WHITE PAPER. A Technology Overview: Combating the Paper Health Care Crisis with Claim Processing Automation

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1 WHITE PAPER A Technology Overview: Combating the Paper Health Care Crisis with Claim Processing Automation

2 A Technology Overview: Combating the Paper Health Care Crisis with Claim Processing Automation Executive Summary In the middle of a national transformation from a traditional fee-forservice model to one of managed care, today s health care system is more complex than ever and health care spending continues to rise. The more than 800,000 practicing physicians in the United States are less often found in small family practices or independent hospitals but instead becoming part of large conglomerates, comprised of multi-office locations that operate under a per patient fixed monthly rate system. At the same time, annual health care spending continues to increase. In 2005, health care spending represented 16 percent of the Gross Domestic Product at a cost of approximately $2.2 trillion. Total health care spending increased another billion dollars in just two years and is expected to reach $3 trillion in 2011.* To put this dollar figure into perspective, consider that annual health care spending is now 4.3 times the amount spent on national defense.** $3.0 ANNUAL U.S. HEALTH CARE SPENDING Dollars in Trillions $2.0 $1.0 $0.0 $1.2 $2.2 $2.3 $3.0 $4.2 Year: This new model of managed care, combined with the sheer volume of health care spending, has created a ripple effect, forcing the need for transformation in all aspects of health care management, with claims processing as no exception. With rising volumes of paper claim forms, manually processing these documents has become another drain on an industry already facing many fiscal and operational challenges. 2

3 Business Challenges and Limitations of Manual Claims Processing After decades of processing claims entirely within the constraints of a paper-based environment, many insurance carriers (payers), have invested in an adjudication or health information system to manage the large amounts of claims received from providers. However, the majority of claims received from medical providers are submitted in a paper format on the densely-packed CMS-1500 form (or UB04). This means that even if a payer is utilizing an electronic adjudication or health information system to manage the claim process, the critical data from the incoming CMS-1500s must be manually entered into the adjudication system before the validity of the claim can be reviewed and evaluated to make a payment decision. The frequency of overpayments, rejections, and denials often reaches 50 percent, mainly due to manual data entry errors and the high complexity of claims (The Healthcare Billing and Management Association, HBMA Edition, July 2007) With industry experts estimating more than 75 million pages of claims are processed daily, the need to perform manual data entry of anywhere from 60 to 70 data fields to up to 200 or more fields per claim can be a significant point of pain and labor expense for a payer. The Healthcare Billing and Management Association reports that the frequency of overpayments, rejections, and denials often reaches 50 percent, mainly due to manual data entry errors and the high complexity of claims (HMBA Edition, July 2007). And if a claim is rejected or denied, the provider has the opportunity to re-submit the claim multiple times until a resolution is reached meaning that each time the original claim is re-submitted, additional manual data entry must be performed by the payer to enter the corrected information into the system. Other issues including poor print quality, misaligned text, and incorrect data have compounded the time and cost challenges created by the sheer volume of manual data entry needing to be performed before the actual claim review and payment process can begin. With the rising labor costs associated with the incomprehensible number of hours needed to hand key in more than 1.5 billion pages of claims a month, some payers have turned to overseas labor for a seemingly more affordable manual data entry solution. However, using overseas labor has created additional challenges with data accuracy, quality, and communication issues. In some cases, it has resulted in many labor cost efficiencies initially gained being eroded by the need to manually verify all entered data, or search for and correct manual data entry errors propagated downstream in the adjudication or health information system. Dealing with these 3

4 errors has impacted the ability to properly manage payments and denials, and cut into revenue. A better solution to the challenge of efficient claims form processing is the introduction of a front-end capture system designed to replace manual data entry, and enhance the speed and quality of data entered in the back-end health information systems already in place. These specialized front-end data capture solutions allow payers to cut costs while at the same time improve productivity, data accuracy, customer service, and profits. Automated Technology Overview Specifically designed to meet the unique requirements of specialized claim forms such as the CMS-1500 and UB04, data capture technology has advanced to the point where the software can automatically capture all of the data needed quickly and accurately without the need for manual data entry. This can include medical procedure information (CPT codes), cause of illness (diagnosis codes) to patient ID number and more, whatever is desired. Once captured, the data can be automatically cross-validated against a payer s existing data tables that are often updated daily with new information. And the most effective solutions can even look up items such as the physician ID number in an existing database and automatically translate it into the doctor s information, to create a complete data record. This specialized claim processing software has also been designed to address the unique challenges of claim form processing faced by manual data entry operators, including trying to locate the appropriate information on a document with a small font size, hampered by poor print quality or misaligned text, making the forms hard to read. Also, claims forms are packed with data which may or may not be correct and operators may not be able to catch every error. An automated solution can compensate for readability issues using specific image and text enhancement technology. And to ensure an accurate record is transferred into the adjudication system, a software feature can perform equation validation and verify the data as it is captured, such as balancing claim totals to line item details. How Automated Claims Forms Processing Works A claim form is an example of a structured form. Just like on a CMS-1500 or a UB04, a structured form has the desired data located in static positions on the page across the document type. In other words, the document not only contains the same type of information from form to form, but also has the same layout. This means that the provider number, for example, can be found in the same spot on a CMS-1500 form from one claim to the next. 4

