By Karen Bowden, RHIA, President of Consulting, ClaimTrust, Inc.

100% Clean Claims

In today’s financial environment, more than ever, outmoded billing processes can mean the difference between operating in the black or the red for healthcare organizations. Most hospitals still lose as much as six percent of their hard-earned revenue to preventable denials that are never appealed. Additional revenue is lost to un-denied claims paid below contracted rates, and still more is never even billed due to inefficiencies in the billing process.

Hospitals are simply leaving money on the table at a time when they can least afford it, primarily because of the prohibitive effort traditionally required to collect that last 2-5% of revenue that is more difficult to bring in for various reasons. According to McKinsey & Company, 15% of healthcare costs are spent on the payment process¹ – so it is no wonder that many healthcare organizations just give up on revenue they are fully entitled to.

The good news is that today, best practices, analytics and revenue-cycle technologies have reached the point where hospitals can achieve substantial revenue improvements for relatively small investments in time, technologies or services. The cost to collect, especially from payor organizations, can be reduced to the point that near 100% collection has now become an attainable and sustainable goal.

Following is a practical blueprint for updating the hospital billing operation to maximize the organization’s potential to quickly and efficiently generate 100% clean claims for maximum allowed payment for all covered services performed. It is based on decades of experience working with hundreds of hospitals to identify and address revenue cycle problems, and informed by the latest best practices developed to address such recent phenomena as RAC audits and CMS reimbursement policy changes.

What is a Clean Claim?

The average clean claims rate for U.S. hospitals ranges from 75-85%². One of the first challenges we face in pursuing the goal of getting to 100% clean claims is trying to figure out what constitutes a clean claim. For a hospital, this usually means a claim that is paid in full the first time they drop. From the payor perspective, a clean claim is one that is not denied – a subtle but significant difference that highlights the issue of payments at variance with contracted rates which can represent a larger revenue opportunity than denials.

Generating clean claims can be an extremely elusive goal due to the complexities and changeability of health payor reimbursement policies and procedures. In fact, for many claims, most payor organizations cannot define a clean claim or even know if a particular claim will be denied or not by their adjudication system – it’s a clean claim if it pays clean. This means that payors are, in effect, applying a number of rules in claims adjudication that they cannot or will not disclose to provider organizations. Keeping up with these “unpublished edits” is at the heart of any successful billing process.

A Model for Optimal Billing Success

For provider organizations seeking to generate 100% clean claims, this means that simply following the rules as stated by the payor organization is going to be necessary but not sufficient. To be successful, the optimal billing model must be based on three core principles:

• Rigorous discovery of payment rules, including proactive research and reverse engineering
• Careful analysis of remittance data to detect payments at variance to contract, discover areas to improve internally and discover unpublished edits
• A culture of continuous improvement that can easily adopt new rules and processes and that creates accountability at the department, team and individual levels

Discovering Payment Rules

As discussed, unpublished edits of various types represent one of the primary obstacles to achieving 100% clean claims – your organization cannot comply with or dispute the rules if you do not know what they are. So one of the most critical success factors for this model is implementing a rigorous and continuous discovery process designed to identify and understand all edits for all payors and either incorporate or dispute them prior to claim submission.

Published Edits

The first place to start is finding all of the known edits for all of your payors that actually are published somewhere, but are not yet embedded in your processes. For CMS, this means checking the CMS and local Fiscal Intermediary websites on at least a quarterly basis. While CMS edits are a recognized industry source for billing edits, individual payors have claims processing billing manuals and medical technology policies that drive how they will process claims. We recommend checking those sources at least quarterly.

Medical Necessity

One of the biggest contributors to broken claims in the hospital billing process is lack of access to up-to-date medical necessity requirements for all payors. Access to this data – which can change with some frequency, especially for conditions such as certain cancers where standards of care are very dynamic – is critical, and not just for pre-registration and registration staff. Billing and medical records departments also need easy access to these requirements to efficiently QA claims in process and work denials.

Identify All Missing Charges

Once charges come in from the providers for coding, a very valuable step which is skipped by many organizations is thoroughly checking for missing charges. This can be tedious and time-consuming, so finding automated tools for this process is essential, but it basically boils down to scrutinizing claims to deduce charges that should have been billed, but were not. We commonly see implantation procedures, for example, where the charge for the actual implant itself is not included in the claim.

