News

Look to Auto Insurance For Health Payers'
Consumer-centric Future

November 4, 2011 | by Dina Overland

If you watch television, you know all about car insurance commercials. You can probably even quickly identify the various mascots for the companies--the ubiquitous cavemen, the gecko, the "mayhem" guy (playing a blind spot, teenage girl, referee making a bad call, among others), the quirky sales agent working in a store that appears to be in some version of Heaven, that actor who played the President on "24." I could go on, but then I'd be admitting how much TV I actually watch. Suffice to say, unless you live under a rock--which, incidentally, was the subject of one said commercial--you know what I'm talking about.

What does this have to do with health insurance? While listening to a recent American's Health Insurance Plans-sponsored webinar, I was intrigued by something. Eugene Sayan, founder and chief exec at Softheon, suggested that the reform law will transform the health insurance market to become that of car insurance. Consumers will be able to shop online to compare health plan prices, and insurance companies will continually decrease costs and enhance incentives to remain competitive. "They will try to one-up each other." said Sayan. My curiosity was piqued, particularly since I wrote just last week about the importance of competition among insurers. So it should come as no surprise that I would welcome such a transformation throughout the health insurance marketplace.

After 2014, when the individual mandate is in effect, insurers will have to adjust their practices to market directly to consumers. That could mean they use commercials, complete with outlandish mascots and melodic jingles, to sell their plans to the public. At the first sign the business-to-consumer marketing model is attracting more consumers, you can be other insurers will get on board.

Nest thing you know, we'll be inundated with information and, for the first time in the history of U.S. health insurance, consumers might be able to start negotiating with their insurance company for better prices and/or coverage. Once the public is empowered with knowledge, anything can happen.

Insurers, therefore, should be prepared for an onslaught of questions, requests for more information, and comparisons among their competitors. To stay alive and competitive, insurers will have to adapt their plans to the consumers' needs and successfully market those plans to convince the public their product is superior to others--all while keeping in mind that current consumer shipping habits don't necessarily indicate how they will shop in the future, Sayan said. He predicts, for example, that consumers will shop online more frequently for health insurance, meaning that payers will have to brand themselves across all platforms.

These are challenging times for health insurance companies. some may lose the battle to win consumers, but the ones that survive will adapt their policies and practices, respond to consumer behavior and needs, and improve their coverage options while maintaining costs in this new paradigm of health insurance.

And who knows? Maybe in five or 10 years from now, we'll be singing the catchy jingles of an Aetna or UnitedHealth commercial and laughing at their mascots doing silly things in commercials. - Dina (@HealthPayer)


Stop Pumping Cash Into Your Old Legacy System Clunker

May 01, 2010 | by Michael T McCue

FEW THINGS strike more fear into the heart of a health plan executive than the thought of replacing a legacy system. Whether it's a technology that adjudicates claims or runs some other mission-critical business process, it's always tough to sever ties with an enterprise system that has served its purpose well for so many years.

Still, there inevitably comes a time for all technologies when the drawbacks simply outweigh the benefits.

Often the key to determining whether a legacy system has reached the end of the road is to look at the bigger picture, according to Peter Bristol, senior director of information technology with Medford, Mass.-based Network Health, a Medicaid plan.

"One good indicator that a legacy system is becoming inefficient is when the organization stops hitting key metrics, such as quality of service indicators and auto-approval rates for processes," Bristol says. "The technology itself might seem to be functioning properly, but if the overall organization isn't performing the way it should, it might be because a legacy system just isn't pulling its weight anymore."

When executives begin to wonder whether that dreaded time has come, they need to ask themselves:

  1. Although I see the end of the line for this legacy system, how do I know if this is the right time to replace it?
  2. Can I get a few more productive years from the technology and push the expense and productivity costs into the future?
  3. I've come to grips with the fact that this legacy system is holding me back and costing more than it's worth, but how do I go about replacing it?
Even if this year isn't the right time to launch a new technology, major system replacement is a massive and expensive undertaking that can take years to plan, much less execute. Executives should know what signs to watch for and what they need to do to prepare, because despite what the old adage says, death and taxes aren't the only guarantees in life-legacy system replacement is, too.

