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There's gold in the zero balance review

When claims close, an opportunity opens to increase payment accuracy and revenue

The healthcare billing and payment process is Byzantine in its nature. To properly bill and collect from payers, providers must navigate a maze of complex revenue cycle processes, including proper patient identification, registration, authorization management, service documentation, charge capture, coding, billing and follow-up.

Then there are the payer responses. In 2013, 7% of paid medical claims had errors, according to the most recent data from the American Medical Association. Denied claims averaged about 5% that year, the AMA found. Insurers today are focusing more on prior authorization and medical necessity. Benefits are more restricted, and carve outs for services such as behavioral health are more common. More services are subject to deductibles, and in-network and out-of-network coverages are harder to track.

When providers finally receive payments, the complexity continues. People and systems post payments, record denials, transfer balances due to patients and/or secondary insurances, and take adjustments that were not taken at the time of billing.

Payers also face complexity. Benefit plans vary by patients' insurance groups. Patients change jobs and insurance; Medicaid HMO reimbursements vary by state and can be difficult to properly administer.

Both payers and providers must maintain consistent quality amid daily pressures, information system updates and staff changes.

After claims are closed, most hospitals and health systems, many with six figures' worth of claims annually, will not review accounts that have been paid or adjusted off. Certainly, they will look at outright denials, especially if there is a pattern. But closed claims mostly have been the Dead Letter Offices of the healthcare system.

And yet, there may be gold in them. In fact, it is likely.

For one thing, zero balance reviews, as they are known, offer the opportunity to find out how accurately are payers paying their bills. Often providers don't know this and are surprised by the results. These reviews also find many claims that can be reopened to recoup lost revenue. Even if it is too late to claw back payments, the zero balance review opens up vast opportunities to improve processes to ensure higher future revenue.

For one large urban hospital system in the Midwest, we identified $5.5 million in potential underpayment in just a few months, of which $3.9 million made the cutoff for appeal.

The majority of the underpayments and cash collections came from Medicare and Medicaid managed care plans and a large commercial plan. Often we were able to find coverage for eligible patients, including Medicaid, so the hospital was able to receive payments retroactively.

There were multiple issues with payment, including:

  • Claims with multiple errors being sent by the provider

  • The payer is not remitting add-on payments

  • Outlier remittances underpaid

  • The payer deliberately switching out DRGs to lower complexity to reduce payment

It takes a lot of sophistication to figure out if money has been left on the table. Providers need technology, staff and advanced analytical capabilities to manage this process effectively. Some of the challenges of this process include:

  • Determining the expected reimbursement for each account and comparing it to the actual reimbursement

  • Finding out what happened to the account last. Was it paid appropriately? Were adjustments taken appropriately, such as contractual or denial write-offs? Did a system take any adjustments inappropriately, without humans knowing it?

  • Looking for lower-than-expected payments that nevertheless matched the claim, which may signal that the claim lacked a modifier or a field was filled in wrong, leading the payer to pay the claim as it was submitted

If a provider does not have sophistication, their resources will spend time on work that yields little value. Those resources will become disengaged and ineffective.

Also, there is a need for professional advice on how to fix the underlying problems found in the zero-balance review. Often these processes require:

  • A reimbursement analyzer, in our case a program that calculates the expected reimbursement from payers

  • Automated retrieval of latest payer claim statuses (did the payer adjudicate the claim as paid in full, as a partial payment or as a denial?)

  • Analysts who can organize data to find trends

  • Staff who can analyze potential billing errors

  • Staff who can analyze contracts/reimbursement issues

  • Personnel to appeal inappropriately denied claims

When the proper mix of people, processes and technology is brought to bear, staff engage in meaningful work and gain energy from identifying and solving problems. Motivated staff, supported with the right resources, can mine zero balance accounts for higher collections and insights needed to correct ongoing errors. Providers gain an unexpected influx of cash as well as the confidence that future claims will be paid more accurately.


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