Prospective Payment Review: The MLR “Silver Bullet” for Health Plans – 09/28/10

SEP 28

As healthcare spending levels swell to unprecedented levels, commercial and government payers alike have been looking for ways to stem the amount of fraud, waste, and abuse (FWA) prevalent in the U.S. health system. Within an already overwhelmingly complex payment environment these issues are anything but an easy-to-fix problem.

For years the payer industry has been relying on a “pay-and-chase” or retrospective method for recouping billions of dollars of excess and unnecessary payments. This archaic approach is extremely inefficient, employing labor-intensive processes that in some cases take years to complete.

Most are out-matched and watching the size and scope of the FWA problem increases to unprecedented levels. For some perspective, the National Health Care Anti-Fraud Association (NHCAA) estimates that of the 70% of payers that employ an anti-fraud and abuse system with the vast majority still following a retrospective approach.

By shifting focus to the pre-payment setting, payers can generate millions in incremental savings through a reduced medical loss ratio (MLR). MLR discussions are heating up as health plans come under pressure to increase their revenue contribution per dollar spent by members to actual care by reducing administrative tasks (like payment reviews) and other fees (like broker commissions). Legislative mandates for MLR thresholds will push the dollars spent on actual care from 65 cents to 85 cents (or more) as health reform evolves. The process improvements needed to accomplish these levels are significant.

Effectively conducting a prospective payment review process via commoditized editing and claims processing solutions won’t cut it. Rather, sophisticated technology solutions which include analytics, clinical content, and skilled human intervention are table stakes.

TripleTree is convinced that an integrated, end-to-end approach incorporating each of these elements is the most effective means of paying the claim right the first time – and represents the silver bullet in stemming losses associated with FWA. Prospective payment review simultaneously reduces the incidence of FWA and curtails the enormous expense associated with identifying, chasing down, and collecting overpayments after the checks have been cashed.

Successful vendor solutions from the likes of TC3 HealthiHealth Technologies, and HealthCare Insight (a Verisk company) go far beyond administrative automation by providing integrated technology-enabled platforms utilizing predictive payment analytics, deep clinical content derived from hundreds of trusted sources, and experienced payment policy specialists and clinicians. These important components are proving the ability to drive MLR savings of 0.5% to 2.0%, which in turn can improve a health plan’s operating profits by as much as 25-50%.

Our advisory work of assessing best-in-class vendors who are optimizing the medical claims payment processes and driving down administrative costs for health plans around FWA is extremely active.

Let us know what you think and have a great week!

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Seth Kneller