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Highmark Blue Cross Blue Shield

The Highmark/UPMC success story is a rare example of a payer and a provider coming togetherto work as one system with shared process design and collaborative IT development.

Players

Highmark

Highmark Inc., a Pennsylvania-based nonprofit corporation, provides a range of insurance products to its approximately 23 million people nationwide.

Highmark operates as Highmark Blue Cross Blue Shield in western Pennsylvania and as Highmark Blue Shield in the rest of the state, partnering with Blue Cross of Northeastern Pennsylvania and Independence Blue Cross.

University of Pittsburgh Medical Center

UPMC is the leading health care system in western Pennsylvania and one of the largest nonprofit integrated health care systems in the United States. UPMC, with its affiliation with the University of Pittsburgh School of Medicine, enjoys a strong national and international clinical and research reputation, drawing patients from throughout the United States and dozens of countries across the globe.

UPMC’s consortium of health care facilities includes 20 tertiary care, specialty, and community hospitals. The health system also includes primary care and specialist physician practices, cancer care, imaging and surgery facilities, rehabilitation services, in-home services including hospice care and durable medical devices, retirement living and long-term care, pharmacy services, and an array of health insurance products. With more than 35,000 employees, UPMC is the largest employer in western Pennsylvania.

Capgemini

Capgemini is one of the world’s largest providers of consulting, technology, and outsourcing services. The company helps businesses implement growth strategies and leverage technology. The organization employs approximately 48,000 people worldwide and reported 2003 global revenues of e5.754 billion.

Capgemini has the leading consulting practice serving the health industry, delivering broad-based, results-driven solutions for today’s business challenges. Capgemini offers a wide range of health-specific solutions for health care provider and payer organizations, including business and clinical transformation, information systems integration and management, outsourcing, customer relationship management, revenue cycle and support service enhancement, and supply chain management.

Background

In the health care industry, a difficult interface exists between health care providers and payers regarding processing and paying claims. IT systems in health care are extremely complex and a close connection between payer and provider to diagnose cross-organization problems in both technology and process is rare. Payers are pressured by legislated prompt-pay regulations to finalize claims quickly and have a variety of responses – rejecting some quickly in order to finalize claims and avoid penalties. For other payers, in order to avoid a denial, an attempt to resolve an issue on a claim is made, resulting in a long finalization cycle, despite potential penalties. Regardless of an individual payer’s response, a lack of accurate information often necessitates denial. In response, providers are often caught in a cycle of submission and resubmission. Hence, a vicious cycle of rejecting and resubmitting repetitively often ensues that creates much rework on both sides, perpetuates repetitive system and process errors, and generates mounting open AR balances without a ready solution in sight.

In June of 2002, Highmark and UPMC negotiated a 10- year contract with a clause that specified that an investment fund would be created, with Highmark making a commitment of $20 million to be spent on joint information technology initiatives. The purpose of the fund was to consolidate and integrate operations between the two health care entities, to decrease costs, and to improve patient care. This resulted in prothe creation of an unusually powerful collaboration that allowed both organizations to make dramatic progress in solving core issues.

The results achieved in the first year were dramatic. They included:

• Improved cash flow (with total outstanding AR of more than 30 days reduced by 43 percent);
• Reduction in the number of denials (by 75 percent for UPMC and 95 percent for Highmark) and;
• Increased efficiencies (with the time to reprocess a denial reduced by 70 percent and the cost per inquiry reduced by 52 percent).

In addition to the quantitative results, the two organizations readily acknowledge that a huge shift in relationship has occurred. They have learned to talk in a common language and are motivated to achieve the right objectives for the overall system. They have explored joint issues and, in order to solve them, have created shared work processes that challenge old ideas about who does what between payer and provider in the claim submission, review, and payment. Benefits from the work between Highmark and UPMC have reached beyond the two organizations. The larger provider community benefits from root cause analysis that drives needed changes in Highmark’s systems. UPMC and Highmark are identifying and resolving problems so quickly that, often, fixes occurred before other provider systems are even aware that the issue existed.

In addition to the quantitative results, the two organizations readily acknowledge that a huge shift in relationship has occurred. They have learned to talk in a common language and are motivated to achieve the right objectives for the overall system. They have explored joint issues and, in order to solve them, have created shared work processes that challenge old ideas about who does what between payer and provider in the claim submission, review, and payment. Benefits from the work between Highmark and UPMC have reached beyond the two organizations. The larger provider community benefits from root cause analysis that drives needed changes in Highmark’s systems. UPMC and Highmark are identifying and resolving problems so quickly that, often, fixes occurred before other provider systems are even aware that the issue existed.

Beginning to Collaborate

The investment pool set aside by Highmark was targeted at four areas thought to have high potential return:

Revenue Cycle (Inpatient and Outpatient, Including the Physician Office) – More efficiently link medical providers with insurers through eligibility, enrollment, denial management, registration, and scheduling processes.

