Accounts Receivable Management
Numbers and technology dont drive accounts receivable and payable processes. People do. A patients experience related to charges something that may happen once in a lifetime is an indelible experience that fundamentally affects the financial survival of payers and providers. Frustration over bills quickly escalates, often negating fond feelings about a good clinical outcome.
Nine out of 10 patients neither understand their benefits prior to receiving services nor can decipher bills related to those services. This is true even though many employers have shifted benefits management responsibility to their employees and despite increases in the number of self-employed workers responsible for managing their own health care. The nuances of multiple payers, maximum benefits, out-of-pocket variables, copays, and the fine art of denial management are at best unfamiliar to member patients. At worst, they combine into a mind-numbing mystery to be avoided unless and until an unanticipated bill arrives in the mail.
When payers and providers maintain an adversarial or grudging relationship, matters become even more complicated. Patients end up as irritated, sometimes angry, go-betweens. They complain to their friends. They complain to their families. They complain to their employers. In an era of comparison shopping for health plans and health providers, the consequences can severely affect the bottom line. Conversely, everyone benefits when payers and providers collaborate to enhance everyones understanding prior to the need for services, and when they work together to reduce delays, denials, and collections. Happier consumers lead to more profitable health care plans and providers, who gain market share because of high levels of customer satisfaction.
The Key Processes
Despite differences in nomenclature from one organization to another, six fundamental processes make up the accounts receivable and payable arena:
- Charging how the provider determines costs and codes for specific services and communicates those charges and codes to the payer;
- Claims submission and adjudication how the provider generates and transfers a claim to a payer and how the payer processes that claim;
- Reconciliation and remittance processing how payers and providers reconcile what has been billed by the provider with what a payer has or will receive and what the payer has paid or rejected;
- Denial how a payer rejects a claim in part or in whole, generally based on either technical issues related to the information contained in that claim or clinical issues related to benefits covered in the patients policy;
- Follow-up and collection how providers pursue claims and patient bills that have not been paid or do not appear to have been processed or paid; and
- Grievance how payers, providers, and consumers appeal and rectify differences.
Accounts receivable and payable management falls primarily within the major process areas of processing transactions and managing the revenue cycle. (See Figure 8, The Payer-Provider Collaborative Process Model: Manage Patient and Member Financial Services, in the white paper A Framework for Collaboration: The Process Model.) The major process of customer inquiry management and its associated administrative costs depends heavily on how well the earlier processes work.
The white paper Scheduling, Eligibility, and Registration discusses the fundamental role information plays in these processes and how inconsistent or idiosyncratic information can affect them. The quality of information gathered at the front end and how well that information is maintained and updated have a critical effect on process workability and efficiency down the line.
The information continuum flows from enrollment through the grievance process. Collaboration can create significant benefits for payers, providers, employers, and consumers. When payers and providers improve communication and information quality at the point of registration, for example, the number of clean claims rises and the number of pending or rejected claims drops. When seeking improvements to their accounts receivable and payable processes, payers and providers would do well to investigate the quality of communication and information in the overall scheme.
How Charging and Claims Submission Work
Providers determine their charges for specific services primarily based on their costs and profitability goals. Their expectations are simple: They bill payers and patients, and expect to be paid in full when no contractual relationship exists with the paying party, or more commonly, paid in accordance with terms of their contracts with the payer. Payers also are driven by profitability and the pressure to keep premiums within reason. In contracting with providers, payers often set thresholds for charges and as part of the contractual terms, reimburse providers based on those thresholds and on the timing of claims submission. Many payers have time-based filing limitations, for example, that determine whether they ultimately pay a claim.
By working together to share information about their respective business requirements, payers and providers better understand the reasons for charges and thresholds. Better understanding each others business drivers helps to set realistic expectations for what can and will happen. For example, certain provider departments may not process and relay charges to the business office within the required time resulting in considerable lost revenue. Collaboration between payers and providers helps identify problematic departments and whether and how those departments can improve their turnaround time. In some cases, if departments have little control over the timing of charges, payers can rework time thresholds for those departments. This leads to significantly reduced bad debt and administrative rework.
When payers and providers collaborate on claims submission processes, both realize benefits. In Figure 1, focusing on attachments to claims helps create steps for reducing costs, which increases provider cash flow and improves customer satisfaction.
Figure 1. Two Perspectives on Claims Attachments
Collaboration can improve how providers generate and communicate claims to payers and how payers process those claims. Commonly, claims submission can be manual, electronic, or a combination of both. In addition, many providers use external resources to generate claims. Resulting system complexity and multiple processing entities frequently lead to lost or misplaced claims, or misinterpretations.
Collaboration and prudent use of technology offer a number of benefits. Electronic, streamlined processes enable providers to deal directly with payers, eliminating middlemen for significant cost reductions. In addition, mutually developed processes and systems dramatically improve communication and information quality. This is especially critical when claims depend on attachments such as discharge summaries or other records. Collaboration also leads to improvements in the quality of information in each claim as it leaves the provider. When claims information is consistent and correct prior to its delivery to the payer, claims processing flows smoothly.
