| Mistaken payments add up to an estimated $200 | | | | |
| billion, exceeding 10% of national healthcare costs. | | | | 1. Target identification Audit identification report |
| Other Party Liability (OPL) alone, i.e., claims that | | | | shows total annual revenue and the degree of |
| should be paid by somebody else, make up $68 | | | | variance between the audit target and peers in |
| billion or 3.6% of national healthcare cost. The | | | | the same specialty and geography. The product |
| enormous size of potential savings due to | | | | of the two numbers is proportional to the |
| improved claims processing continues to attract | | | | expected gain from the audit, essentially providing |
| attention and resource focus. Insurance | | | | a natural audit ranking. |
| profitability experts believe that a payment | | | | 2. Audit preparation A higher return to the payer |
| scrutiny program can be as successful a | | | | is the key advantage of a carefully designed and |
| profit-building strategy for insurance companies as | | | | executed post-payment audit. Audit preparation |
| raising premiums or adding members. A growing | | | | starts with a review of audit target selection, |
| industry of outsourced technology and services to | | | | which is the result of provider profiling and |
| avoid mistaken payments is also symptomatic of | | | | variance reporting. This stage includes a list of |
| a growing demand for such services. Some | | | | claims paid in the past that are most likely to fall |
| vendors cite cumulative payment savings as high | | | | outside of standard distribution of the peer group. |
| as $3 billion. | | | | 3. Audit execution The auditor requests and |
| However, avoiding mistaken payments is hard | | | | analyzes medical notes supporting the data |
| because of four-pronged constraints, namely, the | | | | reflected in the sample of paid claims produced at |
| volume of claims, the disparate and disconnected | | | | the audit preparation stage. The auditor's |
| sources of relevant information, the | | | | objective is to establish the proportion of claims |
| resource-intensive manual processes needed to | | | | found unsupported by reviewed medical notes |
| identify and investigate recovery opportunities, | | | | within the set of audited sample (percent of |
| and regulatory requirements for timely payments. | | | | overpayment). |
| To manage these difficulties, many payers | | | | 4. Refund (and penalty) extrapolation The auditor |
| adopted a two-phase-based "pay-and-refund" | | | | extrapolates refund as the product of percent of |
| approach for payment minimization. The second | | | | overpayment and the total payments by the |
| phase of this approach is designed to correct any | | | | auditing insurance carrier for the past six years. |
| mistakes made during the first phase. Each of the | | | | 5. Negotiation |
| phases can be further divided into two stages. | | | | 6. Settlement |
| Specifically, the initial phase splits into prepayment | | | | Some stages, such as audit execution, negotiation, |
| review and timely payment of valid items, while | | | | and settlement must be entirely manual, and may |
| the final phase includes post-payment audits and | | | | require highly skilled and experienced personnel. |
| refunds of items proven invalid during the audit. | | | | Other stages, such as verification of |
| Prepayment Review | | | | overpayment amount and currency, identification |
| Prepayment review typically proceeds in two | | | | of overpayment reason, and audit prioritization, |
| stages, identification and confirmation. Potential | | | | may be partially automated, using rule-based |
| overpayment identification requires | | | | technology to identify procedure repetition, high |
| cross-referencing multiple systems that manage | | | | payments per day, surge analysis, unusual |
| provider enrollment, authorizations, recovery case | | | | modifiers, unusual procedure rates, geographic |
| management, and call centers for both insured | | | | improbabilities, or 5/50 patterns. External |
| and providers. | | | | resources might be added at this stage to consult |
| Overpayment confirmation uses Correct Coding | | | | provider watch lists, OIG sanctions databases, or |
| Initiative (CCI), Local Medical Review Policies | | | | high-risk address databases. |
| (LMRP), and other rules to categorize the potential | | | | Summary |
| overpayments into Contractual/Clinical, Eligibility, | | | | A full-scale implementation of payment scrutiny |
| Coordination of Benefits, or Duplicate Payments. | | | | requires sophisticated processes to handle |
| Overpayment confirmation typically includes tests | | | | prepayment claim review and post-payment |
| for inter-claim, intra-claim, or cross claim | | | | audits and uses advanced fraud detection |
| inconsistencies, lifetime duplicates, date range | | | | technology. Prepayment claim reviews are less |
| duplicates, re-bundling, inappropriate modifier | | | | expensive than post-payment audits and |
| codes, wrong E&M crosswalk, upcoded or | | | | therefore can be applied to every claim, while |
| undercoded visit level, etc. | | | | post-payment audits must be carefully targeted. |
| Prepayment review requires powerful database | | | | A system to manage overpayment recovery |
| technology. Most of prepayment claim review | | | | process must include claim identification, its |
| process can be automated along with subsequent | | | | history, provider and insured information, medical |
| denial notice or explanation of benefits (EOB). | | | | notes, insured services call center notes, |
| Post-Payment Audit | | | | authorizations, etc. Without the ability to efficiently |
| In contrast, post-payment audits tend to | | | | manage a large volume of recovery cases, the |
| consume more resources during each one of the | | | | risk for errors or missed payment deadlines is |
| audit stages: | | | | high, resulting in missed recovery opportunities. |