In recent years, managing a hospital's revenue cycle has become more than a dollars-and-cents proposition. Communication--between provider and payer organizations and between claims management and claims processing systems--has become increasingly important.

This level of communication can be quite complicated. The sheer volume and level of detail in the claims-related data that must be transmitted between payer and provider are overwhelming--patient demographics, diagnoses, treatments, tests, insurance identification, eligibility, coverage policies, medical necessity requirements, bundling rules, and so on. It's no wonder that problems crop up, information slips through the cracks, and friction develops between provider and payer.

But tools are available that can help minimize the opportunities for miscommunication. Web-based claims management systems can eliminate many of the problem areas and help systems "talk" to each other in ways that make both the provider's and the payer's job easier.

Current Systems Flawed

Many hospitals today use a combination of internal resources and a clearinghouse to help manage the transmission of claims to third-party payers. Often, claims are prepared at the departmental level and then sent to the medical records office, where they are checked for errors and charges are assigned. Claims are held for several days to make sure all related charges have been submitted. The claims are hatched by payer and uploaded to the clearinghouse, using a legacy or modem-based system. Simultaneously, a copy of the claim is archived. The clearinghouse then scrubs the claims against major categories of edits and transmits each batch to the appropriate payer.

This approach has downsides, such as:

> The process doesn't ensure that claims are compliant with all regulations and edits. Although most clearinghouses can identify national and state guidelines, they seldom have the capabilities to make sure claims comply with payer-specific edits.

> Transmission may be conducted with older technologies such as modems, which can inadvertently drop claims without the knowledge of the clearinghouse or provider. The payer can confirm receipt of a batch of claims from the provider, but can't verify the number of claims or the dollar amounts represented in each.

> Providers can't track the status of claims once a batch has left the office. They can't check to determine whether the payer received the complete batch, which claims were accepted and which were rejected by the payer, what problems may have arisen, and when payments were made.

These deficiencies can lead to a variety of problems. Reporting errors depress the first-pass rate, requiring providers to resubmit claims. Insurance industry studies indicate that only 60 percent to 70 percent of the claims they receive pass on first submission and that rebilling can cost $2 to $10 per claim. A hospital submitting 6,000 claims a month can expect about 1,800 of them to be rejected, costing up to $18,000 in rebilling during that revenue cycle.

Resubmission, of course, adds substantial time to the revenue cycle. Generally speaking, it takes about two weeks for a payer to identify a problem claim and return it to the hospital. Staff members spend time calling the payer for clarification and correcting information. After resubmission, another two weeks or more might pass before the claim is processed and payment received. This process can have a significant impact on an organization's cash flow.

In addition, revenue opportunities might be missed altogether. If medical records or billing staff are using out-of-date claims editing or medical necessity software, the payer's system might generate unnecessary denials or incorrect payment of the claim. Plus, inadequate monitoring and reporting tools deny providers the opportunity to correct ongoing mistakes in-house.

Throughout, staff members are investing a tremendous amount of time in the paper chase--identifying problem claims and correcting errors, following up on outstanding charges, and generating reports and tracking documents manually.

Advantages of a Web-Based System

The latest generation of web-based claims management systems minimize the number of points along the continuum where mistakes can be made or data can be lost or corrupted. A hospital's claims are still created at the department level and sent to medical records for review and application charges. However, once all services have been reported and the charges entered, the hospital uploads claims from its billing system to the claims management system via the web. Claims are checked against up-to-date databases containing relevant payer policies and edits. The system identifies potential problems within specific claims and then provides system users with links to payer guidelines for correction of these problems. System users can then gather additional information on the problems, correct the claims, and alert colleagues so errors can be avoided in the future. Only then are the charges submitted to the payer.