There's no way to avoid it, because the law of diminishing returns eventually comes into play-much like the old clunker car that keeps running but needs a new quart of oil every week.

"While there are costs and risks associated with a major system change, the benefits will make it worthwhile in the end," says Davina Lane, executive consultant with Sinaiko Healthcare Consulting in Los Angeles. "You get to stop pouring money into upgrades that continue to cost more, yet offer an increasingly lower return. At first, you just need a little patch every six to 12 months, but eventually you'll also need to change hardware to keep supporting the old technology."

If the hardware fixes that keep the old system operational don't turn out to be a fit for a new system, even more investment will go inevitably down the drain.

Sometimes technology teams need to take a step back and look at the organization's entire IT ecosystem, Network Health's Bristol says. CIOs should look for internal or external customer dissatisfaction, whether there are an unusually high number of operational bottlenecks and emergency IT situations, or a disproportionate amount of time being spent on system maintenance.

He also recommends looking at the business landscape by measuring the organization's performance against external benchmarks, such as industry surveys and competitors' results.

Sometimes it's not the system itself that costs so much, but the related service costs, according to Eugene Sayan, founder and CEO of Softheon, a business process software provider based in Hauppauge, N.Y.

"It's really about the total cost of ownership," he says. "As technologies get older, fewer vendors support them. Over time, companies can become more and more dependent on a decreasing number of vendors, and they have no choice other than to pay whatever those vendors want to charge."

On occasion, analysis might show that only one or two components of a legacy system are causing a problem. In that case, it might be possible to build a bridge to work around the outdated functions while squeezing a few more productive years out of the otherwise efficient system.

"Some legacy systems have commonalities that allow you to connect the old to the new fairly painlessly, because today's technology is so flexible that we can put a Web interface on just about anything, even an old COBOL system," says Derek Woo, Sinaiko's managing director of revenue cycle and informatics. "But just because you can, doesn't always mean you should. If the systems don't talk well enough, you're just perpetuating the problem and pushing it into the future."

If you decide to build a bridge, Woo warns, it's a sign that the countdown to a new system has started, and you need to plan a long-term solution. Once it becomes obvious that an outdated technology is holding the company back and a full replacement is needed, executives should:
  • Establish a realistic schedule for the entire process. Legacy system replacement rarely takes less than 18 months from start to finish.
  • Put together a well-thought-out implementation team. Be sure to include a member who is responsible for progress documentation, because it's a long process and sometimes teams need to go back and figure out why a certain decision was made.
  • Get buy-in from your company's full IT department. Some internal groups might feel threatened when outside vendors are engaged.
"IT departments sometimes see a positive and close relationship with a vendor as a threat, but they are the ones you need to be the champions of the project," Sayan says. "If your internal IT people are engaged from Day One, they will consider the project their own and work that much harder to make sure it gets done right."

Bristol agrees, adding that the people aspect comes first, both internally and externally, so CIOs must ensure that they're building a team that will provide breadth and depth to see the project to completion.

"It usually comes down to having good partners and a solid internal team," Bristol says. "If you play to win on those two elements, you have a better chance of a successful implementation."

But no matter how smoothly things appear to go, Sinaiko's Lane says companies shouldn't just pull the plug on the old system as soon as the new one is up and running. Customized systems need time to settle in.

"Running the old system in parallel with the new one isn't something that's done by every company, every time ... but it probably should be," she says. "I highly recommend doing it if the company can afford the added expense for a little while, just to make sure everyone is up to speed on the new system and all the bugs have been worked out."

She also recommends setting a timeframe on that practice. Running the old system in the background can eventually become a psychological crutch, and sooner or later, the new technology is going to have to carry the weight on its own.

 

 

Softheon Considers The Cost of Processing Claims

October 2005

Technology company Softheon, based in Hauppauge, N.Y. knows something about claims processing and management. In a recent issue of AHIP Coverage, the AHIP Solutions partner compares the cost of processing claims electronically vs. doing it manually. According to research from the Gartner Group, the processing cost of a claim that adjudicates on the first pass - which accounts for between 60 to 70 percent - is estimated at $2.50. Conversely, a manually processed claim resulting from an exception or "pended" from the core system - which accounts for between 30 to 40 percent - costs $28.

