Bill review companies – will they be the solution?

Think about what bill review and generalist network and specialty bill review and negotiation firms do. All have the same value proposition – discounted medical bills. (most networks don’t deliver value in the form of better docs or outcomes, their business model is reduce cost by slashing bills retrospectively.)
All are in the cost reduction business although each take a different approach. A useful analogy is transportation; trains, trucks and ships all transport goods; each has its strengths and weaknesses, and at different times one model is more successful than the others. Right now, trucks transport most goods, even though they cost more because they can deliver convenience by moving goods to the precise location on time. This model has gained in large part due to low fuel costs, heavy investment in roads, and customers’ adoption of just-in-time inventory management. As the economics of transportation evolve, we may see a resurgence of rail and/or shipping; the cost per ton/mile for rail and shipping is significantly lower than trucking.
For several years bill review has been a commodity. Despite vendors’ best efforts to differentiate, most buyers place great emphasis on price. As a result, bill review vendors have worked hard to squeeze out cost through automation, auto-adjudication, streamlining and offshoring. None of these technologies are ‘bad’, rather the rationale behind employing them may well be misguided.
In an effort to compete bill review vendors have lost sight of their reason for existence – to ensure their customers pay only what they legally are required to. Instead they compete on the basis of how cheaply they can write checks out of their customers’ checkbooks.
This is not entirely the bill review vendors’ fault. Their customers bear much of the responsibility for the situation, playing vendors off against each other in an effort to reduce the payer’s admin expense. And the payers have succeeded. That success has come at a cost which some payers are only recently beginning to grasp. Here are a few examples.
For some procedures, the amount reimbursed is dependent on modifier codes. At least one large payer has instructed its bill review staff to ignore the modifiers as their entry slows down the bill review process.
A vendor known for its very competitive pricing often charges extra for ‘nurse review’ of items that are commonly audited and repriced within the bill review process. This allows the vendor to recoup the margin it gives away with its low per-bill pricing.
Another large payer’s bill review process actually requires claims personnel to authorize payment of each and every bill, no matter how routine, no matter how many times that provider has been paid for the same procedure in the past. This step has been put in place because the bill review process can’t be trusted; instead of fixing the process the company uses its expensive staff to do something the system should.
Payers want national solutions yet don’t want to take the time to understand some of the state-specific intricacies that can dramatically influence costs. For example, hospital reimbursement in PA is based on each hospital’s chargemaster, requiring repricers to have access to current data. In CT, payers are required to reimburse hospitals at cost, yet very few payer or bill review vendors have invested the energy required to determine each hospital’s costs.
Sure, payers have been able to cut their bill review costs, but the price they are paying is, in many instances, much higher than the reduction in administrative expense.
More and more, payers have come to rely on their networks for cost reduction; bill review is a necessary part of the bill flow and a way to get bills repriced to network rates, and a source of data for state reporting. In large part this reflects the change in pricing methodologies for bill review from a percentage of ‘savings’ below billed charges to a flat fee per bill or per line. In the transition, the purpose of bill review has been lost.
As payers look for better solutions to address rising medical costs, they should go back to the basics. There’s nothing more basic than making darn sure you are only paying what you are legally and contractually obligated to. Simple, yet this will require significant investment on the part of vendors, investment that will have to be recouped from their payer customers.
What does this mean for you?
Bill review vendors should not be competing on the basis of price per line or bill. Payers should buy smarter, but won’t until and unless they realize what they’re buying; technology, people, and processes all focused on writing checks out of the payer’s checkbook. Only then will bill review vendors be able to do their job effectively.
Note: my firm, Health Strategy Associates LLC will be surveying payers on bill review this spring. If you would like a copy of the public report send an email to infoAthealthstrategyassocDOTcom. Substitute symbols for AT and DOT.