Daniel Enthoven

ACA and ICD-10 spell trouble for claims paying operations

November 25, 2013

A recent Enkata survey found that while many health care payers are unconcerned about potential impacts of the Affordable Care Act (ACA) and ICD-10, their complacency could be ill-founded. Our survey found that a primary concern of claims payers is meeting the Service Level Agreements they have with service providers. However, while 53% of payers expect claims volumes to rise substantially in the next two years, only 26% expect to improve their auto-adjudication rates. Meanwhile, 80% of payers don’t expect to increase the headcount of claims processors. Obviously, something has to give for payers to meet their SLAs without hiring or improving automation.

The situation is further complicated by the lack of visibility into how the ACA and ICD-10 will impact claims paying operations. ICD- 10 may come and go without a hitch. However, if it has even a modest impact on auto-adjudication rates, the claims paying operation could be overwhelmed. Likewise, if the ACA brings a large volume of previously uninsured consumers who need health services, the initial result could be a significant spike in claims.

Fortunately, companies are taking some steps to address these changes. In fact, of the companies participating in exchanges, 89% were making some internal adjustments. Additionally, 86% of all payers reported making changes to prepare for ICD-10. When asked what kinds of changes were being made, virtually all of the companies said they were looking at technology investments and process improvements to deliver the required efficiency improvements.

Is it realistic to expect process and technology improvements to deliver the needed gains? With few companies reporting expected improvements in auto-adjudication, most payers must be looking to manual claims processing to get required efficiencies.

Can Manual Claims Processing Handle The Load?
Performance data from Enkata indicates that there is the potential for improvements of up to 20% or even more in some organizations using technology. Error rates could also be reduced by 10% or more. In looking at performance gaps between the leaders and average performers, we have found that the quantity of completed work could be increased by 10% to 15% though simple interventions and better technological management tools. This would free up resources currently used to correct errors and recover overpayments.

Unfortunately, it won’t be easy to achieve these gains. Most of the easy and obvious fixes have already been put in place. Using the same approach, it’s unlikely payers will find additional performance gains. That said, where we have studied employee performance, we’ve found there are often simple steps that can improve performance.

Optimizing the Performance of Manual Claims Processors
One of the biggest issues that allows gaps to form between actual performance and potential performance is the traditional approach to managing by metrics. In organizations where employees have explicit or implicit targets, some employees view the target as a cap on maximum productivity. They may take shortcuts to hit their target, and they may stop working once they get there. Meanwhile, when employees miss targets, it is often unclear why or what to do about it. As a result, managers tend to focus on outlier employees with substantially worse performance. They get the worst of the worst to be only bad, while many other average employees receive no support to become great at their jobs.

To increase output across the team, employers will need to start looking beyond metrics to understand the actual work that employees are doing. By understanding employee work habits, the processes they follow, and their patterns of work over time utilizing technology, managers can make three key changes. First, they can define and enforce their best practices, which ensures high quality and prevents people from taking shortcuts. Holding people accountable for process as well as output is the only way to manage quality. Then,employers can set meaningful targets based on what someone should be able to do, rather than to operate from historical averages that tend to understate performance. Finally, employers can identify improvement opportunities for all employees who aren’t reaching their potential.

Pressure is coming to claims payers in the form of the ACA and ICD-10. These changes will create more work and more complications regardless of how well-prepared payer organizations are. As a result, payers are going to be forced to make rapid productivity improvements, or miss their Service Level Agreements. The good news is that most organizations still have the potential for meaningful productivity improvements in their manual claims paying operations, provided they make the right technological investments to help managers help their processors reach their potential.

Daniel Enthoven is chief marketing officer at Enkata, which provides SaaS applications to optimize employee effectiveness in call centers and back office operations. With 20 years of technology and call center experience, Dan was an early employee of Nuance Communications, and worked for Monster. He has a BA and an MBA from Stanford University.