Softheon, an AHIP Solutions partner and a business process software company focused on health insurance plans and life insurers, has introduced its next generation Grievance and Appeals Solution for Payers. This second-generation Softheon solution includes configurable templates to manage the many steps in the grievance and appeals process for commercial plans and Medicare plans including the more stringent requirements of Medicare Part D appeals. It is part of an end-to-end suite of business process-centric content and information management solutions.


Seeking Improved Technology

October 2005

Survey respondents overwhelmingly confirmed that effective use of technology is the most important change needed to improve health care operations.

Expanded use of technology is the single most important change needed to improve operations at health plan organizations. Health payers, who have traditionally lagged behind other industries in IT implementation, are acknowledging the need for automation of their many content-intensive processes, according to industy research.

In an effort to understand what health plans are doing to improve operations in such process areas as enrollment, claims and member services, Softheon, Inc., a provider of enterprise content management and business process management solutions tailored to health plans, recently completed a survey focusing on the use of performance metrics to drive operational improvements in health plans. The survey was conducted in conjunction with America's Health Insurance Plans as part of an online partnership program, and Gartner, Inc., a provider of research and analysis on the global IT industry. The survey's 60 respondents overwhelmingly confirmed that effective use of technology is the single most important change needed to significantly improve operations at health plan organizations.

Specific Findings

The survey respondents were IT executives who represented companies ranging in size from some of the nation's largest plans to small regional plans and Medicare providers. Specific findings include the following:

Only 10 percent of the plans have implemented a complete end-to-end automated solution for enrollment management. Forty-four percent have limited automated systems, while 14 percent use only manual processes.

Claims in inventory are tracked via reports from core claims applications at 36 percent of the firms, with seven percent using a separate document management application, and two percent still using manual estimates or counts. Forty-eight percent use a combination of the three methods.

Twenty-one percent of the organizations have full automation and workflow in place to handle call closure and follow-up, while 13 percent still use manual procedures including checklists and systems-prompted cues. Forty-five percent use a combination of these methods.

While only 63 percent reported using metrics for any combination of internal analysis, internal external and/or account specific business/IT service level agreements, of these, one-third reported that technology improvements would have the greatest impact on performance metrics.

Deadline-driven processes

The highest rate of implementation of automated solutions (66 percent) came from companies that had adopted a claims pre-adjudication data validation solution outside of core claims applications. However, of these, only 16 percent had implemented a complete end-to-end solution, while half the survey respondents employed only a limited solution.

Typically, an automated solution such as Softheon launches initially in areas such as claims pre-adjudication and pended claims management. Later, it is incorporated into such departments as provider operations, appeals and grievances, finance and accounting, and more. Customers who have engaged Softheon as the standard end-to-end solution for imaging, document management, workflow and BPM technology throughout their enterprises have found that its flexible architecture pays off in increased operational efficiencies and cost savings as additional applications or corporate departments are added without the need for additional infrastructure. Once the initial application goes live, the same rules, repositories and programming can be used in all future applications.

A robust solution drives the cost out of processes through automation and work management, providing a complete audit trail to ensure compliance with HIPAA and Patriot Act requirements. It also provides Web access and measuring points for root-cause analysis allowing users to process claims more quickly and easily, reduce costs, comply with corporate standards and federal guidelines, and most important, enhance service to their customers. With the availability of total solutions that pay for themselves as rapidly as they escalate the completion of processes, it is surprising that more plans have not adopted such solutions.


Claims Processing

September 2005

Process Optimization
The Softheon Process Optimization Framework, from Softheon, complements the payer's core system and manages all aspects of paper and EDI claim preparation, claims data validation and edits, pended claims management and reporting. Its claim processing solution combines imaging and document management, workflow, business process management and analysis, data integration and reporting software. Clients using the company's claim processing solution experience higher first-pass adjudication rates, improved claim payment accuracy and more consistent pended claim management.

In the pre-adjudication phase, Softheon quickly and accurately captures, edits and repairs claims data from paper and electronic claims, logically organizes it for future use and sends it to the core system for processing.

