Improved Medical Billing is a Path to Lower Healthcare Costs

by Carl Mays II

An underappreciated source of today’s high medical care costs is the medical claim adjudication process that is employed by commercial payers. The current process is intentionally fraught with unnecessary hurdles and pitfalls that save the payers money by lowering the amount they reimburse physicians and facilities. Well designed medical billing processes from medical billing companies and medical offices can eliminate the profitability of the current adjudication process and streamline the entire insurance reimbursement process.

One of the root causes of today’s rising healthcare cost has been touched on but not properly explored in the round of debates about how to fix healthcare in the United States. The issue? The methods being used by insurance companies to extract money from providers through a ludicrously inefficient claim adjudication process.

Payers consistently and systematically underpay claims. In addition, claims that have been properly submitted and for which proof exists the claim was accepted are simply “lost” by payers and the claims have to be resubmitted (sometimes multiple times) in order to secure payment. I know from experience with many practices that this “lost” claim phenomena is rampant across payers and states.

There is a strong economic motivation for payers to maintain the current inefficient billing process. They can increase their profits sharply since more than fifty percent of the claims they misplace or accidently underpay are never noticed by medical providers.

The payers ultimately lose money on providers that catch the payer’s mistakes and pursue the claim. It cost the payers about $25 each time one of these watchful provider’s medical billing specialist calls the payer and speaks to a live person. To mange this cost, they payers have a system in place to make sure they pay the diligent practices properly while continuing to lose claims and underpay less watchful practices. They payers do this by grading each practice. If you are watchful you receive an A. If you are not catching the payer’s errors you receive a F. A’s are paid well. F’s are not paid well.

If payers had a base of providers that were all diligent and spotted each and every lost or underpaid claim they would quickly discover that there was no economic incentive to play games with how the claims are paid. This is why better medical billing is a key front in the battle against rising healthcare costs.

Imagine if every physician’s internal billing department or medical billing company pursued every claim until it was paid in full. The payers would see their cost to adjudicate the claims rise and they would see their payments to providers rise because the lost/under paid claim games would no longer prevent providers from ultimately being paid. This combination would lead to each physician ultimately being paid quickly and without fuss because the insurance companies would lose significant money by playing games ($25 per extra phone call generated by the games) and they would gain nothing since payments would only be delayed, not avoided.

There is lots of talk about the dream system where claim adjudication happens in real time and physicians immediately receive their reimbursements. Such a system will never happen until the economic incentive payers have to maintain a difficult, complicated and veiled system are removed. This is what well designed and executed medical billing processes can do by doggedly pursuing each claim.

Copyright 2008 by Carl Mays II

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