Administrative Simplification, Simplified for Hawai‘i

Abstract

Background

The American health care system contains a layer of administrative controls that has become increasingly burdensome to medical practices in terms of uncompensated physician and staff time and practice costs. A primary care physician in solo practice spends between 4 and 10 hours a week directly interacting with health insurance companies and his or her staff will spend an additional 60 hours a week. This reduces patient-care availability, net practice income and physician job satisfaction.

Methods

A literature review was conducted to determine possible solutions to administrative burdens physicians face in Hawai‘i. A total of 51 articles were found matching search criteria with five being reports from major organizations.

Results

Twenty-seven articles were found that related to administrative simplification. The “administrative complexity” problem has been defined and its financial impact quantified. Promising solutions have been developed and proposed by private not-for-profit organizations and by the government, both state and federal.

Discussion

A successful administrative simplification plan would: (1) Provide rapid access to insurance information; (2) Allow medical practices to readily track specific claims; (3) Streamline the preauthorization process through the use of decision-support tools at the practice level and by directing interactions through real-time network connections between insurers and provider electronic health records, thus minimizing phone time; (4) Adopt the Universal Provider Datasource system for provider credentialing; and (5) Standardize (to the greatest degree possible) provider/insurer contracts. These solutions are outlined in detail.

Introduction

In a typical business a bill is submitted by a seller and a remittance paid by the purchaser, a very straightforward process. In healthcare, however, there is a third party, an insurer or a government payer, which adds a layer of “administrative controls” for ostensibly legitimate purposes such as cost containment. In this paper the term “insurer” refers to an insurance company and/or a health plan while the term “payer” means all parties who reimburse (pay) providers, the insurers, and Medicare/Medicaid. Unfortunately, the billing/remittance process then becomes a complex knot of paperwork. Multiple eligibility rules must be strictly followed when basic insurance information (eligibility, co-pays, deductibles, plan benefits/exclusions, and medication formularies) is not readily accessible. Requested tests and treatments must match the payer's non-transparent clinical criteria, such that routinely, over lengthy telephone calls, a provider is forced to defend her clinical judgment to a clerk wielding a protocol book. Invalid bills (claims), when denied, must be corrected, resubmitted, and appealed, taking significant time. In addition, the doctor must prove and reprove her qualifications (credentials) to deliver the services, and must negotiate and renegotiate fee-schedule and payment rules, sometimes necessitating the services of an accountant and/or attorney.

With Hawai‘i having a growing shortage of physicians and potentially losing more than 40% of its physician workforce to retirement over the next decade,¹ now is the time to make changes to this cumbersome system. Improving the “practice environment” through simplification of the administrative controls should reduce both the cost and the “hassles” of running a medical practice.

Methods

In mid 2011, a literature review was conducted to determine possible solutions to administrative burdens physicians face in Hawai‘i. The search was performed on Medline using the MESH terms, “administrative simplification,” “administrative complexity,” and “billing,” limited to the last five years and the English language. Of the over 3,000 articles found on the topic, 51 presented material on some aspect of administrative simplification, complexity, or billing. Five were reports from large national organizations. Six of the articles were studies that used a survey methodology. These provided useful information on one or more aspects of office administrative procedures.

Results

Using differing methodologies, the cost of “administrative complexity” has been estimated in the literature. The Institute of Medicine estimates that 6.5% of total healthcare expenditures in the United States is spent on billing and insurance related activities, while in other industries the comparable number is less than one percent.² In 2007 the accounting firm, Price, Waterhouse, Cooper estimated that 15–30% of US healthcare costs are spent on “administration,” and up to 10% ($210 billion in 2008) comprises the “excess cost of claims processing.”³ Casalino, using a survey methodology, estimated that a solo primary care physician (PCP) and staff spend thousands of hours each year interacting with health insurance companies — time away from their patients.³ The value of this uncompensated time averaged $68,000 per year for each practice. Moreover, as healthcare costs have escalated, so has the rigor of the administrative controls. In Casalino's physician survey more than three-quarters of the respondents said that the cost to physician practices of interacting with health plans from 2004–2006 had increased, with the majority saying it had “increased a lot.”⁴