When claims fall out of adjudication and land in pended claims queues, Softheon provides templates, agents and workflow tools to aggregate claims by error type, matching talent to task for completion of the claim repair and re-submit process.


Softheon Considers The Cost of Processing Claims

August 2005 | by John Andrews

When it comes to claims and revenue management, Medicare is usually the main topic of discussion. That's no surprise given that it's healthcare's predominant payer and nearly all program changes have a ripple effect on the industry.

But while Medicare gets most of the attention, commercial payers present their own set of claims filing challenges for provider billing departments - namely, subtle variations in coding and forms that result in automatic denials if even one character is out of place. In the still-prevalent world of paper claims, the same minor mistake made repeatedly can severely block revenue flow, causing a massive backup in accounts receivable and spiking days outstanding levels dramatically. Moreover, the provider won't know about it for weeks and rectification can take even longer..


"A big part of the problem is that people don't have good mechanisms for reporting (each payer's) requirements and managing the information," said Jim Riley, president of sales and marketing for Richmond, Va.-based Payerpath. "Medicare is fairly consistent across the country, but private payers have their own systems, their own rules."

Not only do paper claims cause nasty snarls in cash flow, electronic systems that use batch processing can suffer the same backlog if claims filing errors aren't caught immediately. Payerpath and other revenue management software vendors recommend using Web-based platforms for claims filing in order to monitor each claim in real time.

Payerpath's main clientele is made up of group practices, about 2,300 representing some 15,000 physicians natiowide. The company also has about 30 hospital customers and across the board system users report 97 percent first-time claims acceptance and a 35 percent improvement in accounts receivable levels. Chris Ford, associate director at George Washington University Medical Faculty Associates says that prior to implementing Payerpath last year, the practice's revenue stream was a series of fits and starts.

"We're a very fragmented multispecialty practice, with 15 different divisions," he said. "Whenever a claim was sent back there were a lot of mechanics involved ... it would have to be corrected, re-queued and [cash flow] would slow to a trickle."

With a centralized, Web-based server, claims can be transmitted at various times during the day, preventing backups. With fewer denials and faster claims turnarounds, the organization's DSO, or days outstanding, has dropped 15 days since implementation.

Perhaps Payerpath's biggest advantage for the George Washington group, however, is that it documents the time and date of each claims transaction, Ford said, because several of the practice's commercial payers impose filing deadlines. With paper claims, the provider often had no recourse if a claim mysteriously got "lost" in transit after the deadline elapsed.

"This system allows us to look at each claim's complete history from the time we downloaded to transmittal and acceptance by the payer," Ford said. "We can now prove that we filed a claim on time and that the payer acknowledged its receipt. That has helped us immensely."

When it comes to provider-payer relations, IMACS president Harriet Flowers agrees that claims management systems need a "trust but verify" function to keep payers honest. For too long, insurers had the upper hand and took advantage of providers' lack of business acumen, she said.

"It's a game and our goal is to level the playing field," said Flowers, who founded Dallas-based IMACS in 1990. "There is so much subterfuge and so many layers that even if the provider gets paid it's hard to tell if it's the right amount or not."

Providers have made a lot of progress in financial management since the early days of managed care, Flowers said, but keeping track of all the specifics and nuances of each contract remains a major undertaking.

"These contracts are getting more complex all the time so the hospital doesn't know what to expect and the payer doesn't have the system to figure it out," noted Keith Setzer, IMACS executive vice president for sales and marketing. The IMACS system helps bring clarity to the process, Setzer said.

The payer community is quick to point out that clean claims work in their favor as well, say representatives from Hauppauge, NY-based Softheon, which provides claims management software for insurers.

"It costs health plans an average of $2.50 to pay a clean claim whereas it costs $28 if the claim needs to be reworked," said Kathleen Rohrecker, Softheon vice president of marketing.

Also, the healthcare climate has reached a stage where payers are aggressively vying for provider participants, so a painless claims filing system offers a competitive edge, she said.

Instead of creating an entirely new operating system for payers, Softheon developed a product that sits atop established mainframes to enable electronic claims transactions.

"Many payer organizations have had archaic systems in place for many years and haven't changed despite the evolution of technology over the past decade," said Softheon CEO Eugene Sayan. "Our proposition is simple: Let us clean up and edit any information that comes from [electronic data interchange] or paper and address these issues without a lengthy correction cycle."