Remittance Data Analysis

As 835 remittance data comes in, organizations need to look for both denials and payments at variance with contracted rates (i.e. underpays and zero-pays). Denials management will have two main components: routing denied claims for repair and resubmission, and analyzing the data for billing process optimization. Denials analysis should focus on discovering new payment rules to incorporate on the front end, and identifying root causes of internal errors. Tracking trends in internal errors is vital to ensuring accountability and continuous improvement.

Underpays should typically trigger some level of dispute processes with the payor organization. These are not claims that have been dropped improperly or lack documentation, but are rather claims that have been adjudicated as correct submissions for covered services and paid below the expected rate. As such, they usually indicate some kind of problem in the payor’s adjudication process that needs to be flagged to the payor and carefully monitored going forward.

Continuous Learning and Culture of Accountability

Clearly, the process of discovering payor rules and analyzing remittance data represents a significant investment of time, technology and human resources. When accompanied by cultural change, however, that initial investment can be quickly reduced to a relatively small ongoing effort by ensuring that new knowledge of payor practices or internal issues are all addressed and internalized and not repeated.

Putting the Model Into Action

Following is a four step approach with critical success factors for putting this model into action. These steps are designed to support progress toward the ultimate goal of quickly and efficiently generating 100% clean claims for maximum allowed payment for all covered services performed:

1) Flexible and Comprehensive Pre-Billing Review

A strong system for reviewing coded claims before they drop is at the cornerstone of a successful billing process. This is where the core claim QA process takes place and where all of the payor-rule knowledge gathered from external sources and from remittance analysis is put into action. Critical components for this function include:

• Dedicated staff – you need a team that cares about getting it right and will respond well to being held directly accountable for all of their work. Performance-based incentives can be a powerful tool for this
• Well-defined procedures – This phase is all about process and the ability to incorporate new knowledge and procedures quickly and smoothly
• Adequate resources and management controls – but be flexible, your resource requirements will decline over time
• Structure to accommodate rapid changes to rules and policies

2) Discovering and Implementing All-Payor Edits

Ultimately, keeping on top of unpublished edits in a comprehensive and consistent manner is a daunting task for any provider organization. So, finding a business process outsourcer (BPO) or software-as-a-service (SaaS) vendor that specializes in hospital revenue cycle is the best practice here. As you evaluate vendors, keep in mind:

• Beware of BPO/SaaS vendors that have edits but lack the sophisticated logic and automation to make implementing them quick and easy
• The ability to stay on top of unpublished edits is the hallmark of a good vendor – most can do the easy stuff like medical necessity and Correct Coding Initiatives, but look for vendors that go the extra mile
• Look for reverse-engineering models that can accurately deduce payor rules from remittance data accurately deduce payor rules from remittance data and develop prebilling edits

3) Use Edit Reports to Create Work Queues for Staff

Good analytics and reporting will allow you to most efficiently sort pre-billed claims and denials for rework. Best practices for workflow include:

• Group claims by issue so team members can efficiently power through similar work
• Use management controls to monitor aging and step-in to resolve large claims being held up for small charges and to identify trends contributing to A/R days
• Establish a 3 business day standard for releasing corrected claims
• Staff appropriately
  • Find flexible players that can work both front and back-end processes
  • Plan for gradual reduction in staffing needs

4) Policies and Procedures

To create a structure that can continuously improve in effectiveness and efficiency, your process must be architected around solid policies and procedures. Good policies will support a continuous, learning model and will be designed to meet the specific requirements of your organization’s circumstances. Some of the policies we find to be generally effective, include:

• Develop a well-documented claim-correction process
• Trend issues by payor to identify and prioritize critical issues
• Separate internal issues from problems to address with payors
• Collect accurate documentation on all payor-related issues to support effective contract negotiations
• Create a culture of accountability for departments, teams and individuals
• Always track preventable denials back to the source for a permanent fix

Monitoring Success

On-going monitoring of key performance indicators will be essential to assessing your organization’s performance and communicating internally for continued buy-in and support. Identify the areas of focus for continuous improvement that are most critical for your organization, as well as common metrics, such as cash, A/R days and business process efficiency.

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¹ Nick LeCuyer and Shubham Singhal, “Overhauling the U.S. Healthcare Payment System,” The McKinsey Quarterly: Web Exclusive (June 2007)
²Pam Wymack, “Denial Management – Key Tools and Strategies for Prevention and Recovery,” HCPro (September 2005)