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The Managed Care Insider eNews
Volume 4 Number 3
March 2002
Welcome to The Managed Care Insider eNews.
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The focus of this issue of The Managed Care Insider eNews is the claims audit
- not a very sexy topic, but fundamental to the business bottom line. Paula Nordhoff
explains why a third party audit is valuable and offers tips on how to select
an auditor. Read on and, as always, please email your comments to insider@scheur.com.
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Does Your Claims Shop or Delegated Provider's Claims Shop Need a Check-up?
by Paula M. Nordhoff
Managed care organizations often wait until times of duress - regulatory oversight,
customer or provider complaints, threatened or actual litigation, failed system
conversion, sustained downturn in claims performance or increasing internal management
concerns about numbers and performance reporting - to do an outside check-up
on claims processing, one of the most vital customer service functions.
The reasons for delaying a claims audit are varied. While vital, claims is not
perceived as sexy or business-generating and audits cost money. Management often
views claims as "back room" and not as important as marketing, finance
or other key MCO business functions. Sometimes, the mistaken belief is that claims
has been automated to such a high degree that problems must be minimal, or the
internal auditing process identifies problems and can fix them, or the big outside
audit done a couple of years ago fixed the problems and things must be okay.
But a troubled claims shop can mean business loss, litigation or regulatory intervention.
In most regulatory environments, MCOs have a contractual obligation to periodically
review the performance and standards of functions delegated to outside entities,
whether they be national mental health delivery organizations or local provider
organizations. Even in meeting obligations, reviews may not be comprehensive
enough to detect thematic issues, which could spell big trouble down the road
for the MCO and the delegated entity.
In reality, claims is one of the biggest windows into the entire organization
and its functioning, or lack thereof. Some of the most nagging and prolonged
customer service problems are related to a claims processing issue "gone
bad." In most cases, these nightmares involve several departments, not just
claims.
Why Conduct Third Party Audits
There are a number of reasons to consider hiring a third party to conduct a fully
randomized and statistically valid audit on an in-house or a delegated provider's
claims shop:
Proactive identification of problem patterns
Clarification and focus on likely problem areas that may be small in scale or
endemic in the organization's processes
Post-implementation of a new product or major changes in benefits and/or provider
contracts
Slippage in claims statistics in terms of IBNR, pends, etc.
Post-audit conducted by a large account
Post-system conversion
Potential or actual sale or acquisition
Litigation
Verification that revenue and cost control maximization is occurring
Post-periods of large staff and/or management turnover
Why Use a Qualified Third Party
An honest and effective contracted audit firm will listen to concerns and help
strategize an approach to evaluate the potential issues and ramifications. In
some cases, it might be worthwhile to do an operations assessment prior to jumping
into a full, statistically valid claims audit. An operations assessment - looking
at business processes and documents, conducting staff interviews and evaluating
current claims reporting - can help to validate initial concerns, provide information
that the issues may be different than portrayed, or focus more on a couple of
processes rather than the whole operation. This assessment approach is viable
and cost-effective. If the assessment reveals significant concerns, then a statistically
valid claims audit may indeed need to be the next step.
Use of a qualified and credible third party is required in situations involving
regulatory concerns, litigation, provider contract disputes, and sale or acquisition,
but is helpful even in situations of internal concern for a number of reasons:
Objectivity
Speed of audit conduct and results
Minimal disruption to the claims organization and its productivity
Documented process and comprehensive methodology
Expertise to sort out symptoms from source problems
Verification of problems by use of source documents, not just policies and procedures
What Criteria Should You Use in Selection of an Auditor
A number of very important selection criteria can be applied in selecting a group
or firm to do an audit:
1. Demonstrated knowledge and expertise in MCO claims processing, enrollment,
provider file/contract maintenance and systems.
2. Auditor client list and contacts.
3. Ability to demonstrate, in detail, a comprehensive audit methodology, including
development of the universe of claims for sampling, random claims sampling, and
procedural steps for assessment or audit conduct.
4. Credentials of resources, both employees and contractors, who may be assigned
to the project.
5. Reasonable timeframe projected to meet the organization's needs.
6. Documented process for training the audit team.
7. Willingness to contract to deliver not only a results report, but also all
the work papers, sampling methods, claims used in the sample, audit findings
and staff rebuttals.
8. Written method for error categorization, calculation and method for counting
claims in more than one error category.
9. Indication as to how to determine statistical validity of sample size and
accuracy level needed.