HIPAA Standards/New Federal Regulations – Combine compliance efforts to new rules and regulations required by the Health Insurance Portability and Accountability Act (HIPAA) and other government agencies.

IT Infrastructure – Both organizations have made large investments in information technology. The focus will be to examine the IT infrastructure needs and setup of both organizations and identify opportunities to leverage hardware, software, and technical services.

Clinical Systems and Care Management – Share knowledge and direction in referral, precertification, case management, utilization management, and quality management functions – the objectives being to streamline operations, decrease medical cost ratio, improve outcomes, add value for all customers, and move to wellness/prevention focus versus episodic care and medical crisis management.

As is true of many payer-provider relationships, the Highmark/ UPMC relationship was historically quite contentious. Not surprising was that much of that contention was caused by the inability of each organization to communicate and resolve revenue cycle issues. A decision was made to begin with revenue cycle since this was the area of greatest frustration between them. In fact, prior to this juncture, there was a history of failed attempts to make progress on revenue cycle issues. The revenue cycle process and history between the organizations was fraught with problems seemingly too big to solve. However, the commitment of both organizations from the most senior levels and a new approach to collaboration across payerprovider boundaries would lead to unprecedented success in solving some of the most difficult issues within the revenue cycle process.

Establishing Ground Rules

In order to ensure the team was focused in high-value areas and to keep the projects on track with the intended purpose, investment criteria were established which described the parameters around utilizing the investment fund.

• Each project was to generate a minimum ROI over a threeyear horizon of 2-to-1, accruing to the overall system (Highmark and UPMC combined);
• The preliminary cost-benefit analyses were to be robust and include a description of how systems and processes would change to accrue the benefit; and
• The solutions that were developed were to be leverageable to the provider community outside of UPMC.

These criteria created a climate where the joint team members began to think of themselves as one system, obviously maintaining appropriate checks and balances, but focusing on creating benefits that could be extended to the entire community while providing mutual benefit to the two organizations.

Getting Started With Revenue Cycle

Establishing the Approach

In order to make progress on resolving core issues in both systems and processes, it was necessary to concurrently make progress on resolving open AR balances. Thus, two efforts prothe ceeded in parallel. A “SWAT” team was formed to address open AR issues and resolve them. And several project teams were formed to proceed with identified projects that would prevent the AR balances from re-accumulating. The intense investigation and analysis that occurred as the SWAT team worked generated data and insight regarding core problems. The data/insight fed the project teams’ work in addition to being used to fix diagnosed system problems and create a new process interface between the two entities (dedicated tertiary service units).

The SWAT Team

In order to address the elephant in the room, Highmark’s vice president of customer service and operations created a multidisciplinary SWAT team that included operations and IT representatives from both organizations. This group included high-ranking executives as well as midlevel managers, and in addition, mobilized large numbers of analytical resources. The SWAT team met weekly in three- to four-hour sessions for a number of months, tackling the arduous process of working through all open accounts receivable, claim by claim where needed. In so doing, they were able to diagnose system issues that had not previously been apparent, and Highmark implemented system fixes soon after identification. Additionally, through these meetings, team members came to a new understanding of each others’ processes and they implemented redesigned shared work processes. Highmark created dedicated units for its tertiary providers with markedly improved efficiencies, incorporating Internet-based inquiries (as opposed to telephonic). These process redesigns allowed Highmark to provide dramatic service improvements, reducing the time to process a denial from 10 weeks to three weeks (or less) and reducing the cost per inquiry from $8.00 to $3.73. As new processes were implemented, Highmark experienced a large reduction in call volume for UPMC claim-related questions (33 percent). Significant cash flow acceleration occurred as well as marked reduction in rework.

Joint Design Session and Work Teams

In order to identify potential project areas, a facilitated design session was held, including executives and midlevel managers in related areas from both organizations. This session generated a list of potential areas of focus, where problems were felt to exist. Issues were prioritized, based on sizing of the issue area from both organizations’ perspective, predominantly based on rejection percentages. While objective measures were used, there was also a need to address issues that were highly contentious and easy to address, even though one party or the other believed that no real benefit would be realized. By knocking these out quickly, the team was able to move on and achieve a much better working relationship.

Each issue area was developed in two phases:

• Solution identification and validation (see Figure 1); and
• Solution implementation (see Figure 2).

Figure 1. Solution Identification and Validation

Figure 2. Solution Implementation

There were several projects undertaken: some short, some intermediate, and some long term. Significant early progress was made, with multiple quick wins. Both parties’ willingness to seriously collaborate produced a relationship of trust and generated momentum. The work teams and related projects are illustrated in Figure 3.

