Uncovering waste, garnering savings
Since most payors have improved claims adjudication technology, the most significant savings opportunity for employers using audits is in eligibility, discounts and care management, specifically:
* Point-in-time compliance - insufficient hours worked, termination or COBRA expiration.
* Secondary eligibility - coordination of benefits, subrogation or Medicare.
* Nonsubscriber eligibility - premium mismatch, "mystery" claimants.
* Dependent eligibility - ineligible spouses, children or noncollege enrolled children.
* Discounts - in-network provider discounts and pharmacy discounts.
* Care management - case management, disease management and wellness.
The following are examples of successful data mining-driven audits:
Point-in-time eligibility. An audit found numerous employees who did not meet the employer's minimum hours worked requirement erroneously had received benefits, including one new hire who received more than $140,000 in medical benefits and then resigned after receiving medical treatment. Others in the same group mistakenly received nearly $100,000 in benefits after their termination and COBRA expiration. Overall, more than $300,000 in savings was identified for the employer, which was spending $5 million annually on health care.
Secondary eligibility. More than $200,000 in recoveries were received related to several erroneous claim payments for treatment for kidney failure that were made in conjunction with a Medicare eligibility case.
In yet another case, an employee involved in a motorcycle accident required $25,000 in medical services. Since the employee was not at fault, the claim should have been subrogated by the payor, but it was not. Moreover, when the employer's CEO heard the health plan paid for claims related to "hazardous hobbies," he recommended hazardous hobby-related claims be excluded from the plan. Only through the audit was this oversight identified and monetized.
Non-subscriber eligibility. Non-subscriber eligibility refers to family members wrongly receiving benefits they are not paying for. For example, nonsubscriber eligibility audits typically compare coverage to the relationship code on the respective subscriber's medical claims. These audits typically reveal ineligible spouses and dependent children.
Dependent eligibility. At any given time, up to 10% of dependent members are ineligible. While legacy-dependent audits are effective at removing ineligible dependents, they are less successful at quantifying the actual savings related to ineligibles. The only audits that provide realistic savings are those that match ineligible members with their medical and pharmacy claims. A recent audit of a plan with approximately 600 members found one ineligible dependent posting more than $40,000 annually in medical charges.
Missed discounts. While most third-party administrators and payors routinely boast about their steep network discounts, the wrong discount often is applied, and plan sponsors unknowingly pay higher fees, particularly for inpatient admissions and outpatient procedures. For example, in a plan with $4 million in annual health expenditures, approximately $1 million in future annual savings were confirmed due to low or missed discounts by the TPA.
Pharmacy discounts. Most pharmacy contracts provide discounted rates based on average wholesale price or maximum allowable cost, which vary among generics and brands as well as medications purchased via retail or mail-order. To confirm the correct discount was realized, data mining enables auditors to test all prescriptions on a transactional basis. One recent audit revealed nearly $300,000 in lower-than-contracted discounts, and the contract was modified to ensure expected discounts were realized.
Care management. Many HR consultants and benefits brokers claim disease management, case management, wellness and incentives can reduce annual health care costs by 5%. While these programs generally are delivering results, they also need to be audited.
One case management audit found $50,000-plus cases were not managed by the case management provider, representing missed financial savings opportunities for the plan. A disease management audit revealed that the majority of Type 2 diabetics were being ignored by the disease management vendor, and the employees in turn were ignoring their health, resulting in many catastrophic claims.
Taking action
In addition to recapturing overpayments and containing future costs, data mining-driven auditing can indicate whether a business process - such as hiring or termination - needs improvement, or whether a specific payer or pharmacy benefit manager contract needs updating.
Given the materiality of health care costs, employers cannot afford to not audit their respective plans every two or three years. The availability of claims data, coupled with Web-based eligibility reconciliation and claims-driven technologies, are becoming increasingly available. With these tools, employers can effectively and efficiently take control of their health care costs and identify and contain costly financial leaks. Through these methods, HR/benefits professionals can become financial heroes to their organizations.
Howard Gerver is the founder and CEO of HR Best Practices, which works with employers to understand and materially control health care costs through data mining. - E.B.N.