5 Instead of an operator manually keying in the data from each claim form, a template defines the zones or fields to be captured off the structured form. Each field refers to a specific area on the form and can be formatted to accurately capture the data contained within that zone. For example, a field containing a Social Security number can be formatted to look for nine numerical characters. Some capture software can even recognize different versions of claim forms, accommodate the various ways different providers complete the same form, adjust for the different printers utilized to print the data, and the differences from company to company responsible for printing the hard copy of the form. Remote Verify Electronic document image storage & retrieval Capture Quality Assure Identify Process Verify Output Patient accounting or adjucation database The Automated Data Capture Process The automated data capture process begins with a scanned or imported claim image. Paper claim forms can be scanned at a central location or from a variety of remote locations or both whatever best fits a payer s existing business model. No matter which method of scanning is selected, document images are viewable within seconds. Because a lot can happen to physically affect the readability of a claim form before it is scanned, such as becoming torn or dirty, or poorly printed with smudged characters, current scanner communication can be optimized to create the cleanest image possible. In addition to maximizing the scanner properties, data capture software will automatically deskew, lighten, crop, despeckle, and rotate an image. This clean-up process provides the cleanest possible claim form 5

6 Optical Character Recognition Optical Character Recognition (OCR) is the electronic translation of printed text from a document image (usually created by a scanner) into machineeditable text. OCR technology eliminates the need to manually key data off of paper documents into an adjudication, health information, or other back-end system. The four basic types of recognition technology used in claim processing are: OCR: Optical Character Recognition for machine print MACHINE PRINT ICR: Intelligent Character Recognition for hand print OMR: Optical Mark Recognition for check marks Yes No BCR: Bar Code Recognition for bar codes image for the recognition technology to be applied. At this stage, the variations of forms can also be automatically identified, eliminating the need for manual pre-sorting. After importing the scanned electronic document images and applying the image quality assure process, advanced technology within automated data capture software can separate critical data from form noise. Form layout elements such as character boxes, lines, background noise, and text labels are recognized as non-data elements and ignored, just like a data entry operator would do if they were reading the form and searching for the correct data to manually enter into the system. Data obscured by poorly printed characters, strange lines, and other elements go through another automated clean-up process to enhance the software s recognition ability. With lines, smudges, and other unwanted marks removed, and characters automatically regenerated and enhanced as needed, the software can then quickly capture the desired data from the enhanced image. By creating a master form template, where the user has drawn boxes or defined the zones and parameters for processing data from structured documents of the same type, the user can decide which fields to capture off of the form. Some payers capture 60 to 70 fields, where others capture up to 200 fields, depending on their business processes. The labels for a specific piece of information, such as Patient Name can be skipped, while a zone can be drawn around where the actual name of the patient would appear. This would tell the software to capture the patient s name which appeared within the user-defined zone using Optical Character Recognition (OCR) technology but not the unnecessary descriptive label that was outside of the box. The appropriate recognition technology is applied to each field according to zone parameters. A user can customize a zone parameter to alert the software to expect a certain type of data in a field. For example, when capturing CPT codes, the software may be told to expect to capture a maximum of a combination of five alpha-numeric characters through the use of a zone parameter. Additionally, a feature like dynamic text zone alignment can ensure fields are aligned in the proper location for the template, meaning the data can be accurately collected even if there was a misalignment of the form during the printing process. After the claim data is captured, it is validated against a user s own business rules. The most user-friendly solutions allow hundreds of rules to be applied. For example, MM/DD/YYYY date formatting of a captured data field can be implemented with point-and-click ease. This means that no matter how the data appears on the form, it will be collected in a consistent format to create a uniform data output for records that are utilized downstream. 6 Captured data can also be verified using payers existing databases. Because the information contained in these database records may

7 frequently change or need to be updated, it can be difficult for operators to know if they are using the most current information. But an automated lookup ensures data accuracy is maintained. A piece of captured data, such as a CPT code, can be compared to the database table to ensure it is valid, or used to pull back additional information to auto-populate additional fields within the record, all without any operator intervention. At this point, once any business rules or automatic lookups have been applied, many claim forms will be 100 percent complete and can optionally bypass human verification, going straight to the adjudication or back-end system. This speeds processing and saves labor costs. A document image that contains questionable characters or business rule violations can be routed for efficient resolution. Operators can quickly move through each extracted data field or can simply advance from one questionable character or business rule violation to another. Some solutions include the capability to allow verification to take place locally, at remote locations or both. With this feature, home workers, branch A solution with built-in balancing features will cross-check each equation to verify total charge, amount paid, and balances due. A balanced equation can bypass verification, significantly reducing correction time. offices, new corporate acquisitions, and overseas offices can all be accommodated via the Internet. Performing data verification of the automatically extracted data fields or just reviewing business rule violations is much more efficient than hand-keying in each piece of data off of each claim form. Even with the increased data accuracy provided by an automated solution, payers may have a business practice in place or even a contractual requirement that a verification operator s work be reviewed. An automated data capture solution allows specific data 7

