The Claim Auditing Side of Health Plans from TFG Partners, LLC's blog

Employer-funded health plans have made news twice recently in the legal arena. Some sponsors have taken their claim administrators to court, and class action lawsuits on behalf of members are planned. In each case, a healthcare audit may figure into the causes for action of defense against them. An independent review of claim administration and payments is essential to confirming reports from third-party administrators or pharmacy benefit managers. As they pay thousands of claims weekly or monthly, errors can occur, even with the most advanced systems. Auditors can flag each one for correction.

There is no doubt that claim payment error rates have been driven to low levels. However, health care and medicine costs are high, and even a small number of mistakes can add up to significant numbers. Keeping processing systems fine-tuned matters, and auditors have a role to play. When you hire a firm staffed with people experienced in claim payment systems, their auditing abilities can be more advanced. They can electronically review thousands of claims for all the relevant data points in minutes, checking for irregularities and overpayments. As software and systems have advanced, audit accuracy has improved.

Regulations from ERISA and Sarbanes-Oxley remain, to name a few, and require periodic auditing. But today, there is a far more compelling plan-management (and cost containment) rationale to be made for frequent claim audits. Given the complexity of medical billing, the opportunities for hard-to-detect errors are significant. In the days of random-sample auditing, only large error patterns would be uncovered. Today, flagging individual errors, each correctable and recoverable if it makes financial sense, is common. Correcting claim administration systems to avoid repeating those errors is beneficial.

There can be benefits to working with the same auditor over time as they can compare current and past periods to evaluate performance. But there's also value in interviewing other firms to determine whether their systems and methods go beyond what you already use. For example, if you work with a large audit firm bundling its services and including claim reviews, they may be less advanced than a specialist firm concentrating in the area 100 percent. Their expertise can work on your side, and when their rates are competitive, it can be the wisest way to go. You see short and long-term improvements in the audit.