Healthcare Billing and Reimbursement: Starting from Scratch

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The healthcare billing environment in the US is a disaster. It creates huge waste in care and cost. As presented at the Cayman Islands International Healthcare Conference in October 2010, this slide deck suggests what the billing system might look like, if we could start over.

Text of Healthcare Billing and Reimbursement: Starting from Scratch

  • 1. Healthcare Billing & Reimbursement Starting From Scratch Moving From The Economics of Revenue to the Economics of Health

2. Introduction Dale Sanders Twitter: drsanders Text: 1-345-925-8329 Email: LinkedIn: Blogs 2 Text, email, or tweet your questions during the presentation 3. Acknowledgements For direct and indirect benefit of their knowledge in this presentation David Burton, MD; Healthcare Quality Catalyst John C. Goodman, PhD; National Center for Policy Analysis Paul Keckley, PhD; Deloitte Blackford Middleton, MD; Harvard Medical School John T. Preskitt, MD; Baylor University 3 4. Key Messages The US health insurance and claims processing environment is the single greatest flaw in the US healthcare model We are significantly influenced in the Cayman Islands by the US insurance model Third party administrators are US-centric Information systems are US-centric We can further reduce the influence and become a role model for the United States Our Health Services Authority/CINICO partnership on the CarePay project is a MAJOR step in the right direction The Bermuda Health System offers valuable lessons 4 5. Overview Flaws in the US Reimbursement and Billing Model The Effect On The Cayman Islands Recommendations for Change Evidence of the US Models Flaws The Cayman Islands Government Role in Change Seth Avery Case Study: Bermuda Transition to Something Better Opportunities and Suggestions for the Cayman Islands 5 6. 6 7. Healthcare Billing at a Restaurant You wait 45 minutes for a table, even though you had a reservation. You tell the waiter that youre hungry but theres no menu. The waiter returns with a meal that he thinks is appropriate for youbut he doesnt know how much it costs. You have no idea what the food is or what it costs, but you agree to eat it. You leave without knowing your bill. The restaurant sends the bill to your bank, not you. Your bank tells the restaurant, Your waiter ordered the wrong thing for you. Were not paying for it. 90 days later, the restaurant calls to tell your account is being turned over to collections. 7 8. Unnecessarily Complex 9. Major Flaws in the US Model We can eliminate these from our Cayman Islands claims processing environment 1. E&M level of service coding 2. Revenue Codes 3. The necessity of Medical Records Coders in the billing process and diagnosis coding An expensive by-product of the flaws and complexity 4. Procedure-based billing Instead of diagnosis-based billing 5. Transaction-level adjudication Instead of contract performance levels 9 10. HSA Billing & Reimbursement Environment ~$85M in operating revenue A/R days: 70 Income mix Self Pay: 8% Commercial Insurance: 24% CINICO/Government: 68% About 350,000 patient financial encounters per year ~200,000 pharmacy encounters and claims ~150,000 traditional clinical encounters and claims About 20% (70,000) of these claims are denied & resubmitted because of errors and disputes Rework labor can range from 5 minutes to 5 days per claim 10 11. Factoids HSA 103 FTEs (Full Time Equivalent) employees at HSA are involved in billing and reimbursement US 31% of healthcare costs are in administrative overhead associated with billing and claims processing Thats about $50,000,000 per year in Cayman Reduce that overhead and return it to physician and staff salaries, equipment and facilities improvements, etc. 11 12. Healthcare Is Not That Unique Healthcare is a Services Industry activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability. The Tertiary Economic Sector Primary Sector: Farming, mining, fishing Secondary Sector: Manufacturing We should borrow ideas and concepts for billing and reimbursement from the Services Sector that balances quality, cost, economic efficiency, and risk for all parties 12 13. Common Sense Contracting Time and Materials (T&M) Encounter-based, CPT procedure-based billing Firm Fixed Price (FFP) Bundled payments, DRG and ICD diagnosis-based billing Episodic treatment of chronic disease 13 We need less of this And we need more of this 14. + Evidence of the US Mess 14 15. Administrative Hassles Related to Medical Bills and Insurance Are Serious Problems for More Than 25% of US Adults Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2011. 7 10 6 19 24 17 0 25 50 Total Fair/Poor health Excellent/Very good/Good health Serious problem Very serious problem 26 34 23 Percent reporting serious problems spending time on paperwork or disputes related to medical bills and health insurance in past two years 16. 