“Too much to do and not enough time or manpower to do it.”
For many companies, that is a common complaint. But for insurance carriers, tasked with processing an ever-increasing number of claims as well as handling other focus areas, the situation can have negative financial implications, especially with regards to overpayment errors.
The Costs and Causes of Payment Errors
According to industry estimates, about 3 to 5% of claims are erroneously paid out. Despite considerable gains in claims payment validation, over $100 billion in wasteful spending still occurs each year.
The causes can range from programming errors in the system itself to mistakes made by those inputting the initial information. Another revenue “leak” can be attributed to failing to identify errors or correct them following notification. For instance, if the claims system has an incorrect contract loaded, the revenue continues to spill out, claim after claim.
Even after identifying the errors, recovering the money presents a challenge, since many insurance carriers don’t have the resources to do an effective job. Unfortunately, many providers will hold onto the money if there isn’t an insurance company audit program to identify these overpayments, leaving the carriers shortchanged.
But with insufficient internal staff to investigate overpayments or to audit the accuracy of payments, the leakage continues, drip by drip, dollar by dollar. Yet some carriers, uncomfortable with the idea of opening their files to an independent firm or worried about the cost of generating those files, resist bringing an outsider on board.
Benefits of Outsourcing Claim Verifications
For those carriers considering going “outside the gate” for their payment integrity needs, there are identifiable advantages.
Industry expertise. It’s very common for a payer to use multiple vendors and space them out based on how many days they have to wait before they can identify an overpayment—a strategy known as “a lag.” However, the expertise of outside firms, who work with many payers, have more resources, technology and industry experience, enables them to identify trends across the board.
Contingency-based fee structure. Insurance companies typically will get 80-85% of every dollar recovered by the outside firm. This can represent a significant influx of money, offsetting the dollars that otherwise would have been lost
Performance audit. It’s not enough to recoup past overpayments. Carriers still need to correct the problems that led to those errors. Outside firms are very good at finding the leaks to help the payer plug the holes, thereby reducing future erroneous payments.
Once the decision is made to retain an outside firm for payment integrity auditing, carriers must perform due diligence to ensure their needs will be addressed, evaluating prospects in terms of their experience, recommendations, fee, quality and results. This will ensure that the carriers will receive the maximum benefit from the arrangement.