Understanding the Cost of Ineffective Payment Integrity Operations

October 31, 2022 - Effective payment integrity on the part of payers is not only essential to reducing administrative costs but also improving relationships with providers that ultimately benefit members.

Administrative costs comprise between one-quarter and one-third of total healthcare expenditures in the United States, which recently surpassed $4 trillion annually and is likely to increase. While administrative spending is necessary for the healthcare industry to operate properly, a growing portion results from waste in the form of inefficiencies and errors.

A recent review of overall healthcare spending in the United States estimated that 25 percent was due to waste across the healthcare system, ranging from $760 billion and $935 billion waste. Administrative complexity — such as billing and coding costs, physician administrative burden, and payer administrative burden — was the greatest contributor to waste, costing the healthcare system $248 billion. Another analysis of healthcare expenditures found that billing and insurance-related activities account for between 32 percent and 52 percent of administrative spending by physician groups and hospitals and 85 percent by commercial payers.

For providers and members, administrative complexity can lead to delays in payment and care access. Earlier this year, the Office of Inspector General investigated Medicare Advantage denials and found that one in five claims were denied despite meeting coverage and billing rules. Findings ultimately led the federal agency to conclude that “avoidable delays and extra steps create friction in the program and may create an administrative burden” for members, providers, and payers themselves.

A deeper understanding of payment integrity

While administrative complexity leads to increased spending to resolve inaccurate payments and denials, it also proves costly to the relationships payers have with providers and members. The right approach to payment integrity ensures that payments are made correctly to providers according to contract terms and policy and free of error, fraud, and abuse.

Payers are investing in payment integrity solutions to avoid potential issues before paying claims, minimizing disruptions to timely reimbursement for providers and potential impacts on financial experience for members. But to realize the best return on investment for a payment integrity solution, payers must identify a vendor with a suite of capabilities to ensure the accuracy of all payments with analytics and intelligence and improve interactions with providers through clear communication and education.

“The conversation for the industry needs to start being about more than savings to the payer and more so net savings,” says Jaret Giesbrecht, Senior Vice President of Payment Integrity at Zelis. “It’s easy to look at the top line and overlook the impact of a payment integrity vendor’s approach. A payer needs to know from its networks and customer service groups how much noise the approach is causing our system to evaluate that vendor’s full impact.”

According to Giesbrecht, competition in the payer space is ramping up pressure on health plans and third-party administrators (TPAs) to consider more closely how their pre- and post-payment operations impact their future business.

“As things only get more competitive in the market, having good relationships with the providers is important,” he explains. “If a provider believes a payer is adding costs, it could negatively impact provider negotiations and open the door to price increases for members. Fighting healthcare costs effectively is impossible when a payer adds cost through inefficient or overly demanding operations.”

Why communication and transparency matter

A proven payment integrity vendor can ensure that all parties — payer, provider, and member — benefit from greater accuracy and transparency.

“A payment integrity vendor can provide a different kind of perspective, able to zoom out to understand the many nuances that color the relationships between payers and providers,” says Bonnie Coburn, Vice President of Product Claims Editing at Zelis.

“A true payment integrity partner is able to serve as an effective mediator and foster more collaborative relationships between the two that ultimately benefit members,” she continues. “Getting things right the first time builds trust and allows for more productive interactions down the line.”

In light of ever-changing policies and variations in contractual arrangements, payers need to trust that their payment integrity vendor is able to keep pace with changes while meeting the terms and conditions that govern claims and reimbursement.

“Content changes at a rapid pace and needs to be cross-walked against what the individual insurer is doing from a policy or contractual standpoint with providers today,” Giesbrecht emphasizes. “That requires a lot of hands-on, regular interaction that many payment integrity vendors cannot provide due to a lack of investment and understanding of the human aspect of pre- and post-payment operations. Without consistent updates to dynamic content, payers will continue to have incorrect denials that add cost to the overall system.”

Proper claims management and reimbursement require a high level of interpretation, which places a premium on clear communication and transparency.

“The human factor is sometimes underestimated, and it’s worth noting that coding is interpretive,” Coburn maintains. “There are gray areas that must be resolved. Having two-way communication and the ability to educate providers on the causes of errors or the reasons behind certain determinations allows feedback to inform future action. It is important to update not only technology but also payment integrity staff to bring clarity to complexity.”

The right combination of people, process, and technology provides the foundation for both effective payment integrity and meaningful collaboration between payers and providers that reduces cost and inconvenience to the member.

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Zelis harnesses data-driven insights and human expertise as scale to optimize every step of the healthcare payment cycle. We partner with more than 700 payers, including the top-5 national health plans, Blues plans, regional health plans, TPAs and self-insured employers, 1.5 million providers and millions of members, enabling the healthcare industry to pay for care, with care.