Eligibility Verification

The Oregon Health Authority recognizes that many processes which have long been automated in other industries are still largely performed manually by healthcare providers and even some payers. The primary cause cited in the Oregon report rests with regulations established in the Health Insurance and Portability and Accountability Act of 1996 (HIPAA) and later by the federal Department of Health and Human Services (HHS). Because many issues were left unresolved, the private sector developed individualized practices that suited each health plan's particular business or information system needs. An example included in the report specifically addresses a medical practice's need to verify which health insurance company covers any given patient. The current regulations allow payers to provide both confirmation of coverage and specific information about benefits, co-pays, formularies, etc. However, the regulations do not require that payers provide these details. Hence, though the payers all verify eligibility, many choose not to transmit the additional information unless a provider submits a specific request, usually by phone or Fax.⁵ Minnesota and other states are years ahead in the effort to verify insurance eligibility electronically. Indeed, Minnesota has had a multi-stakeholder committee working together to standardize administrative processes for over 20 years.

Although standardization of these electronic data transmissions would significantly reduce everyone's costs, private health insurers generally have had difficulty in reaching agreement on specific standards. Therefore, a private, not-for-profit coalition of more than 600 organizations, the Council for Affordable Quality Healthcare (CAQH), was created to serve as a catalyst for collaboration on proposals that simplify healthcare administration for providers and payers.⁶ Several health plans that do business in Hawai‘i are member organizations. This coalition's Committee on Operating Rules for Information Exchange (CORE) is developing voluntary operating rules that build on existing HIPAA and HHS requirements by adding and/or clarifying standards for transmission, security, error resolution, and more. Health plans would have to become CAQH members, adopt its rules, then create internal systems that allow them to quickly and economically send healthcare information electronically, such as eligibility information to physician offices. Each CAQH member pays an annual fee, which sustains the CAQH programs.⁷

Health ID Cards

A different approach to the health plan eligibility problem entails the use of standardized patient ID cards, which the state of New Jersey is interested in piloting. Most private practices photocopy a patient's health insurance ID card and then type the information into their database, which contributes to the claims error/reject rate. A machine-readable health ID card system that uses bar code, magnetic strip, or other technology would reduce clerical errors and significantly speed up the eligibility verification task. In support of this concept, the Affordable Care Act requires that electronic data-transmission operating rules allow for machine readable ID cards.⁸

Claims Processing

The Oregon Health Authority estimates “claims status inquiry and response” accounts for almost a quarter of the administrative cost.⁹ Claims processing is complex, as illustrated in the Massachusetts Hospital Association's flow diagram in Figure 1.¹⁰ Although this refers to bills generated in a hospital ER, a medical practice's process is similar.

Figure 1.

Massachusetts Hospital Association Flow Diagram

Because of the complexity of insurance claims processing and because insurers have on average a 20% error rate,¹¹ the American Medical Association (AMA) recommends the mandated use of “health claims acknowledgements” (HCA) in the operating rules. HCAs are signals sent when a specific step in a health insurer's claims processing has been completed. They allow the insurer and provider to track a claim. If further documentation is required, the provider can expedite the matter; if incorrect or incomplete information was sent, the provider can identify the problem and send corrections to avert a denial and the need to resubmit the claim. The CORE operating rules will facilitate the adoption of HCAs and a provider's ability to respond appropriately to insurer inquiries.³

Preauthorization

In Casalino's study each solo PCP spends 4.3 hours per week on interactions with payers. Two-thirds of this physician time is spent on requesting approval from a payer to order a test, perform a procedure, or prescribe a medication not on a patient's health plan-approved formulary.¹² In primary care practices that no longer employ a nurse the PCP's 4.3 hours might rise significantly. Tice, et al. estimate that a physician in Hawai‘i spends two hours every day interacting with health plans.¹³

The Healthcare Administrative Simplification Coalition (HASC) recommends that health plans support automation, simplification, transparency, clear communication, and, to the extent possible, standardization of prior authorization processes among health plans and pharmacy benefits plans. HASC supports electronic prescribing national networks in product offerings by electronic health record (EHR) vendors, health plans, and pharmacy benefits plans to achieve the goal of providing real-time, patient specific formulary access into e-prescribing functionality.¹⁴

