August 31, 2010
Featured Article
Make more money with payer-provider transparency

A portal-based solution called MedeAnalytics makes claims data easy to access and share and supports custom metrics for Blue Shield California and its partners.

If you ask business executives from hospitals about their most pressing issues, you're likely to hear phrases like "boost revenue cycle yield," "improve reimbursement" and "reduce claim denials." They want prompt and accurate reimbursement for patient services.

Blue Shield of California, a not-for-profit health plan with 3.4 million members, would hear these words regularly from its network of hospitals, but not during casual banter or over dinner. Instead, they rang out during heated and tense contract negotiations with millions of dollars at stake. By some estimates, hospitals lose as much as six percent of their revenue due to preventable denials that aren't appealed, undenied claims paid below contracted rates or inefficiencies in billing.

"Negotiators from hospitals would bring boxes of unpaid claims into the room and put the skids on further talks until those claims were resolved," says Juan Davila, senior vice president for network management, Blue Shield of California. "That triggered a lot of finger pointing about who was to blame for those claims. It was intense."

Sometimes a hospital's perception of BSC's performance was skewed. For example, the provider might think the health plan was taking 40 days to pay when the data showed that it took the hospital 30 days to bill and the plan 10 days to pay.

Increasing responsiveness and transparency

As this scene played out with different hospitals, Blue Shield knew something had to change. The company was ill equipped to quickly respond to ad-hoc requests from hospitals for claims data. Without easy access to operational data, claims and network management representatives were spending many hours manually compiling data upon request, which only served to drain administrative resources. This inefficiency and lack of operational insight compromised Blue Shield's ability to effectively address claim settlement demands and hurt the company's ability to negotiate competitive rates during contract talks.

After several of those "teachable moments," Blue Shield started to think about a program to help bring more visibility around claims performance. The company also believed it was aligned with hospitals in wanting to reduce administrative expenses and devise new ways to share data and work together on solutions. Of the $1.2 trillion wasted in the entire U.S. health system each year, $210 billion of that waste is a result of inefficient claims processing - the second-largest area of waste, according to PricewaterhouseCoopers.

Blue Shield interviewed several hospitals in its network to explore program requirements and to determine what matters most to providers about conducting business with the health plan. The response from providers was blunt: Blue Shield is judged by how well it pays claims in compliance with contracted rates and how collaboratively it works to resolve issues.

Finding a technology partner

In early 2007, Blue Shield initiated a search for a technology partner to help answer this challenge. Blue Shield wanted an analytics solution that would make claims data easy to access and share with partners. It also needed to be flexible and powerful enough to support custom metrics that were tied to the operational hot buttons found in each provider's contract.

Blue Shield conducted its search using the following criteria:

  • Functionality: Did the solution have an intuitive interface that would be suitable for the end users in Blue Shield's claims and network management teams? Did it have off-the-shelf reports that could be put to use immediately? How robust was the custom reporting capability? How did it handle data management?
  • Data sharing: How easily could the solution interface with existing systems? Would it be easy to access and share data with outside partners?
  • Delivery method: Was the solution Web based or would it be necessary to install client software? How would each scenario affect usability, IT staffing, timing and rollout?v
  • Client service: Did the vendor have experienced, capable client relations staff to provide pre-sale consultation and post-sale training and support? Would access to such staff be included in pricing?
  • Support: What were the terms of the service level agreement? What processes were in place to get a system back up if it ever went down?
  • Time-to-value: How quickly could users go live on the system? How steep would the learning curve be?
  • Management team: How experienced and responsive were the vendor's senior leaders? Did they understand health care in general and Blue Shield's needs in particular? Was the company viable?
  • Customer references: Did each vendor have health plans as customers? If so, which of these clients had challenges similar to Blue Shield's? Would these customers be available for reference calls?
  • Cost: What was the pricing structure? What were the upfront and ongoing licensing fees? What was the budget?

Blue Shield considered a range of partners offering either best-of-breed solutions or integrated systems. After conducting an initial screening of numerous vendors, the company chose three to undergo a rigorous evaluation process consisting of interviews, site visits and demos. Middle and senior management from Blue Shield's IT, claims and network management teams participated in the process, which lasted several months.

Blue Shield's senior vice president for network management approved the selection of a Web-based solution offered by MedeAnalytics, based in Emeryville, Calif.

Implementing the pilot project

With MedeAnalytics in place, implementation was set to begin on a pilot project for the new claims transparency program. Blue Shield recruited a large Texas-based health system with a major presence in California to participate in the pilot. Months of team work went into constructing the pilot program before both Blue Shield and the provider were able to agree on the key performance indicators they would use for the program. After data validation and testing, the partners launched the pilot in January 2008. The implementation process took six months.

In September of that year, Blue Shield and the health system from the pilot presented results to the public, and Blue Shield's Partnership in Operational Excellence and Transparency (POET) was born.

Rick Igram, vice president for contracting at St. Joseph Health System and an early adopter of POET, remembers his reaction when he first heard about the program at the conference. "What got my attention was Blue Shield of California's willingness to concede that there was room for improvement around how they handled claims. When they showed us how they could help both parties improve the claims payment processing cycle and lower costs, I was impressed."

Rolling out POET

Launched in late 2008 with 14 hospitals, POET advances Blue Shield's effort to be transparent with partner hospitals by openly sharing claims information. It also defines a process for collaborating with hospitals to iron out operational kinks at their root causes lest they slow revenue cycles.

The portal from MedeAnalytics makes available data on key performance indicators:

  • Claim cycle time (from discharge to claim payment)
  • Submission method (paper versus electronic data interchange)
  • Denial volume
  • Appeal volume and outcome
  • Blue Card claim volume

In as little as a week, participating hospitals can go live on the portal to access their own claims. Blue Shield holds quarterly meetings to review improvement opportunities with hospital representatives who manage patient financial services and contracting.

In addition to making operational data around claims transparent to hospital partners, POET also helps identify where Blue Shield can improve its own administrative performance. Where claims data was once dispersed and difficult to share, POET is now helping the health plan better understand and resolve claims disputes, payment discrepancies, authorizations, case management and practice pattern variations.

The issues POET has helped address so far include:

  • Changing Blue Shield's process to better coordinate access to hard-copy authorizations. This accelerates processing and helps lower claims denial rates.
  • Communicating more precisely about the need for more documentation. This reduces the administrative burden for hospitals and improves Blue Shield's processing speed.
  • Working with hospitals to take better advantage of submissions made via electronic data interchange (EDI). POET helped St. Joseph correct a coding issue that was impeding the claims process.

Calculating ROI

ROI to date has been measured in administrative efficiencies and improved provider relations.

  • Blue Shield has reduced the claims cycle time by two days.
  • POET-enabled hospitals have experienced a 15% reduction in claims denials.
  • First-pass claims-processing rates have gone up while back-end reworks have decreased.
  • Provider relations have improved as disputes around claims have gone down.
  • Contract talks have gone more smoothly as Blue Shield has been able to simplify contract language and leverage improvement in claims performance into rate negotiations.

Blue Shield is expanding and enhancing POET on multiple fronts. So far, nearly 100 hospitals are participating, with more expected this year.

For more information on MedeAnalytics, click here.


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