Intentional and systematic inefficiencies in the insurance companies’ medical reimbursement processes lead to inflated medical costs. Improved medical billing processes from providers and medical billing services can play a significant role in decreasing this component of healthcare cost.

Although the issue of claims processing is mentioned as one of the sources of rising healthcare costs, the true economic drivers that are keeping the current inefficient and opaque processes in place has not been well explored. The fact of the matter is that the current process prey’s upon the technology, process and staffing limitations of most physician offices to take money from the physicians and give it to the payers. The result is rising costs and following revenues for the average medical provider.

Payers consistently and systematically underpay claims. In addition, claims that have been properly submitted and for which proof exists the claim was accepted are simply “lost” by payers and the claims have to be resubmitted (sometimes multiple times) in order to secure payment. I know from experience with many practices that this “lost” claim phenomena is rampant across payers and states.

Payers have strong incentives to utilize these tactics to lower their costs. More than 50% of the claims that are underpaid or lost by payers are never pursued by physicians and facilities. Since the payers can save significant money by losing claims and accidently underpaying they have strong motivation to make the billing process difficult.

Nothing is free, so payers do incur a price on their end because of the current process. It cost about $25 when a payer that has spotted an underpaid or missing claim gets a insurance representative on the phone. This has lead payers to get quite clever and grade each medical provider. The grade is based upon how well the provider spots issues and calls the payer (thus generating costs for the payers). If the provider catches the payers “mistake” each time they will be rated an A. If they never catch the payer’s errors they will receive a F. Interestingly, the payers that are rated an F seem to have many more lost and underpaid claims than those rated an A.

As soon as payers see the economic motivation of losing and underpaying claims disappear, they will be forced to adopt acclaim adjudication process that is easier and cost significantly less for medical providers. The way to make this happen is to ensure that each provider is rated an A. This is why improved medical billing processes are a key weapon in the fight against rising healthcare costs.

If every medical billing company and every billing department relentlessly pursued each claim then the insurance companies would see their costs rise and be forced to revisit their strategy. They would be hit by the double sided sword of increased payouts to providers (since the tactics would only slow down payments not eliminate them) and increased cost of adjudicating claims (since all of those medical billing specialists are sitting on the phone costing the payers $25 per call).

Many companies and individuals are dreaming of the day when the medical billing process disappears entirely and claims are adjudicated in real-time while the patient is standing at the checkout desk. In this system significant costs will be saved, but the system will never emerge until payers no longer have an incentive to play games with medical claims. Medical billing companies and medical providers can make this happen by insuring that all providers are rated A in the eyes of each payer.

Copyright 2008 by Carl Mays II