Minneapolis-based StoneBridge Group's StoneBridge Exchange system is being used by five of Minnesota's largest health systems and not only has it resulted in speedier claims turnaround and significantly fewer denials, it also has the capability to identify and relay each patient's coverage status.

"Because a lot of patients get admitted through the ER, it's not always easy to get their insurance information from them at the time they come in," said Mike Tressler, vice president of StoneBridge Group. "Even if a patient is listed as self-pay, our system can identify whether they will qualify for Medicaid."

This kind of information synergy is why Austin, Texas-based Vignette touts its suite of products as the answer for claims management as well as other business functions, said Bruce Milne, vice president and general manager of healthcare and insurance practice.

"What we've found is that there is no single silver bullet, but a convergence of technologies as the answer," he said. "Workflow crosses a combination of categories and all elements tie in together. We take a holistic view."


Claims Processing in the Real World

July - August 2005 | Kathleen D. Rohrecker

Today's health plans are under increasing pressure to reduce costs-while complying with regulations, maintaining or improving quality, accuracy, consistency and service to members and providers. Aggregate claim processing costs represent a significant opportunity for savings, and the effectiveness of claims processing has a direct effect on the level of satisfaction members and providers report for the plan. Where better to initiate a cost reduction effort than in the claims processing function?

The processing cost of a claim that adjudicates on the first pass-which accounts for between 60 to 70 percent-is estimated at $2.50. Conversely, a manually processed claim resulting from an exception or "pended" from the core system-which accounts for between 30 to 40 percent-costs $28, according to research from the Gartner Group. Health plans can save millions of dollars a year by reducing the number of claims that are pended, and by handling pended claims quickly and efficiently through improved automation.

Although there are shared understandings in the marketplace regarding the most common errors and causes of manual rework and pended claims, there is no standard method for achieving the goal of reducing claim-processing costs. No health plan is exactly the same, targets the same market, offers the same product mix or adheres to the same best practices, nor are the claims themselves "cookie-cutter."

Billions of Claims Processed Annually
According to the Center for Medicare/Medicaid Services, at least six billion health care claims are filed per year. That's six billion claims submitted by providers-and six billion processed by health plans. Consider this: If, as an industry, health plans reduced the average cost to process a claim by twenty cents each, the industry would save $1.2 billion.

Cross-departmental commitment to constant improvement is one of the best indicators of a health payer's overall success in reducing claims processing costs. Payers that create an environment and a culture that invites change have better results. This spirit of leadership needs to be channelled and harvested by technology that is intelligent and powerful enough to help people become more effective, enabling the plan's workers to collaborate with suppliers to improve the quality of their inputs. Payers who modify their processes as market demands change and further opportunities for improvement are identified have a clear advantage. By implementing process and content management software, claims leaders can both reduce the incidence of manual processing and reduce its cost when it inevitably occurs.

The Claims Process Has Many Steps Each transaction, from data entry to adjudication, is a step in the claim processing procedure. Claims managers have their production schedules and quality goals and need to lead the organization to develop and implement the optimal way for the individual health plan to meet those goals. The flow of work in the claims processing procedure consists of four major steps:

  • Claim intake: The claim and key data contained on it enters the process either electronically or on paper.
  • Claim preparation (or pre-adjudication audit): The claim is prepared for payment such that it has the best chance that automated processing is completed on the first pass through the core system.
  • Claim adjudication in the core system: The claim passes through the core system and is paid, denied or pended.
  • Pended claims management: Claims that were suspended for any number of reasons are reviewed and re-processed manually.
Paper Handling Means More Opportunity for Errors Claim intake can be defined as the receipt and entry of claims data into the process flow. The goal of claim intake is to maximize the efficiencies of people and technology to initiate a rules-driven process while securing mission-critical claim data. When claims are submitted via electronic data interchange (EDI), claim intake includes the ability to render data provided on an EDI stream to the appropriate claim form, saving it as a tagged image so that it can be viewed online as easily as a paper claim. With paper claims, optimal claim intake leverages such technologies as document scanning and imaging and Optical Character Recognition (OCR) capabilities.

