How Payers Can Drive Better Payment Integrity Value

With health plans facing a 7.0% year-over-year medical cost trend for individual and group markets in 2024, as well as medical loss ratios nearing 90%, healthcare executives are reinvigorating their payment integrity programs to help manage their financial performance. Plan leaders are rethinking their traditional “piecemeal” payment integrity strategies in favor of a more holistic, coordinated approach designed to achieve higher value for employers, members, and providers.

For plans also coping with inadequate reimbursement rates from Medicaid, high-performing payment integrity programs can help them ensure their sustainability and maintain high-quality care without cutting benefits.

Reaping More Value From Prepay Review

The advent of better technology allows plans to marry their prepay and postpay efforts and optimize their payment integrity approaches. By adopting a more holistic view of payment integrity, plans can also shift more functions into the prepay space to create efficiencies and reduce provider friction. Plans should consider these prepay approaches:

Implement second-pass claims editing. Relying on primary claims editing isn’t adequate to safeguard against inappropriate payments. Second-pass or final-filter claims editing, however, can augment plans’ payment integrity efforts.

Second-pass editing is often difficult for overburdened plans to manage in-house and therefore many skip it, potentially leaving as much as 4% of their annual claim spend on the table, according to our experience. Plans can improve their claims payment accuracy and reduce medical costs by working with a partner to handle second-pass editing. One large Medicaid payer avoided $200 million annually in payment errors, or 2.7% of its annual claim spend, by using second-pass editing to close gaps in its primary claim editing process. Small plans can also realize significant benefits — particularly because their stakes are higher.

Make diagnosis-related group (DRG) validation and clinical reviews more comprehensive with artificial intelligence. Typically, health plans can only recover 60% to 70% of inappropriate payments. However, AI technologies like machine learning and natural language processing create additional value by reducing the number of medical record requests sent to providers, therefore limiting reviews to charts that are most likely to yield meaningful value to the plan. This can both reduce recovery expenses and decrease the burden on provider organizations.

Improve coordination of benefits (COB) with a “pause-and-pay” approach. Using advanced analytics and precision selection, plans can reduce overpayments by reviewing claims and determining payment responsibility before they are paid. As a result, plans can increase their value while reducing the risk of provider and member abrasion caused by the standard yet inefficient “pay-and-chase” approach.

Improving Postpay Results with Data Mining and Machine Learning

Even though holistic payment integrity programs aim to shift more functions into the prepay space, a plan’s postpay efforts are just as essential, particularly when they are complemented with AI. 

To be proactive in the postpay arena, plans should also prioritize the following strategies:

Keep payment policies updated. With payment policies in a constant state of change, plans that fail to update a single policy could stand to lose millions in just a few months. One health plan saved $20 million in three months after retrospective data mining uncovered a costly contract issue related to medical pharmacy claims. Another plan achieved $1.6 million in savings when data mining revealed an incomplete policy update.

Focus on fraud, waste, and abuse. A holistic payment integrity program combines technology and expertise to target FWA in both the prepay and postpay spaces. Plans that harness the power of AI are more likely to detect anomalous billing patterns and potential FWA schemes. One health plan was able to uncover a suspiciously high volume of certain HCPCS codes billed by one provider through this approach.

Gaining Confidence And Certainty

Despite the power and potential of AI and other technology, software alone is not enough to provide the savings and efficiencies that plans need to reach their performance targets. Working with a service provider whose incentives are aligned with the plan’s goals can ensure there is an unwavering focus on creating value. Plans can also benefit from partners with deep clinical expertise who can form collaborative relationships with medical directors and payment integrity leaders in plans of all sizes and in different geographies.

In addition, leveraging experiences from a wide range of plans and benchmarking key performance measures can give healthcare executives the confidence they need to avoid second-guessing their decisions, so they can direct their payment integrity efforts with greater certainty.

Ultimately, taking a holistic approach to payment integrity can help plans achieve value beyond medical cost savings by reducing their administrative burden, fostering better relationships with providers, and improving affordability for members.