How Pre-Payment Review Elevates Payer Payment Integrity

December 06, 2021 - Payer payment integrity strategies are generally built around post-payment reviews to ensure appropriate reimbursement was sent to providers for medically necessary services. However, truly comprehensive payment integrity strategies have shifted to pre-payment reviews to improve claim accuracy and reduce administration burden on both sides.

Medicare and Medicaid, as well as many large private payers, have used post-payment reviews for years to verify they are reimbursing providers not only for appropriate, medically necessary care, but also claims that are submitted according to agreed-upon billing rules.

Payers have established workflows and implemented technology to support the post-payment review. The approach to payer payment integrity has also been viewed as more convenient by some payers since the claims have already been adjudicated and contractual information has been identified indicating a potential over- or under-payment.

“Post-payment review is seen as easier because claims have already been paid so payers and third-party administrators can already see, contractually, how that claim is paid,” explains Amy Anzola, vice president, Hospital Bill Review at Zelis.

However, this post-payment approach and the resulting pay-and-chase mentality has left money on the table and increased administrative burden.

Large public payers like Medicare have already started this shift to address the challenges of post-payment review and they have seen success with identifying improper payments before they are paid to providers. Medicare fee-for-service alone has seen its lowest improper payment rate after shifting from pay-and-chase to pre-payment review.

The pitfalls of post-payment reviews

Despite its popularity, post-payment reviews have actually increased administrative burden for both payers and providers.

Nearly one-third of providers have a negative experience with payer audits, according to a 2020 Frost and Sullivan study. One in ten providers responding to the study also said the audits cost them $1 million in administrative costs annually.

“The issue with post-payment review is the way you recover. It is an offset,” states Anzola. “That offset can be a pretty big dollar amount and years after the service was delivered. It can end up being really burdensome for the provider.”

The claw back process from post-payment reviews also costs payers.

“Recovering funds that have already been paid is challenging and more time- and resource-consuming,” Anzola states. “This is rare, but occasionally when you have to perform reviews post-payment and chase refunds, a facility may have gone bankrupt. Then, there is no opportunity to collect funds from those companies.”

What’s more, post-payment reviews have resulted in more improper payments paid out to providers, not less. In traditional Medicare, the improper payment rate was near 14 percent in 2014 when CMS relied heavily on the pay-and-chase method for correcting payments with insufficient documentation and other errors. The federal agency has since moved away from the pay-and-chase method to focus more on upfront billing education and predictive technology to identify improper payment. Just recently, CMS reported that the improper payment rate has dropped to a historic low of 6.26 percent.

Pre-payment reviews can help payers reduce their own rates of improper payments. Most improper payments do not stem from healthcare fraud. In fact, CMS found that the majority of improper payments in Medicare and Medicaid were caused by documentation issues, followed by medical necessity problems and incorrect coding.

Reviewing claims before they are paid out enables payers to identify the top reasons for improper payments and stop improper payments before they leave the payer and hit a provider’s bank account.

Adding a pre-payment component to payment integrity

“If you’re able to catch payments before they go out the door, it is more efficient on the payment and the revenue side. It is also less of an administrative burden on both the payer and the provider side,” stresses Bonnie Coburn, vice president, Product Claims Editing at Zelis.

Despite its advantages, pre-payment reviews are not part of many payment integrity strategies. Many payers have never done the audits before, so dedicating the resources to adding or expanding pre-payment review can feel daunting. Some payers also experience challenges with accessing the contractual details necessary to review reimbursements before they go out. Post-payment reviews are easier in the sense that payers can see how the claim was paid and why based on contractual obligations.

But as payers seek to reduce provider abrasion and reduce their own overhead, technology is helping to implement pre-payment reviews.

Payers can leverage technology and service partners to implement and automate prospective payment integrity solutions. Editing solutions are available to identify issues on claims before they are paid to providers. A solution can also incorporate a payer’s specific billing policies to ensure claims are paid according to specific contracts with providers, as well as in compliance with CMS and other relevant regulation.

The solutions do this without adding to a payer’s administrative workload. Payers can invest in solutions that integrate with their core claims processing systems to examine every claim that comes through. Some solutions also integrate with adjudication platforms so the technology can review claims in near real-time, without the back-and-forth claim exchange needed to coordinate payment integrity across solutions.

Technology can take away the headaches of implementing pre-payment reviews while saving payers money that would have been given to providers inappropriately. However, technology is not a “set it and forget it” solution, warns Coburn.

“There also has to be engagement from the clients and the health plans in order to keep them running efficiently and meeting specific business and policy needs,” Coburn states.

A comprehensive approach to prospective payment integrity also relies on operational processes. Payers should tap into the knowledge of clinicians and certified coders to ensure billing compliance and appropriate payment. Clinical chart and itemized bill reviews are key to implementing a successful pre-payment review pillar to their payment integrity strategy. The reviews help payers to comb through more complex claims (e.g., specialty pharmacy and air ambulance claims).

With technology backed by industry experts, payers can engage in both pre- and post-payment reviews when necessary, and incorporating both types of reviews is key to executing a robust payer payment integrity strategy that reduces administrative costs while streamlining the claims process for all involved.