, when multiplied by millions of requests each year, the time and money add up. In 2018 alone, providers made 173 million claim status inquiries by phone, fax or email, according to the Waystar Claim Status Inquiry Guide.

Providers feel the burden, too, saying claim status monitoring is one of their biggest challenges, yet the 2018 Council of Affordable Quality Healthcare Index (CAQH) reveals that claim status inquiries have the potential for the highest savings opportunity per transaction of any revenue cycle.

And due to the Affordable Care Act, 20 million new patients have entered the healthcare system in the past few years, making it more and more difficult to deal with legacy systems, cited the CAQH Index. So what is the solution for streamlining the process?

Ric Sinclair, chief product officer at healthcare revenue cycle software company Waystar, makes it sound easy: simplify. Last year, 1% of all healthcare revenue was lost to problems with charge capture and poor documentation. But Sinclair says that that 90% of denials are preventable and two-thirds are recoverable. Sinclair notes that now, more than ever, the healthcare reimbursement process needs a change. 

Waystar reports that one of every four claims requires a status and follow up. By comparison, Sinclair says, consider a grocery store checkout process in which one out of every four scanned items would require a call to the store manager. And imagine if a number of the customers just walked out of the store without paying for the items until 120 or 180 days later?

"There’s a denial-free world, and turning healthcare payment process into a retail-like setting and retail-like payment model is the key,” Sinclair told FierceHealthcare. “Once we can manage the revenue cycle and reduce the administrative burden on providers and patients, fewer denials are achievable.”

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Sinclair notes that $350 billion in annual healthcare spending is on wasted on the processes that are still manual.

“That is an incredible call to action,” Sinclair says. 

Modernizing the process

The average hospital has more than 120 employees dedicated to the billing process. And when it comes to deploying a bill, there are more than 10 revenue-cycle touch points. 

Sinclair has observed providers using their legacy software tools, and the process will involve a team member needing to get on a phone, sign a form or fax something out when it comes to a denial. As it stands now, if a consumer needs to pay part of a bill, he or she usually will not know this for at least 30 days, when a bill comes in the mail. 

Waystar claims graphic

“But if that payment could be clear up front to both insurance and consumer, it could dramatically reduce administrative burdens,” he said. And Sinclair makes it clear that insurance companies want to improve the system and cut out the waste as well. The system, as it is, benefits no one, he said. 

There is a lot of money being wasted, he said. For example, one of Waystar's payer clients would write off claim denials under $100, as it would’ve cost more than $100 worth of time to collect the unpaid bill. 

Vibra Healthcare, which operates hospitals in 18 states, began working with Waystar a few years ago after realizing they needed a technology partner to reduce costs and streamline the billing process. The system was at that time unable to provide electronic remittance, automated claim status or claim denial tracking. 

The health system worked with Waystar to reach a 98% clean claims rate and was able to rebill $12.8 million worth of inappropriate payer denials.

Kraig Couture, senior vice president of revenue cycle at Vibra Healthcare, admits that implementing a new system for any healthcare company is a challenge. Perhaps the hardest part is getting the buy-in from staff to spend the extra effort to learn a new way of conducting transactions.  

“Being able to set aside dedicated resources is very hard, as is finding an extra few hours in your day, but knowing the rewards that will come at the end of the project makes it worth it,” Couture told FierceHealthcare. 

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Harry Merkin, vice president of marketing for HealthEdge, says there are long-standing technical, cultural and data barriers that have existed between payers and providers that will need to change. 

"Payers have been focused on fiduciary responsibilities while providers have been instrumental in working with patients who require services,” Merkin told FierceHealthcare. He believes it is the responsibility of the payers to do everything possible to minimize the administrative burden put on providers and their practices.  

“In doing so, payers must provide data in a form that is digestible and understandable for them. And the provider must be able to take the appropriate next action, based on the data supplied to them by the payer,” he said. “This requires the payer to put themselves in the place of the provider and aligning goals that will result in business success for everyone. This is a formidable challenge and one that typically requires small steps and quick wins to instill confidence and trust.”

Policy implications

Policymakers should be looking to augment rather than overhaul the existing system, Sinclair said.

“I do believe there is a potential for some changes to take place,” Sinclair said. “If we can align incentivization by leveraging technology and forward thinking (and there is more payer cost pressure and more automation).”

Couture says there are two big changes on the horizon for the healthcare payment process: First, he ultimately sees a move to bundled payments. 

“Everything points to continued reductions in payments and a streamlining of the process from [the Centers for Medicare & Medicaid Services], which means then the commercial payers will follow,” he said. “Bundled payments will continue to squeeze the providers and only the top performers will be able to survive. Hospitals will need to be part of larger networks to be able to financially survive, and they will also have to offer top notch patient care otherwise they will not survive the continued reductions in payments. 

Additionally, Couture predicts that hospitals are going to have to look at every way possible to automate the back-end revenue cycle process. Due to the reduction in reimbursement, hospitals will need to find ways to use artificial intelligence to replace high-cost labor, and patient accounting systems will also need to evolve.  

“Companies that don’t work with providers, don’t provide new technology, and don’t offer their services at a reasonable cost, will not survive,” he added.

Merkin agrees that technology is key for payers to enable the best possible automation processes. Automation is necessary for accuracy and speed, he said. 

"We all know that administrative costs are an important factor in the overall financial equation of a payer and modern solutions such as core administrative systems that adjudicate claims and provision payments can make a significant difference in results,” Merkin added.