Follow That Claim, an American Medical Association report, reported that 30 percent of all paper claims submitted to health plans are rejected. Health plans save money and decrease errors when providers submit claims electronically instead of on paper. Higher first-pass auto-adjudication rates for EDI claims also benefit providers.

Paper handling introduces more opportunity for errors into the process. If 40 percent of the claims for a plan that handles one million claims a month come in on paper, that's 400,000 paper claims a month. If plans have to key in data from 40 fields on the Centers for Medicare & Medicaid Services form-even if they use OCR technology and just spot-check fields for quality-that's 16 million opportunities for error on the inputs to the process per month!

Plans can provide incentives for accuracy and EDI claims submission, but cannot mandate it. Payers can encourage reduction in the amount of paper claims submitted by requiring, encouraging or rewarding providers that submit claims via EDI. Blue Cross of Idaho was highly successful in increasing the volume of claims received electronically when it implemented a three-prong approach. First, Blue Cross of Idaho educated providers on the benefits of electronic claims submission. Second, the plan identified a list of software vendors that worked well with their core systems and encouraging providers to adopt those systems. Lastly, Blue Cross of Idaho provided online tools for providers to correct EDI claims. As a result, EDI claim submissions increased from 59 percent to 79 percent, reduced the number of rejected claims, improving providers' cash flow and saving providers and Blue Cross of Idaho money.

Blue Cross and Blue Shield of Texas created a cash flow-related incentive for providers. For providers that submit at least 85 percent of claims electronically for three consecutive months, Blue Cross and Blue Shield of Texas pays the claims via direct deposit, rather than by cutting and mailing a paper check. This puts money back in the providers' practice sooner.

Managing Paper
Although health plans try to reduce the amount of paper being submitted, they inevitably need to manage paper in such a way that its content moves swiftly and securely through the organization. One of the best ways to manage paper is to scan it into an imaging system as early as possible-either in the mailroom or by the administrator of a department-before it gets distributed to individual workers. Moving paper claims through the organization as digital images helps prevent loss or delays and improves compliance with Health Insurance Portability and Accountability (HIPAA) and prompt-pay regulations. Digitized claims can be more easily tracked, reported and protected from aging. And, digital information can be protected more easily from disaster and from unauthorized access.

A robust imaging and document management system not only helps health plans manage claims that are initially submitted, but also provides a system to organize documentation that may be submitted later such as to support a claim review. Such a system matches incoming mail or faxes to pended claims folders and notifies the claims analyst that additional information is in the folder for review, preventing delays and helping payers to complete claims reviews quickly and accurately.

The goal of claim preparation or pre-adjudication edit is to increase the percentage of claims that adjudicate on the first pass and reduce the overall cost of claims processing. An industry study cited in Health Management Technology estimated that securing accurate patient information at this stage could prevent as much as 90 percent of claim denials.

Good claim preparation helps reduce the number of preventable denied claims by validating member/provider data, dates of service, Current Procedural Terminology (CPT) codes, etc. It can also help identify duplicate claims. Systems that leverage core system data to validate and correct data or suggest changes to repair the claim prior to adjudication aid this process.

The most successful plans are those that involve providers in the process of editing claims prior to adjudication by deploying a secure environment in which providers are permitted to correct errors before suspect claims are sent to the core system. One major Pennsylvania health plan and the University of Pittsburgh Medical Center created a dashboard to view claims status and history. A major payer in Michigan collaborated with fourteen providers to create an electronic "bucket" for claims that didn't pass initial edits. The providers access, rework and resubmit claims in real time. The plan reported a $14.3 million savings by avoiding rework, collection agency fees and bad debt.

Processing by the health plan's core system is the third major step in claim processing yet is not one that will be addressed here. Most health plans report blended auto-adjudication rates in the core system between 60 and 75 percent, with paper claims' percentages being lower than EDI claims. For a plan processing one million claims a month, that's between 250,000 and 400,000 claims monthly to process and re-submit to the core system in a timely fashion. These large numbers present an enormous opportunity for improvement for most plans.

