Understanding the Complexity of Healthcare Claims, Payments

March 14, 2022 - While the healthcare industry has made significant strides in improving care quality and delivery, its approach to submitting and paying claims is wrought with complexity, inefficiency, and fragmentation.

A recent landmark study on the complexity of billing and paying for physician care found that 30% of healthcare resources are tied up in administrative costs, one-seventh of total annual spending in the United States. The authors found that the process for claims and payments remains a significant challenge, with physician practices spending upwards of $30 billion each year on billing costs. What’s more, more complex bills were responsible for high administrative costs, taking resources away from more important patient-facing activities and efforts to improve clinical productivity.

These costs beg the question: How did the industry get to this point? The answer lies in understanding how a claim becomes a payment.

“When a doctor starts a practice, if they want 'steerage' or patients in the door, they have to contract with health plan directories, an incredibly complicated process. Once the practice has joined networks and has members coming in the door, now the rule fun begins, eligibility verification, pre-authorizations, utilization management review, claims submissions, denial management, and so much more,” says Zelis Executive Vice President of Product Eileen Dougherty.

“The thing is: All those payer networks have different processes with different levels of stability, unique entry pathways, and ways of getting data back or the practice won’t get paid. So in many ways, the practice needs a Rolodex of all the people at all these different health plans that you need to talk to in case their systems are down, for example.”

All of this doesn’t even include the process of creating a claim.

“Oftentimes, when creating claims, the practice must send those claims to its revenue cycle management system, a clearinghouse, or a chargemaster system to see if you can re-bundle claims to ensure the claims are properly formatted for that plan, delivered to the right place and are optimized to ensure the best reimbursement,” Dougherty continues. “Finally, the claim goes to the payer, which sends them out for repricing, editing and sometimes out-of-network negotiation. The claims can be denied in full or in part, bundled, or unbundled. And it just continues on and on and on and can take months for a provider to get paid.”

As Dougherty stresses, each day that passes between service and payment leads to decreased ability to collect the member’s responsibility, which can only be billed after the payer has determined how much they will pay. And given the decades-long trend towards patients being responsible for a larger percentage of the provider’s paycheck, it’s not surprising this process is stressful. All this back and forth creates friction and, with it, wasted energy.

“Today, I can’t think of another job where it’s hard to get paid as it is being an insurance-accepting doctor in the US. Maybe a government contractor? And the reason for that is because of the complexity and diversity of the healthcare system,” she adds.

American consumers demanded choice, and they have received it. But increased choice has only added to the complexity of the healthcare system.

“The challenge is that we have 400 to 500 payers, including TPAs and self-insured plans. On top of that, we have 800,000 doctors who provide different services, from mental health professionals working out of their homes to massive health systems that own their own payers. And it’s just a very diverse system that has created the foundation for complexity,” Dougherty maintains.

While technology can be an enabler of change, a lack of aligned incentives led to the creation of spot solutions over many decades. In one corner are providers needing income to survive and pay increasing medical school loans and malpractice insurance bills, pay for increasingly expensive medical tech, cover skyrocketing admin costs, and depending on cash flow so that they can continue to provide care. In another corner are payers that are looking to reduce costs, offer real value to employers and provide coverage to members. In still another corner are employers trying to stay in business while striving to meet the expectations of current and prospective employees. In the last corner are members whose interactions with the healthcare system are intermittent and oftentimes hugely emotional.

“It’s incredibly difficult to create a complete solution,” Dougherty observes. “Each of the actors creates a spot solution to a problem that reaches as far as their incentives are aligned, and then it stops. After over 30, 40, or 50 years following the approach, the result is a highly fractionalized system.”

Unfortunately, these one-off solutions and fragmentation require manual intervention to fix, but the latter can easily introduce more errors into the mix.

“Not only is there plenty of manual intervention, but there is also lots of expertise that’s needed in those people who do that intervention,” Dougherty says. “The people who know how to unlock the system are very specialized, and that is extremely costly. Doctors are spending a ton of money on administrative support in order to manage eligibility, claims, prior authorizations, or denials. And they have to do that for more than one health plan. Health plans need technical teams that understand the US healthcare ecosystem to build quality solutions.”

Clearly, the current approach to healthcare payments is untenable. Mitigating the complexity around claims and payments moving forward will be crucial for health plans to improve both provider and member experience while also streamlining their operations.

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Zelis harnesses data-driven insights and human expertise as scale to optimize every step of the healthcare payment cycle. We partner with more than 700 payers, including the top-5 national health plans, Blues plans, regional health plans, TPAs and self-insured employers, 1.5 million providers and millions of members, enabling the healthcare industry to pay for care, with care.