16 17. Spending on Health Insurance Administration per Capita, 2007 17 $76 $86 $140 $191$198 $220 $247 $516 $0 $100 $200 $300 $400 $500 $600 US FR SWIZ NETH GER CAN AUS* OECD Median * McKinsey Global Institute, Accounting for the Costs of U.S. Health Care: A New Look at Why Americans Spend More (New York: McKinsey, Nov. 2008). 18. Factoids A 18 minute office visit takes 52 minutes of patient time and involves 8 people During a 4 day stay in the hospital, patients will interact with hospital staff 160 times At least 25% of the overhead is billing and insurance related 18 Archives of Internal Medicine, July 2008 19. Whats Happening in the US Model? Besides CEOs of private insurance companies making $24M per year :-/ Healthcare insurance is now operating pro emptore as the buyer Life insurance doesnt work that way auto insurance doesnt work that way You spend the insurance money as you see fit for the best quality-cost tradeoff Healthcare insurance is buying for you A major flaw in the model that must change 19 20. Disintermediation of Insurance? some of the most striking examples of efficient care are emerging in those parts of the market where third-party payment is either nonexistent or of marginal importance. John C. Goodman, PhD; National Center for Policy Analysis Buyers of Care vs. Insurers of Care The physician is forced to be an agent of the insurance company-- shaping the practice of the physician--instead of the physician acting as agent of the patient Cerner Corp is a role model for the elimination of third party insurance for its employees healthcare services A model which could be adopted by HSAor all government? 20 21. 21 Leading Indicator: Growth in Self-Pay Clinics 22. E&M (Evaluation & Management) Codes Clinical Procedure (CPT) codes which describe five levels of complexity for physician-patient encounters Originated in the 1990s as a means to cut back on billing fraud The guidelines document from CMS is 48 pages long! E&M coding encourages procedures not cognitive diagnosis Several independent government commissions and the New England Journal of Medicine have repeatedly recommended their elimination Costs the US healthcare system $150B per year to administer NEJM, May 2011 For podiatrists, there are individual CPT codes for nail debridement of 1 to 5 toes and a separate one for 6 or more toes (?!) 22 23. Coding Environment Leads To Higher Specialty Fees & Growing Compensation Gap $161,816 $133,329 $297,000 $215,978 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 1995 2000 2004 All Primary Care All Specialists Source: T. Bodenheimer, R. A. Berenson and P. Rudolf, The Primary CareSpecialty Income Gap: Why It Matters, Annals of Internal Medicine, Feb. 2007 146(4):30106. Median pretax compensation of US physicians, 19952004 37.5% increase 21.4% increase 24. Revenue Codes Origins: AMA & AHA wanted to be paid more for the same clinical procedure, depending on where it was performed CPT 12001 for a simple laceration Can be treated in multiple places Operating Theater: Code 360 A&E: Code 450 Clinic: Code 510 The price and adjudication should be the same, regardless of location 24 25. + The Governments Role 25 26. The Power of Western Democracies They can balance the efficiency of free-market capitalism with the humanity of socialism The US system is decaying under the greed of a free-market free-for-all Purely Socialist systems are decaying under the inefficiencies of no consumer choice Good legislation can find a balance between the two and Cayman is on that path What else could we do to progress? 26 27. Legislative Themes 1. Reduce Costs and Increase Affordability 2. Increase Access 3. Improve Quality of Care 27 28. Caveat If anyone should read the following slides out of context, they are only Sanders Dreams and Thoughts for the Minister, Board, and Senior Management Team They are not actual Legislative Acts 28 29. Caymans CarePay Project Partnership between HSA and CINICO Critical Vendor Partners: AIS, Cerner, IMO Real time, point of care eligibility verification and claim adjudication The patient will know their coverage and out-of- pocket expenses at the point of care No Mystery Billing, 30-90 days later Claims denials reduced or eliminated completely Should be in full operation by February/March 29 30. The Healthcare Financial Efficiency Act - 2012 Mandate point-of-care adjudication and electronic transactions for eligibility, claims and reimbursement CarePay for all covered lives, not just CINICO Regulate standard fees (as is currently) and commit firmly to annual updates Move from CPT-based billing to ICD and DRG- based billing Bundled and Episodic reimbursement rates Eliminate E&M and Revenue Codes from claims adjudication 30 31. 89 81 80 65 62 58 36 0 25 50 75 100 UK NETH NZ AUS CAN GER US Percent of physicians reporting any financial incentive for targeted care or meeting goals* * Can receive financial incentives for any of six: high patient satisfaction ratings, ac