Control Labor Costs When Claim Volumes Grow
As stated earlier, manual processing of a pended claim costs health payers approximately $28 each compared to $2.50 for claims that adjudicate on the first pass. Most core systems were not built to manage exceptions, so the $28 cost consists mostly of labor.

To control their labor costs even as claim volumes grow, plans should begin by re-evaluating their processes and pended claims categories or reason codes. Some exceptions can be avoided systematically or by reviewing internal procedures or data. One large regional insurer increased its first pass adjudication rate from 44 to 60 percent, by editing its pend codes which created the capacity of 10 knowledge workers.

Many payers manage pended claims inefficiently by printing a pended claims report, distributing pended claims across the team, and completing the work from paper. Technology that automates manual tasks and matches talent to task, assigning a claim to the analyst who is best trained to complete it, is key to providing long-term benefits to payers. Such technology facilitates inter-departmental problem resolution and maintains a complete audit trail of claims resolution activity.

In the most efficient scenario, technology enables pended claims (our forth step) to be processed in an online work environment that pulls pended claims categorically from the core system, creating an electronic folder for each pended claim. That folder will contain the original claim and any claim data relevant to resolving it. Health plans that combine the machine-like efficiency and accuracy of straight through processing with the reasoning power of knowledge workers by implementing process and content management software maximize the use of all of their resources. That's claim processing in the real world.

 


Crunching Data: The Key to Six Sigma Success

Joseph Goedert

Quality improvement programs come and go in health care and other industries. Many CIOs remember the days when Total Quality Management and Continuous Quality Improvement were the de rigueur programs that promised to squeeze the inefficiencies out of the care delivery process.

Those initiatives, however, for the most part fell far short of expectations. But now there's a new kid on the quality improvement block: Six Sigma, a program that has been embraced by many Fortune 500 companies and is making inroads in health care.

Some organizations are hesitant to embrace Six Sigma, fearing that it's just a repackaged version of past-read "failed"-quality programs. But proponents say Six Sigma brings definitive and lasting benefits and will have the staying power the other quality initiatives did not.

The quality program is a disciplined methodology that uses data and statistical analysis to measure and improve a company's operational performance by identifying and eliminating "defects" in manufacturing and service-related processes. The goal of the methodology is to have less than 3.4 defects per million "opportunities," as defined by Six Sigma.

What it is
In the 1980s, the late William Smith, an engineer with Motorola Inc. of Schaumburg, Ill., developed the concept of Six Sigma and urged CEO Robert Galvin to adopt the quality program.

Motorola did so in 1987 and the following year was one of the first recipients of the Department of Commerce's Malcolm Baldrige National Quality Award, which was established to recognize business excellence in the United States.

One responsibility of Baldrige winners is to evangelize quality improvement. So Motorola opened its doors and provided Six Sigma training seminars to thousands of companies.

One convert was Jack Welch, then the CEO of General Electric Co. in New York. The company adopted Six Sigma in 1996.

A core tenet of Six Sigma is identifying, measuring and controlling variables. Any Six Sigma project has five basic phases-define, measure, analyze, improve and control.

However, quality improvement does not come just from the top under Six Sigma, says Russell Esposito, vice president and CIO of Vytra Health Plans, a Melville, N.Y.-based managed care payer. Vytra's first Six Sigma project-improving enrollment processes to reduce its high claims processing error rate-came from the top as executives put their imprint on the initiative, Esposito says.

Since then, however, project ideas have come from all 'rungs' of the organization, he says. Vytra now has three or four major Six Sigma projects, and five or six smaller ones, going on at any given time. "All levels are empowered," he says.

"Production-level people must think the same way as quality improvement experts and senior executives." As for Vytra's problematic enrollment process, changes to addresses, other demographic information or benefit levels-such as a member's eligibility for physical therapy-were not getting updated in adjudication systems, resulting in claims being pended for manual intervention.

This "hidden factory" of reworking claims is very expensive, reducing productivity and profits, Esposito says. After fixing the enrollment and other processes, the payer's 10% internal error rate in claims processing fell to 3%.

Esposito credits Six Sigma programs with helping the insurer pay 95% of paper or electronic claims within 15 days of receipt. "That goes a long way in terms of relationships with hospitals and physicians."