| A recent AMA study found that doctors spend | | | | cost, $6 - claim preparation and mail, and $25 - |
| 14 percent of the fees they receive from | | | | claim rework cost. If the claim is paid in full after |
| insurance companies and Medicare on the process | | | | contractual adjustment ($75), practice total costs |
| of collecting those fees, adding more than $200 | | | | would add to $35 and income - $20. But if the |
| billion (about ten percent) a year to the nation's | | | | payer denies a part of the claim, say, $30, then |
| healthcare costs [Lisa Girion, 2008]. Sadly, about | | | | the provider has a choice between leaving it alone |
| 30 percent of over 5 billion claims generated | | | | and losing $10 on the entire incident or reworking |
| annually, are rejected, and surprisingly, only 50 | | | | it and then taking a chance of losing even more - |
| percent of the rejected claims are ever | | | | $35, in case of a repeat denial, or losing $5 if the |
| resubmitted [Walker et al, 2004]. Note that | | | | payer chooses to pay the previously denied part |
| physicians are giving up this revenue in addition to | | | | of the claim. |
| losing revenue because of the annual cuts of | | | | In other words, depending on the claim rework |
| allowed fees. (Since 2000, health insurance | | | | costs, denial amount, and repeat denial odds or |
| premiums increased by 73 percent compared to | | | | claim rework efficacy, it may be in the provider's |
| cumulative increases in inflation and wages of | | | | best interest to minimize losses by abandoning the |
| about 15 percent. Yet physician's inflation-adjusted | | | | denied claim instead of working the denial. |
| incomes dropped by 7 percent from 1995 to | | | | Therefore, a rational payer will deny a higher |
| 2003 [Herzlinger, 2007].) | | | | number of claims, counting on the good business |
| Why are the costs of collecting the earned fees | | | | sense of the rational provider who will only |
| so high and why, adding insult to injury, do | | | | rework a small subset of the denied claims, |
| providers often skip resubmitting rejected claims? | | | | specifically those claims that can be justified with |
| Insurance companies would like us to think that | | | | a quick cost-benefit calculation such as the |
| billing costs are high because of inefficiencies, and | | | | aforementioned example. Such rational payer's |
| they are quick to blame the doctors for them | | | | behavior explains the AMA findings much better |
| [Lisa Girion, 2008]: UnitedHealthcare spokesman | | | | than any inefficiency on the provider's side. |
| Gregory Thompson said, "Data show there is | | | | To justify rework of every denial and to eliminate |
| often a significant lag time between when | | | | a financial incentive for payers to deny claims, |
| services are provided and physician claims are | | | | providers need systems with low claim rework |
| submitted." Another often cited reason for delays | | | | costs and high rework efficacy. To "educate and |
| and underpayments is the time that doctors take | | | | empower physicians so they are no longer at the |
| to resubmit claims or provide additional | | | | mercy of a chaotic payment system that takes |
| information upon insurer's request. | | | | countless hours away from patient care," (William |
| But a recent AMA's "report card" shows a wide | | | | Dolan, MD, member of AMA board [Japsen, |
| variance between various payers in terms of | | | | 2008]) requires a leveled playing field for both |
| payment accuracy and timeliness, ranging from 61 | | | | providers and payers. And leveling the playing field |
| to 87 percent of the time [Bergen 2008]. Such a | | | | with the payers requires equal footing in terms of |
| wide variance in payment accuracy and timeliness | | | | strategies, processes, and resources [Lirov, 2007]. |
| across the payers contradicts the "physician's | | | | References: |
| inefficiency" theory. If this theory was true, then, | | | | 1. Bergen, Jane M. von, AMA issues report card on |
| the more efficient physicians should be losing less | | | | health insurers, Philadelphia Inquirer, June 16, 2008 |
| money on rejections than others, uniformly | | | | 2. Girion, Lisa, "Failings by insurers and Medicare |
| across all payers. Conversely, since the largest | | | | add more than $200 billion a year to the nation's |
| insurance companies are present in most states | | | | healthcare tab, report says," Los Angeles Times, |
| and are exposed to vast majority of physicians | | | | June 17, 2008. |
| and their claim delays, the differences in | | | | 3. Herzlinger, Regina, "Who Killed Health Care? |
| underpayments and denials must be attributed | | | | America's $2 Trillion Medical Problem - and the |
| first of all to the differences in payer's business | | | | Consumer-Driven Cure," McGraw Hill, 2007. |
| strategies and processes and not - to | | | | 4. Japsen, Bruce, "AMA to rate business practices |
| inefficiencies in the provider's office. | | | | of health plans," Chicago Tribune, June 16, 2008 |
| For instance, a simple calculation following an | | | | 5. Lirov, Yuval, Practicing Profitability - Billing |
| example in [Walker et al, 2004] shows that | | | | Network Effect for Revenue Cycle Control in |
| systematic claim denial is beneficial to payers | | | | Healthcare Clinics and Chiropractic Offices, Affinity |
| when the cost of rework outweighs the benefit | | | | Billing, New Jersey, 2007. |
| of resubmitting the claim. Let us assume $130 for | | | | 6. |
| initial charge, $55 - allowed amount, $29 - service | | | | |