Figure 3. Eight areas were identified for revenue cycle and HIPAA design.

Team Structures and Governance

The early stages of the collaboration were heavily facilitated by Capgemini, an objective third party. It was important to create an operating model that would allow the projects to proceed with facilitation and appropriate sponsorship, while transitioning toward a long-term model where working together became a way of life for the two organizations and third-party facilitation could gradually be phased out.

This was accomplished by creating a sponsorship structure where a joint sponsorship team provided oversight for the work teams. As the project teams moved from short- to intermediate- to long-term issues, consistent sponsorship was maintained. As the work became imbedded in the two organizations, a network of individuals who knew each other and worked well together emerged. The degree of facilitation was ramped down and used only on an as-needed basis, i.e., to drive new project teams where difficult issues required facilitation, to document overall progress and notify the sponsor team of blocks to progress and as a neutral party, or to facilitate completion of all cost-benefit analyses.

In this standing operating model, the joint sponsor team reports upward to the executive sponsors (the CIOs from each organization) who in turn are accountable for the collaboration’s performance to their respective CEOs and boards (see Figure 4).

Figure 4. Summary of Current Operational Model

Collaborative Tools

As the short- and intermediate-term projects neared completion and the SWAT team identified and solved issues as they arose, it became apparent that there would be enormous benefit if aggregated trended data were available on an ongoing basis for proactive resolution of issues. Much of the benefit of the collaboration was founded in viewing shared data. If a data mapping could be created that was trusted by and useful to both organizations, it would be enormously helpful.

Along these lines, a prototype for a shared provider claims dashboard was developed. It would be built on aggregated claims data from Highmark’s systems. In order for the data to be useful to both organizations, the categories (and associated denial/pend reason codes) from Highmark’s claim engine were remapped to categories that were useful and meaningful to both organizations.

When claims come into Highmark’s systems from a provider, the majority are rapidly auto-adjudicated and paid. If there is a problem identified in a claim as it processes through Highmark’s systems, it is pended (for further analysis) or finalized (partially paid or denied). The dashboard will afford providers a view of claims in the pended state and allow them to address issues while claims are in the pended state. It will allow them to sort claims by order of magnitude and to identify problems (either process or technology) in their own handling of claims (see Figure 5). For example, if one hospital or physician group has a consistent error in a process related to a particular kind of claim, this will be readily viewable from the dashboard. UPMC plans to upload data from extracts from the dashboard into their practice management systems to drive work queues that address the most important issues/claims first.

Figure 5. The Provider AR Dashboard: Claims in Process

In summary, the dashboard will allow UPMC and Highmark to collaboratively and proactively solve problems as they arise. If there is a shift in cash flow (from UPMC’s perspective), they can rapidly analyze why the shift occurred and what it means. When Highmark implements a quarterly enterprisewide system update, it can proactively assess for any new spikes in denial or pend categories, implying that a system update in one area has adversely impacted processing in another. Highmark can then proactively notify providers of the problem and when it will be fixed, and advise them how they should act to reduce subsequent rework.

The dashboard will allow UPMC and Highmark to accelerate resolution of denials and increase efficiencies. UPMC can upload data to work queues regarding pended and denied claims, focus their activities on the most important, and analyze them with Highmark on a system with a shared data mapping. Highmark can proactively analyze trends and work ahead of the curve to resolve issues, in some cases before they come to a providers’ attention. Collaborative process design allows the dashboard to be an effective enabling tool, where a provider portal (NaviNet) is utilized to enhance efficiencies (for example, allowing inquiries to be submitted via NaviNet rather than telephonically, and allowing them to be handled in batches).

And the benefits of the dashboard are not limited to UPMC. The first phase (pended claims) went live in mid-February of 2004 to UPMC alone, and is subsequently being rolled out to Highmark’s other providers.

Critical Success Factors

Setting the Stage for Success: The Investment Fund

Having a significant commitment of funds made it possible to negotiate rough transitions – when the going got tough, as it did from time to time, the presence of the fund provided impetus to work out difficult and emotional issues and to continue to progress.

Creating Moral High Ground: The Investment Criteria

Just as critical were the criteria that specified how the monies were to be spent. They channeled the teams into a new way of thinking and relating:

• How can we work together to mutual benefit?
• How can we simultaneously create solutions that are of benefit to the entire community?

Objective Third-Party Facilitation

Skilled third-party facilitation was a critical component of this process. Capgemini acted as an objective party, viewing both organizations as one overall system to be enhanced. This helped the two groups to reach common ground.

By asking difficult questions from which both groups shied away, Capgemini facilitated the participants through their resultant reactions. They also acted as a neutral buffer zone to create an environment in which each party could explore common misconceptions. For example, there initially was a great deal of skepticism on the part of UPMC. They were reticent to believe that Highmark would readily pay claims earlier; they deduced that Highmark would lose revenue from potential interest accrual.

