What Anesthesiologists Should Know About Third Party Payer Performance

The American Medical Association (AMA) and the Medical Group Management Association (MGMA) offer tools that allow physicians, policy makers and others to evaluate the performance of a number of third party payers including Medicare. The AMA and MGMA information may help anesthesia and pain medicine groups who contract with private payers to identify potential problem areas and to prepare to negotiate for specific performance standards and remedies for non-compliance.

The AMA’s National Health Insurer Report Card contains metrics on the timeliness, transparency and accuracy of claims processing by the payers analyzed.  The information in the latest annual report is derived from a random sampling of 2.6 million electronic claims submitted by more than 450 physician practices across 41 states in February and March of this year to Aetna, Anthem Blue Cross Blue Shield, Cigna, Health Care Service Corporation, Humana, Regence, United Healthcare and Medicare.  Below are some of the key findings from the 2013 report.

Accuracy:  The payer’s allowed amount matched the physician’s expected allowed amount on 98.10 percent of Medicare claims, 97.52 percent of United Healthcare claims and 96.52 percent of Humana claims.  The lowest accuracy rate was Regence’s (85.03 percent).  These percentages show an impressive improvement over the last three years.  In 2010, the average error rate for commercial payers was nearly 20 percent.  Still, the AMA estimates that incorrectly paid claims have cost more than $43 billion since 2010.

A variation on the question of consistency between allowed and expected payments is the percentage of claims lines on which the allowed amount equals the contracted amount (excluding the application of claim edits and payment adjustment rules).  Here again Medicare and United Healthcare came in with the highest (99.66 percent) and second highest (98.13 percent) scores, and Regence with the lowest (85.21 percent). 

Timeliness:  Claims submitted to Humana had the lowest median time period between the date the payer received the claim and the date the payer produced the first electronic remittance advice (ERA, HIPAA ASC X12 835 Health Care Claim Payment/Advice Transaction):  six days.  The median for Anthem, Cigna and Health Care Service Corporation was seven days.  Regence claims had a median interval of nine days; United Healthcare had eleven, and Aetna tied Medicare for the slowest ERAs at fourteen days.  Overall, payers have improved response times by 17 percent since 2008.

Transparency:  According to the AMA, payers have improved the transparency of rules used to edit medical claims, e.g., multiple-procedure reductions or services included in another procedure, by 37 percent from 2008 to now.  Fewer than one percent of claims lines were reduced to $0 by undisclosed claims edits for all the payers in the group except Regence.  Between 2.0 percent (Medicare) and 5.6 percent (Regence) of claims lines were reduced by disclosed edits.

Denials:  Medicare had the highest rate of medical claim denials (for reasons other than a claim edit) in 2013, i.e., 4.92 percent.  Cigna had the lowest at 0.54 percent.   Anthem’s rate was the second highest at 2.64 percent.  The other five payers’ rates ranged from 1.97 to 1.18 percent.  In 2008, both Aetna’s and Medicare’s denial rates exceeded 6.8 percent.  While the rates have bounced around, particularly in the last two years, the trend is clearly propitious.

Cash Flow:  While Cigna paid 96.72 percent of claims within 15 days, and Medicare 95.8 percent, Aetna achieved this turnaround only two-thirds of the time (66.29 percent).  Aetna did, however, pay within 30 days more than 99 percent of the time. The great majority of claims across payers are paid in fewer than 31 days.

Administrative Burden Index:  This year, the AMA introduced its new Administrative Burden Index to rank commercial payers according to the level of unnecessary cost they contribute to the processing and payment of medical claims.  The cost per claim attributable to “administrative tasks associated with avoidable errors, inefficiency and waste in the medical claims process” ranged from a high of $3.32 (Health Care Service Corporation) to a low of $1.25 (Cigna) with an average of $2.36.   The AMA estimated that if payers eliminated “unnecessary” administrative tasks and used automated systems for paying claims, $12 billion per year could be saved. 

The MGMA study takes the form of a survey rather than an analysis of a universe of claims submitted and paid.  The annual survey assesses member satisfaction with major national health plans including Aetna, Anthem, Cigna, Coventry, Humana, Medicare and United Healthcare.  Nearly 800 practice administrators participated in the 2012 survey, rating the payers on communications, provider credentialing, payment policies, transparency, contracting, payer willingness to engage in innovative payment models and overall satisfaction. 

With respect to transparency, the respondents were asked, “How willing is the payer to disclose the fee schedule used to reimburse your practice under the terms of your contract?”   On a scale of 1-5, where “1” meant “completely unwilling” and “5” meant “completely willing,” the respondents rated the payers as follows:

Asked “How satisfied are you that the payer fully discloses its payment policies?” the respondents indicated:

Although the percentage of claims that contain accurate payment amounts and applicable edits, as in the AMA study, cannot be compared directly with the subjective perception of full disclosure of payment policies in the MGMA report, there is an interesting disconnect between the actual consistency of allowed and expected amounts and the mediocre ratings that the survey respondents’ gave the payers on the comparable question. Similarly, the MGMA survey respondents were generally neutral to moderately satisfied with the promptness of claims payments, although the median time to remittance advice varied from six to 14 days in the AMA study.

Are the practice administrators being unduly hard on the payers?  If one looks at the AMA analysis, it would appear that on many of the metrics, there has been a significant improvement in the last few years.  The AMA results, which are based on processed claims, may reflect not just the efforts of the payers to be better business partners, but also greater sophistication in the preparation and submission of claims.  There is still a long way to go in building trust and confidence.  We encourage all our readers to keep on top of their payer relationships, using performance measures like those discussed in this Alert where appropriate.  The claims payment process, and the rules on which it is based, must become more transparent.