In This Issue: Adjustments and Claim Metrics

Issue summary and other notes...

Article 1 Auto-Adjudication. Measuring, tracking, and improving claims auto-adjudication (AA).

Article 2 Process Improvement Priorities. Best practices for identifying and prioritizing claims process improvement initiatives.

CH Tip FTE Savings Calculations. How best to measure the FTE reduction from that claims initiative?

Auto-Adjudication and Claim 'Blockers'

The Mad Logic of ‘Blockers’ – Why Let the System Process It When A Person Can Do It.

The simplest way to define and understand a ‘blocker’ is by walking through the diagram below.

Claims coming through a claims system pass through two questions.

1. Is the system allowed to adjudicate the claim (the first diamond)? Claims are often forced to manually adjudicate because it is believed the system cannot ‘properly’ adjudicate the claim. These are ‘blocked’ claims. Claims are blocked for lots of reasons, as we’ll see below.
2. Is the system able to adjudicate the claim (the second diamond)? Examples of situations where the system is not able to adjudicate a claim include: Member name mismatches, missing referrals, and COB. These are situations where the claim has a specific problem and cannot be adjudicated without manual intervention.

Four notes about blockers:

1. Often overlooked. We need to block those claims, right? So, we’ll focus our improvement efforts on something else. Wrong. Look again.
2. Usually a significant problem. ‘Blockers’ are a significant problem in many automated processes, whether automobile manufacture or healthcare claims processing. In the absence of data to support the accuracy of automated steps (to ‘trust’ the system), people do what comes natural – they perform those steps themselves. A quick benchmark for a claims operations: if the auto-adjudication rate for a claims operation is 30%, the remaining 70% of manual claims is probably 45% problem claims and 25% blocked claims.
3. ‘Blockers’ are relatively easy to eliminate. People often make the logical mistake that systems are not allowed to because they are not able to. These two questions often get confused in the set-up and ongoing review of system logic and pend codes. Fortunately, once you separate what is ‘blocked’ from what is broken, it is usually fairly easy to build a business case for ‘unblocking’ affected claims.
4. Benefits plans are usually a substantial root cause. Health plans ‘block’ (manually process) claims from individual employer groups for many reasons – few of which make good business sense. The processing cost associated with the manual claims generated by a blocked employer group usually far outweighs the customer service or other perceived benefits. Review your largest plans first.

First Things First: How to Prioritize AA and TAT initiatives.

How to prioritize claims improvement initiatives.

Initiative prioritization is best handled with a simple cost benefit template. There are four things you need to build into such a template. The first two, dollar savings and implementation costs, are the most important.

1. Dollar Savings. At the end of the day, savings is the big driver in terms of process improvement initiative prioritization. It is usually helpful to estimate it from top-down and bottom-up. Remember, at the end of the day there’s no right answer. There’s only the answer that most easily helps you identify the initiatives with the most benefit.
2. System and Process Change Costs. Improving a claims process involves either a system change a process change or both. Such changes require resources and time. In general, implementation costs are reasonably straightforward to measure. Make a simple project plan. Convert the people and time required into dollars.
3. Customer Service Impact. Who (a big ‘who’ or a little ‘who’) is this initiative going to make happier (or madder) and how much happier (or madder) will they be? I usually use the High/Medium/Low approach to customer service impact.
4. Risks. Always ask – What could go wrong with this initiative? Usually, if there’s a significant risk, reducing it will involve some type of added system or process change cost.

Key process improvement initiative prioritization tips

1. Focus on the big stuff. Reprioritize at least every quarter. Because process improvement is a long haul exercise, it’s easy to get focused on a particular initiative and lose sight of other opportunities. A regular initiative review process should be continually asking – are there bigger opportunities than the ones we’re working on?
2. Use breakeven instead of ROI. Discount rates and future cash flows are always messy – and confusing. When do you save as much as you spend (breakeven)? And how much will you save the year after you breakeven?
3. Don’t be too precise. The better initiatives are usually evident without too much precision. It’s not uncommon to find managers struggling to add precision to an estimate that has negligible business value (now we know exactly how bad it is!).
4. Don’t punish mistakes. Mis-prioritized initiatives are common. That’s the nature of process improvement. Punishing mistakes will drive managers to focus on precision and risk and, odds are, ignore the bigger opportunities (i.e. risks). AA and TAT improvement is like stock-picking – spread your bets across a few horses.
5. Speed matters. Pick your top initiatives and start implementing. Today. Wait until you’re sure about quantifying something and the payor across town will have it implemented. Tomorrow you can adjust.

CH Tip: FTE Savings Calculations

Pitfalls to avoid when calculating FTE savings associated with claims improvement.

Say we are evaluating an initiative to reduce claims pended or held for COB. The initiative is estimated to reduce COB pends by 1,000 claims per week.

Bottom up says, one claim takes 10 minutes to process times 1,000 per week times 52 weeks divided by 250 annual work days times 6 hours productive daily time times 60 minutes equals number of FTEs reduced. Top down says, 1,000 claims is what percent of our total weekly manual claim volume times the total number of FTEs we have processing claims.

The most important reason why these numbers will not be equal is number of minutes to process a claim. If COB claims take twice as long as an average claim to process, the bottom up FTE savings will be much larger than the top down. Remember those word problems back in the eighth grade?…