By helping the groups share an honest dialogue, Capgemini helped UPMC realize that they had misunderstood the payer’s motivation. Highmark’s motivation was not to hold or deny claims in order to create float. Highmark was, in fact, wholly committed to paying claims on time. When the project work was completed, Highmark ultimately benefited as the interest revenue lost was more than offset by reduced rework and penalties.

Without a platform such as that provided by the collaboration (in terms of commitment of resources and relationship), it was difficult to diagnose and fix both system and process problems. And it was impossible to create shared mutually beneficial solutions. Through the collaboration, both parties realized their strong interest of improving operations, and processing and paying claims appropriately and quickly, with minimal rework.

Collaboration Operating Model

The operating model was important to success in three respects.

First, iteration of large group sessions with the work of small work teams was very effective for both design and implementation. Initially, a large group session (of about 30 people) was held for brainstorming the solution areas and projects. Periodically, large group sessions (conference room pilots) were held to jointly discuss process and system changes/design and come to common understanding of what was needed and what should occur.

Second, strong executive sponsorship was created through the cascaded structure of executive sponsors (who periodically reported to CEO and boards on progress) and the joint sponsor team.

Third, the joint work teams interacted at a very deep level together, exploring potential shared work processes as well as joint IT development, where the inefficiencies that existed between the organizations were dramatically reduced.

Project Accomplishments

A Favorable ROI

For the short- and intermediateterm projects, an overall ROI of 3.4 for the system (Highmark and UPMC combined) has been projected.

Improved Cash Flow

UPMC realized significant improvement in cash flow, as evidenced by the dramatic reduction in open AR noted below.

• UPMC’s total outstanding AR reduced by 14 percent (or $18 million, from $133 million on January 5, 2003 to $115 million on November 9, 2003);
• Total outstanding AR more than 30 days reduced by 43 percent (or $26 million, from $58 million on January 5, 2003 to $32 million on November 9, 2003).

Reduced Administrative Costs

By reducing the number of duplicate claims and dramatically cutting the number of denied claims, processing became much more streamlined and efficient. It is expected that the provider claims dashboard will further decrease denials.

Highmark’s denial reduction was greater than UPMC as their numbers include internal denials which are never seen by a provider (corrected before the claim is formally denied). UPMC significantly reduced the number of FTEs (full-time equivalents) assigned to work Highmark claims. Highmark utilized the additional capacity to provide higher levels of service, create a dedicated unit, and reduce the level of rework by proactively addressing issues.

• Highmark denials for UPMC claims reduced by 95 percent by volume and 88 percent by dollars; and
• UPMC’s denials for Highmark claims reduced by 75 percent (from 8 to 2 percent of total billed claims).

Increased Efficiency

Both Highmark and UPMC experienced a substantial increase in efficiency.

• The time to process a denial for UPMC claims decreased by more than 70 percent (from 10 to less than three weeks); and
• Cost per inquiry for UPMC claims for Highmark reduced by 52 percent (from $8.00 to $3.73).

Enhanced Relationships

The enhanced relationship between Highmark and UPMC was one of the biggest project accomplishments. Over the course of the project, the executive committee witnessed a dramatic shift in the relationship between the two entities. Friction and skepticism was replaced by a spirit of cooperation and shared effort. In addition, both groups ended up with a comprehensive understanding of each other’s systems and operations. As a result, both Highmark and UPMC – as well as Highmark’s other providers – now operate in a more productive, efficient environment.

Seamless Service

Because of the collaborative effort, patients and members now receive a much more seamless experience at the point of care. Consumers benefit from a health care partnership that is dedicated to meeting their needs.

The Road Ahead

From Capgemini’s experience, the Highmark/UPMC success story is a rare example of a payer and a provider coming together to manage the end-to-end process of revenue cycle, interacting to work as one system with shared process design and collaborative IT development. What resulted was a shared view of what the process requires and what data are needed to solve problems. Both parties accepted new roles and responsibilities across the process that enabled a significant change in the way the organizations operated and in solving and preventing problems. They share a collaborative relationship, interacting with each other and sharing work processes to eliminate potential future problems. As solutions are designed, tested, and implemented with UPMC, they benefit other providers directly (such as the case with the system fixes) or are leveraged to other providers (as in the case of the dashboard).

With short and intermediate term projects completed for revenue cycle and HIPAA transactions, the collaboration is beginning to focus on clinical areas. A decision has been made to begin with pharmacy (with transfer of pharmacy benefit management- based prescription history and sharing of formulary and pharmacy benefits).

With a strong foundation of trust and shared accomplishments, Highmark and UPMC now consider themselves industry partners – rather than adversaries – and will leverage their mutual relationship to provide outstanding service for health care patients.