Over the past century, the health insurance industry has evolved dramatically. In addition to other changes and advancements, this evolution has been characterized by complex multiline health plans, increased regulation, standardized procedure and diagnosis coding, and government programs. These features of modern health insurance, as well as changing medical practices and technology have resulted in increased complexity in the claims adjudication process (the process by which insurance payers determine the amount of reimbursement they are responsible for).
In the face of such complexity, modern claims processing procedures and standards serve the purpose of ensuring the efficiency and accuracy of reimbursement. This is essential to preserving the financial sustainability of insurance payers and healthcare providers, as well as the affordability of care for patients. To this end, the primary components of the claims adjudication process are the filing and receipt of claims (both electronic and paper), several rounds of review (automated and manual), resubmission of denied claims, payment processing, distribution of Explanations of Benefits (EOBs), claims archiving, and claims data recording.
The process starts with the filing of claims by a healthcare provider. Professional service charges (e.g. services from medical staff) and hospital facility fees have separate claim forms; a single hospital stay can require multiple claims. In order to produce a claim, information must be alphanumerically coded regarding the type of visit, the symptoms of the patient, the diagnoses made, and the services performed on or for the patient. As one might imagine, the task of encoding the vast variety of information involved in a medical visit has produced extremely complex coding systems.
Insurance companies often use software to automate the process of initial review. This will check for errors in the patient’s information and missing or incorrect procedure and diagnosis codes. Errors will cause a claim to be rejected so that it can be resubmitted. Software errors, lost paper claims, or even failure to adequately inform providers of their claim’s rejection can result in expiration of resubmission dates before the claim is corrected. Healthcare provider staff often focus on filing new claims over resubmitting rejected claims, slowing turnover times further.
Once a claim passes the initial review phase, reimbursement is determined by checking the procedure and diagnosis codes against the insurance company’s payment policies. This can be a lengthy process, especially if errors such as incorrect coding were missed by the initial review process. Claims may be denied, or reimbursed a lower amount on the basis of codes that correspond to procedures not covered by the patient’s insurance plan. Dealing with such problems usually requires contacting the insurance company and resubmitting the claim. In some cases, the provider will not be made aware of the issue until they receive the Explanation of Benefits (EOB), once again possibly leading to missed resubmission deadlines. Turnover times can be further prolonged in cases involving unlisted procedures. This typically leads to manual review by a medical examiner, to check for medical necessity. Such review requires the request of medical records, often a time-consuming process.
As should be evident from the description above, each step of the claims adjudication process can involve potential errors and inefficiencies. Addressing these problems would primarily require improved software for filing and reviewing claims, better training of medical administrative staff, and simplifying coding systems to reduce the potential for errors. Furthermore, improved systems should be put in place that enhance the ability of filers to track steps in the claims review process. Implementing such solutions is paramount to enhancing the efficiency of the adjudication process. This is especially important as clinical delivery, technological advances and benefit plans become more complex.
