Inappropriate Billing Inflates Healthcare Costs for Everyone

June 23, 2014

Everyone — from patients to providers to insurers — knows that medical care is expensive. However, careful examination for those costs often reveals inappropriate billing practices resulting in potentially dramatic savings. For example, PartnerRe reviewed a neonatal care claim that listed facility charges of $1,670,499. The audit review and physician care plan oversight revealed incorrect charges totaling $346,538, shaving 20.7% off the original bill.

In another case, a 10-year-old boy was admitted to care for congestive heart failure. A careful review revealed errors in designating the level of acuity, charges for experimental services, unbundled services, and other billing errors, including an incorrect CPT code. The savings reduced the combined facility and professional fees from $3,104,856 to $1,875,660 — a savings of $1,229,197.

In medically complex cases like these, it’s easy for patients, families, and even insurers to overlook errors in the long list of services and fees received. Families may be overwhelmed by emotion and unable to address the minutiae of a detailed facility bill. And insurers know that cost procedures vary widely. No standards exist for how much healthcare providers charge.

However, insurance providers that perform diligent reviews of claims can potentially realize millions of dollars in savings. This allows them to deliver the highest possible quality of care in the most cost-effective manner.

Sources of payment discrepancies

Discrepancies can occur in a multitude of ways. According to America’s Health Insurance Plans (AHIP), an estimated 20–30% of the $2.7 trillion the United States spends annually on healthcare — up to $800 billion a year — goes toward care that is “wasteful, redundant, or inefficient.” In 2009, the nation spent $2.9 trillion on healthcare — with more than $165 billion of that cost wasted on

  • delivering more services than were medically necessary,
  • billing for services that weren’t performed,
  • unbundled rather than bundled services,
  • inpatient rather than outpatient treatment, and
  • paying for treatment of infections or conditions acquired while the patient was a hospital inpatient.

Finding a solution

Clearly, the scope of the problem is bigger than a single organization. On a macro level, AHIP has proposed three high-level strategies to begin to address the soaring healthcare costs in the United States:

  • Eliminate barriers to and increase transparency for understanding how markets work.
  • Modeize cost containment measures to allow innovation in healthcare plan design, broaden the use of health IT, promote preventive care, and support new or changes to current laws governing delivery structures, among other changes.
  • Promote basic, fundamental changes in our healthcare system at all levels — nationally, statewide, and locally.

Meanwhile, what are some strategies that payers can implement to gain significant savings for themselves and their customers?

  • Be proactive in addressing costs.
  • Negotiate all contracts to allow for bill review.
  • Don’t pay the bill until it has been thoroughly reviewed for any inaccuracies in billing.
  • Maintain an auditing mindset.
  • Implement an auditing review program which reconstructs and analyzes all charges to determine whether the billing chronology mirrors the patient’s clinical condition and if the billed charges are consistent with medical billing standards and plan design terms and conditions.
  • Be willing to “get in the weeds” and examine the detail.
  • Focus on inappropriately billed room and board levels based on clinical acuity, charges in excess of industry-accepted reasonable/customary norms, unbundling or redundant charges, therapies that are considered experimental under the plan design, and duplicate or non-applicable charges billed in error
  • Partner with an organization that will help you effectively address billing on an ongoing basis.

Would you like help to improve your bill auditing processes? Contact the experts at PartnerRe today to see how we can help.

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