How Reconciliation And Remittance Processing Work
At its most fundamental level, reconciliation and remittance processing encompasses two key activities how a provider compares the claim it has sent to the payer and what it has received, and how the payer moves that claim through its system. Claims are either received and paid by the payer, or received and rejected (for any number of reasons). Often called the black hole by providers, the payers claims processing system seems at first blush to be created purposely to delay payments.
Claims processing is necessarily detailed. Larger payers have highly complex systems, which makes identifying claims status for them and the provider more difficult. Claims undergo electronic editing prior to processing. Payers compare claims to benefits status and payment logic. Benefit plans, often determined by employers rather than payers, may be complex and varied. Claims move in and out of many such subprocesses. Payers can reject or deny claims at any stage, for something as simple as an improper code or as complicated as real-time changes in benefit status.
Current trends have added more quirks to the mix. Medical policies have increased in complexity, exponentially increasing the time required to resolve claims. In addition, varying degrees of HIPAA compliance by providers means payers must accommodate a variety of systems to exchange information. (As HIPAA compliance becomes more widespread, payers and providers will enjoy consequent benefits through improved standardization in transaction and claims processing.)
Consistent control measures at each stage of the payers process help here. Collaboration encourages payers to rationalize their systems and build meaningful controls that lead to administrative cost reductions. Streamlining or otherwise improving systems also significantly improves access to claims status. By working collaboratively with payers to develop controls and other measures, providers understand what happens to a claim at each stage and what they need to do to facilitate processing.
How the Denial Process Works
By collaborating in the areas of claims management (in addition to access, utilization, and care management), payers and providers can dramatically reduce the wasteful exercise of denial management.
When a payer denies a claim, providers must determine why, then adjust and resubmit the claim essentially repeating the claims resolution process. As with virtually every other process, higher quality and consistent information improve the outcome. When payers and providers work together to fix processes at the front end, they experience fewer denials and incur less rework. Decreased rework and denials translate into quicker payment of claims, and fewer provider and patient inquiries. By improving these processes, payers and providers can focus on delivering high quality care and preventative programs rather than focusing on administrative nightmares.
How the Follow-up, Collections, And Grievance Processes Work
Generally, follow-up consists of the provider:
- Tracking down unresolved claims and patient bills;
- Making some attempt to obtain payment for unresolved claims by billing patients;
- Interacting with patients about those bills;
- Referring unpaid bills to a collection agency; and
- By the time providers reach this stage the chances of realizing payment are slim to none, despite the duplicate cost.
Through collaboration, payers and providers can develop consistent timeframes for providers to follow up on claims status. This way they can identify problems long before those claims reach the collection process. When payers relay to providers the time it takes to pay a clean claim (Day X), providers can create meaningful follow-up systems (Day X + 1) and prioritize their efforts.
Collaboratively identifying and developing other aspects of the follow-up process generates benefits. Together, payers and providers can develop efficient ways for communication and other necessary tools, such as Web-based systems, that prevent claims from dropping through the cracks.
As with denials management, grievance management is best prevented in the first place. Collaborative relationships provide the opportunity to handle problems proactively rather than after the fact. Payers and providers can come together every two weeks or each month to discuss recurrent problems and create meaningful solutions to prevent problems (and associated costs) from happening again. Each also should have a means for identifying and sharing problems communicated by members or patients, so that repetitive issues can be resolved and eliminated.
Two Key Collaborative Efforts
Two collaborative efforts between payers and providers exemplify how well such efforts significantly improve accounts receivable and payable processes.
A major payer in Michigan, working with 14 providers, has created an electronic bucket for claims that dont pass initial edits and, as a result, effectively have not entered its system. Providers can access, rework, and resubmit claims essentially in real time, so that claims have all the right information before they enter the payers claims processing system. The payers and providers have worked together from ground zero to identify why and how claims were rejected, and develop tools and processes to prevent rejections. These included databases populated monthly by providers for improved data quality.
Figure 2 demonstrates how a major payer and various providers worked together to identify the causes and consequences of rejected claims.
Figure 2. Value Analysis Diagram
Highmark Inc. and the University of Pittsburgh Medical Center (UPMC) Health System also are collaborating to identify and understand the nature of denials. A significant technology initiative will address these and similar issues over the course of 10 years as the payer and provider join to consolidate and integrate operations. Some highlights include:
- The creation of dashboard, which allows providers to access information about claims status. This tool helps eliminate cost and confusion related to front-end edits and identifies trends for preventative measures.
- NaviNet, which allows providers to inquire into specific claims for individual members, and, by linking to dashboard, allows them to study claims volume at a broader level.
See the white paper A Success Story for more information on how Highmark/UPMC collaboration has significantly improved operations for both.
The True Value of Collaboration
Payers and providers benefit when they collaborate to better understand processes, improve the quality and communication of critical information, and develop meaningful transactional systems. Outcomes include enhanced efficiency and reduced costs for both. Such efforts also help to ease tensions created by negative shared history and experiences, and improve relationships with members and patients.
In a time of unprecedented change, consumer demands on health care plans and health care providers dictate unified efforts to achieve true operational excellence. By collaborating, payers and providers can ensure each will thrive together in the future.
