'Well-intentioned, poorly executed waste': How tech companies aim to reduce billions in wasteful spending

Last year, the estimated Medicare fee-for-service improper payment rate was more than 6%, representing more than $25 billion in improper payments. Despite the historic low, the rate rose in some areas like skilled nursing facilities. 

Managing claims is difficult and complex. One recent study found that nearly a third of healthcare resources are tied up in administrative costs, taking focus away from patient care. Payment integrity has become increasingly vital to healthcare. Experts say it minimizes both excessive healthcare spend and provider abrasion, a term for a soured payer-provider relationship over disagreements in the claims process. 

“Hospital billing is the most complicated thing that you will ever process in your life,” Kelly Arduino, head of healthcare at accounting firm Wipfli, said in an interview with Fierce Healthcare. The fact that there are so many consultants, she added, is “indicative of how extremely complicated and difficult it is.” 

Reducing waste in the system has become a key priority for many healthcare organizations. Working with vendors, health systems and payers are leveraging artificial intelligence, machine learning, data analytics and other technologies to improve billing and payment processes.

'Not about recovering dollars'

Michael Dowling, CEO of Northwell Health, once wrote that the relationship between providers and payers is "inherently antagonistic." Providers are looking to maximize revenue, he wrote, while payers want to reduce payments: “The push-and-pull over reimbursement is simply the nature of the health care ecosystem.”

That doesn’t necessarily mean improper payments are the result of parties trying to game the system. Mostly, it’s “well-intentioned, poorly executed waste,” said Ryan Mooney, executive vice president and general manager of payment integrity at HealthEdge. 

HealthEdge works primarily with payers, making software that pays claims. 

“We’re at the nexus of where all things go wrong,” Mooney explained. Even when a client has the right policies in place, the company’s role is to “sweep through and find where a policy was misapplied or the data was wrong or things were broken.” The root cause could range from a lack of supporting infrastructure to poor communication. 

The key to managing claims is transparency and trust, much of which depends on the model with which a vendor operates, Mooney said. While many operate based on contingency—keeping a portion of every dollar recovered—that approach can disincentivize fixing the problem in the first place. 

A better model, Mooney argues, is charging a flat rate annually. That way, a vendor can focus on identifying not only the errors but why they’re happening and work with the payer to change that. “Payment integrity is not about recovering dollars,” Mooney said, “It’s about getting things right.” 

There are, however, some reasons an organization may not want to pay a lump sum, or subscription rate, for such services annually. While it may be simple for budgeting purposes, that type of contract may limit innovation or what a vendor can investigate, explained Jonathan Wiik, vice president of healthcare industry insights at FinThrive, a revenue management vendor. A client might also prefer a contingency model to focus on specific errors or recover dollars only on claims over a certain amount.

FinThrive lets its clients decide how they want to pay, though it is seeing more organizations requesting subscription-based invoicing for more predictability. One way or another, Wiik encourages providers to consider the potential for savings in this area: “Hospitals need to start treating revenue management as a revenue center, not a cost center.”

Infusing technology into the process  

Because healthcare is so complex, there are lots of opportunities for computing, explained Rik Chomko, CEO of InRule Technology. The company automates workflows like claims processing for payers and providers. 

“It's very rules-driven because that’s the agreement that everyone’s said: 'This is how we’re going to do it,'” Chomko said of the healthcare system. Yet, though InRule relies a lot on artificial intelligence and machine learning, it wants to make that automation accessible, he said. If the goal of technology is to empower humans, they should be kept in the loop. That’s why InRule’s software can be adjusted by users without programming knowledge, he noted.

As in other parts of healthcare, one way to prevent payment errors from happening is to intervene early, argues PointClickCare, a health tech platform offering services like revenue management and real-time insights at any stage of a patient care journey.

Understanding a population can be key to timely interventions, which is where technology can prove especially useful, said Mandira Singh, senior vice president and general manager of acute and payer markets at PointClickCare. Case managers can use the company's software to track a patient across their care journey and for prior authorization to help avoid inaccurate claims, she noted, while providers can minimize surprise bills by checking a patient’s benefits beforehand. 

The firm’s software integrates with electronic health records, much of which has been enabled by the FHIR interoperability standard, Singh said. But, ironically, data transparency regulation has also scared some providers, which worry payers may leverage the transparency to deny claims or renegotiate rates, she said. To drive aligned incentives, regulators should consider “rolling them out in a way that doesn’t seem punitive to one or the other," Singh said.