For example, if the audit is leading to litigation or other serious business
situation, the organization may want sampling with a statistical validity variance
factor of only + or - 2% to 5%. However, if the purpose of the audit is to identify
internal business problems only, a + or - 10 to 15% variance may be sufficient.
These variations not only drive sample size, but also drive the level of effort
required to conduct the audit, and therefore the cost.
Audits can serve to identify trends or problems, as well as help the organization
maximize revenue. Additionally, such a check-up can demonstrate areas of improvement
for client servicing and prevention of customer or regulatory concerns. In the
majority of cases, such check-ups do save significant dollars over the dollars
invested in the actual audit process.
How can SMG help?
SMG over the last fifteen years has conducted claims audits for large, national
MCOs, both private and publicly traded, as well as smaller regional plans. The
request for our services has ranged from preventive care auditing to failed system
conversion leading to a clean-up plan to litigation where we have helped our
clients successfully defend their positions. SMG has also assisted clients in
developing and executing corrective action plans and programs to clean up identified
problems and stabilize future operational performance.
Our expert team brings decades of technical, managerial, systems and auditing
experience to our clients. We have conducted training sessions for some of the
industry's largest professional associations and authored articles and book chapters
on claims auditing, coordination of benefits and operations.
Give us a call or check out our website at http://www.scheur.com.
About the author: Paula M. Nordhoff is SMG's special consultant in improving
the productivity and profitability of managed care operations. With over 26 years
in senior management and operational capacities with MCOs, including Southern
California Edison's Health Care Department, Baxter Health Data Institute and
Pacific Mutual Life Insurance Company, Paula serves SMG clients in project management,
operational start-up and turnaround, operational auditing and best practices
implementation.
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Sites and Sounds on the 'Net
In keeping with this issue's focus on MCO claims shops and audits, we present
the following sites that cover this area.
A claims backlog can be disastrous for an MCO. Read more at http://www.scheur.com/scheur.nsf/smg/NewsletterVol1E5.htm
Healthcare internal auditor professionals interested in educational opportunities,
networking and other support services will learn more at the Association of Healthcare
Internal Auditors Web site - http://www.ahia.org
The Association for Benchmarking Health Care provides resources on processes
and techniques to identify best management practices at http://www.abhc.org
Employers can learn more about how to "audit" their health benefits
plan at:
http://www.businessfinancemag.com/archives/appfiles/Article.cfm?IssueID=172&ArticleID=5742
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WE CAN SHOW YOU THE MONEY!
If you're looking for extra profit margin in your health plan or provider organization,
SMG can show you several areas for increased margin that you may not have considered.
Coordination of benefits allows you to shift responsibility for payment when
there is double coverage or where individuals are covered by both insurance and
Medicare. Third Party Liability claims offer you another opportunity for maximizing
revenue, in the range of $0.70 to $1.00 PMPM.
We are the national experts on COB and TPL. In fact, our team wrote the chapter
in The Managed Health Care Handbook. We've helped hundreds of organizations maintain
or improve their financial and organizational health.
Our team will assess, evaluate and deliver a treatment plan that speaks to your
bottom line. We can perform this service as a one-time check-up or on a periodic,
as-needed basis. Or if you prefer, we can show you how to get the information
you need to effect change on your own. Contact us at nbelle@scheur.com or http://www.scheur.com.
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What's New at SMG?
SMG has just introduced its new Strategic Marketing service to help your group
practice, health plan or hospital build market share. We will help you enhance
your revenue stream and differentiate yourself from competitors through market
research, competitive analysis, knowledge management, marketing and sales campaign
design, public relations and branding.
We develop comprehensive communications and marketing action plans that deliver
your message to your target audience, create trust and confidence in your products
and services, and strategically distinguish you in your market niche: from brand
image to sales, from public relations to advertising, from email to Web site
design, from analysis to implementation.
Learn more about how SMG will help you meet and exceed your business goals at http://www.scheur.com or
contact us at nbelle@scheur.com.
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End of The Managed Care Insider eNews,
Volume 4, Number 3.
Scheur Management Group (SMG) is one of the most experienced specialized healthcare
operations management and business revitalization consulting firms in the country.
Our expertise is in time-sensitive analyses, strategic business and market planning,
operational re-engineering, and communications, as well as implementation of
start-ups, expansions, and new products. The firm's clients cover the spectrum
of insurers, managed care organizations, physician groups, integrated delivery
systems, hospitals, employers, governmental entities, vendors, and other providers.
Contributing to this edition is Paula M. Nordhoff. Editing and Research by Judith
Jaffe. Production Coordination by Nancy K. Belle.
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