The American Academy of Family Physicians (AAFP) in an issue brief on insurance company prior authorization called for greater simplification, transparency, and standardization. It recommends the development and implementation of evidence-based decision support tools at the point of care, presumably as electronic health record add-ons that will be congruent with appropriateness criteria used by the insurers. Demographic and clinical data needed by insurers in this context should be auto-generated and transmitted electronically. Feedback reports to providers on ordering patterns and compliance to clinical guidelines should be done to support physician education.¹³

Credentialing

The CAQH also created the Universal Provider Datasource (UPD) in 2002 to enable providers in all 50 states to upload credentialing documentation, free-of-charge, into a secure central database. Authorized healthcare organizations can then access that information. The UPD participating organizations pay an administrative fee and a set fee per provider to access the data. If all of the organizations that credential providers used the CAQH system, virtually all of the redundant paperwork would be eliminated, thereby reducing the administrative burden.¹⁵ The Universal Provider Datasource, which has already gained wide acceptance throughout the United States, appears to be an ideal credentialing platform. Health plans and hospitals in Hawai‘i have long understood the desirability of the shared service, both in terms of effectiveness and cost. Exploring the UPD system would seem to be the next logical progression in that direction.

Standard Provider/Insurer Contracts

Recently New Jersey and Ohio submitted legislation that would create a uniform health plan/provider contract. Their reasoning was that this would simplify contract review and negotiation. Ohio also sought to do away with “predatory” clauses in their insurer/provider contracts.¹⁹ Whether these are significant problems in other states is not clear at the time of this writing.

Discussion

The administrative controls imposed by health plans and government payers have escalated to an alarming degree. Because healthcare costs will continue to rise, this administrative burden can be expected only to increase over time. In the face of a growing physician shortage, efforts should be taken to maximize practice efficiency and to minimize the intrusiveness of administrative requirements, while maintaining or improving patient care and safety. These goals can be advanced in Hawai‘i by:

1. giving medical practices rapid access to their patients' insurance information, including the ability to determine patient eligibility, co-pays, deductibles, restrictions, insurance company rules, forms, and drug formularies;

2. giving practices the ability to readily track a specific claim, correct errors, and provide additional patient in formation or documentation;

3. implementing a preauthorization process where provider/insurer communication is directed seamlessly through a provider's EHR with transparent criteria and reasonable uniform rules are established; in addition, embedding decision-support tools in the EHR that are congruent with the health plan's criteria;

4. adopting a statewide, centralized credentialing system that requests standardized information at reasonable intervals with no duplicated requests, such as the CAHQ's UDC system, used by large national-level provider corporations, such as Humana;

5. standardizing (to the greatest degree possible) provider/insurer contracts.

Standardization and uniformity have become the watchwords of simplification, along with substituting automated/electronic processes for human labor. The CORE operating rules, if used by all of the health plans and government payers in Hawai‘i, would facilitate the development and adoption of fundamentally uniform processes that would give medical practices access to insurance information and allow claims tracking. Note that the CORE operating rules represent only one option. Having all of the payers agree on a set of standards is the key.

Preauthorization programs that require a provider to phone a benefits company (often in another state) or that require a handwritten/typed form should be considered overly burdensome and phased out. Health plans that service any given community should work among themselves and with their providers to reach agreement on the to document tests and treatments of concern. Health plans should then work with EHR vendors to create a seamless system in which health plan requests for information would appear automatically on the EHR screen when the physician orders a test or treatment on the preauthorization list. Decision support should be available upon request. The EHR would provide the patient identification and demographic data, and the provider would click on the criterion that applies to her patient or key in the justification. The information would be sent electronically to the health plan via a secure network connection. The cost should be borne primarily by the health plans, as they are the beneficiaries. If the provider does not have an EHR, many of the steps can be done through a secure web portal created by the payers.

Certainly there is a cost to the payers to implement these solutions, but they are also asking providers to pay a cost every day in the form of uncompensated time and unnecessary aggravation. These relentless hassles inevitably contribute to a higher rate of provider burnout and early retirement. These modest costs should be looked at as an investment, which over the years will pay off in number of providers pleased with their work environment. For their part providers have to be cognizant of the fact that automation plays a pivotal role in administrative simplification. These labor-saving solutions will give providers obvious additional incentives for EHR implementation. Beyond that, providers must accept that preauthorization systems and other administrative controls have proven value and that working with payers in a constructive way will lead to an overall stronger delivery system.

Conflict of Interest

The author has identified no conflicts of interest.