8 fields, a percentage of daily work, random checks, or a complete 100 percent review of an operator s verification performance to be conducted. In addition, a robust solution will allow data fields to be compared to both the version before and after it has been reviewed by an operator to see if any changes were made. These audit options are designed to increase data accuracy as well as support compliance and security regulations, without requiring the user to make any changes to existing business practices or policies. Benefits of Automated Claim Processing As annual overall health care costs continue to rise, the traditional health care model continues to morph, and the incoming paper volume grows, automated data capture can provide a solution to overcome time-consuming manual processing, including manual data entry, manual balancing, and manual sorting. By replacing their manual data entry with an automated data capture solution, payers are experiencing a number of both quantifiable and qualitative benefits including: Reduced manual labor costs Automated data capture can eradicate up to 75 percent of the often-hidden labor costs associated with performing manual data entry. Along with avoiding the planned costs of paying employees to perform the tedious task of keying in data off of incoming claim forms, payers who utilize an automated solution no longer face backlogs of forms at the front-end of the workflow. This eliminates the wait for time-consuming manual data entry to be performed before the claim can be reviewed for payment. And because a potential front-end bottleneck has been removed, the need for expensive, unplanned overtime or requiring employees to work mandatory nights or weekends to catch up on manual data entry is also eliminated. Increased data accuracy Manual processing invites the potential for human errors, creating inaccurate records and lower productivity. Inaccurate data means an employee needs to investigate the error, correct it, and reprocess a claim. Dealing with errors takes employees away from performing more value-added tasks. And an unresolved or undiscovered error means a claim will not be paid. This can be avoided with an automated data capture solution where any questionable character can be flagged and automatically routed for review. By applying business rules, an automated data capture solution can validate captured data without any human intervention. When these rules are applied, accuracy rates can reach 99 percent. Lower per-claim processing cost and increased revenue Lower labor expenses, improved data accuracy and faster turnaround times translate into the ability to generate more revenue in a shorter period of time and at a lower cost. This means 8

9 payers who invest in an automated data capture solution quickly achieve a positive ROI and are able to realize a lower per-claim form processing cost, an important metric in the heath care claims form processing industry that can mean greater profits. Elevated productivity with no additional human resources required Before the advent of efficient automated data capture technology if payers wanted to increase productivity, the only sure option was to add to the existing employee headcount which also added to expenses. Managers were forced to try to find the balance between fiscal efficiency and productivity, often sacrificing one for the other. Now payers with an automated solution report dramatic increases in productivity without needing to add additional employees. By eliminating time-consuming manual processes, more data can be captured in significantly less time, speeding the workflow and eliminating bottlenecks. Faster turnaround time enables timely claim payment and denial resolution Automated data capture speeds the flow of claim data into a payer s adjudication or health care information system. And automated verification of critical data such as CPT codes, diagnosis codes, provider account numbers, and more allow discrepancies to be caught immediately and automatically routed for quick correction. This means accurate claims move faster through the workflow in some cases in hours instead of days. Improved customer service with accurate automated indexing Automation allows payers to proactively prevent customer service snafus, such as lost or misapplied payments, instead of reactively responding to issues that arise. The time required to research inquiries, denials or other exceptions is also reduced because accurate claim data is available within the health information system sooner and is accessible to operators with just a few clicks of the mouse, rather than requiring the necessary claim form to be retrieved from stacks of paper or located in a filing cabinet. With an automated solution, claim data fields (such as patient name or account number) can be selected to automatically serve as index fields in the adjudication, patient accounting or document management system for quick and accurate retrieval of claim data and document images. Greater staffing consistency When an automated data capture solution is in place, peaks and valleys in the incoming claim volume are greatly reduced, eliminating the negative impact on staffing patterns. The need to work overtime and weekends can be minimized. And because technology makes each worker even more efficient and can track individual performance, any additional human resources can be added with much greater precision when claim volumes increase. The impact of eliminating manual data entry is clear and powerful. Once information is extracted from a claim form, customized 9

10 business rules are used to validate and normalize the data prior to human verification. Verified data is then delivered to an adjudication or other back-end content management system, and/or workflow for use in analysis, reporting, and retrieval. Information contained on paper can quickly become usable data. Thousands of companies worldwide rely on the specialized technology in an automated solution to capture and process data from claim forms and with good reason. Automated software technology eliminates manual data entry, a process that drains profit and productivity and replaces it with an efficient, benefit rich solution to solve the paper health care crisis. Learn more at *. Poisal, J.A., et al, Health Spending Projections Through 2016: Modest Changes Obscure Part D s Impact. Health Affairs (21 February 2007): W **California Health Care Foundation. Health Care Costs March