Managing Hospital Claims Leakage in Private Health Insurance

Managing Hospital Claims Leakage in Private Health Insurance AHIA Conference 8 November 2010 Michael Douman, Head of Business & Clinical Analysis Bupa Australia Group

Challenges in Addressing Leakage • There is an inherent tension in Funds between attracting and retaining customers; CVP or satisfying customer demands; partnering with providers; and cost containment; which places the CL team in a challenging position vis a vis: • Marketing • Product • Customer Service • Contact Centres • Branches • Claims Assessing/Processing • Data • Systems • There is an inherent tension between CL teams and clinical providers who consider that Funds should not intrude between patients and clinical providers • Government legislation & regulation

Management Imperatives Improved Performance Return on Capital Employed Automation savings Revenue FLEXIBILITY Reduced claims payments Net Cash Flow SENSE OF URGENCY Operating Costs Personnel Reductions Customer Satisfaction

Relevance of Overseas Experience • Relevance of U. S. , U. K. to Australia ? • Validity given: • differences of systems (mixed, private, nationalised) • differences of structure (corporate, retail, outsourcing) • existence and extent of system rules preventing leakage e. g. CMS in U. S. • different payment systems e. g. FFS dominates U. S payment • quality of analytics e. g. CMS • differences in counting & measuring e. g. NHS formula in the U. K. takes account of the type of fraud involved and the average longevity of the generic type of fraud • differences of culture (U. S. entrepreneurialism ? )

Claims Leakage Magnitude • • Intent Scope - Definitional ambiguities U. S. figures range from 3% to 20% of benefits paid - whole system, Medicare or Medicaid ? U. K. research assessing fraud in 6 countries (including the U. K. but not Australia) posited a range of percentage losses (PLR) was found to be between 3. 29% and 10. 00% with an average PLR of 5. 59%. Australian figures range from 0. 5% to 10%+ of benefits paid depending on who is talking Medicare (HIC) quoted range of some years ago was 1. 3% to 2. 3% of benefits paid PHI Funds savings are at the lower end of the range

Scope of Private and Public Hospital Leakage Given that: • PHI Funds don’t have contracts with them • receive less clinical data from public hospitals • there is less that can be reviewed than with private hospitals • A list of examples is provided in the appendices

Focus – Providers, Systems, Members, Staff ? • Where you focus depends on where the greatest weaknesses are. • Provider leakage & fraud is the major issue as providers are the “gatekeepers” to the system • System leakage is potentially significant depending on the effectiveness of system controls and rules • Fund staff leakage & fraud is possible, while elements of a manual system (mainframe entry of data) remains eg staff not assessing according to rules, keying incorrect data, over riding controls, use of ex gratia payments, etc • Member leakage & fraud is really only possible where the member is on an overseas visitors cover as invoices go direct from the hospital to the Fund & only a small percentage of medical claims go via a member to a branch

Bupa Benefits Payments – FY 09

How You Contract Determines Where You Look Capped Payment Systems – DRG or CEP Based • Depending on what is bundled into the capped payment determines whethere is any value in reviewing the payments • Bupa bundles all costs bar medical and prostheses (variable inclusions) in its CEP (Casemix Episodic Payments) payments. Others might exclude ICU days from the bundling. • There is no point therefore with CEP episodes in examining, for example, ICU certificate classifications, or whether CMBS items link to OR bands, or excessive length of stay etc, as the price is the price. In an FFS (Fee for Service) world there is value in reviewing all those items • As Bupa still pays 25% of all payments on a FFS basis we do look at some of the above items, but not to the same extent as we would in a total FFS world Fee for Service Systems • As the number of services, and length of stay, and OR band ICU classification etc all add to cost, then auditing of these cost inputs are important

Preventing Leakage – Proactive • Develop business and clinical rules (including reference tables & flags), & have them programmed & embedded in the mainframe computer system to prevent or limit inappropriate payments • Systems analysis & testing • Input to Hospital contract provisions (HPPAs) e. g. fees, episode rules, CEP rules, EMUs, MECAs, audit rights, termination, • Input to Medical Provider Schedule of Fees contract provisions (MPPAs) • Input to Product rules and benefit payments • Input to Fund rules for services, providers, members, staff • Input to claims processing changes • Communicating what is acceptable to providers

Detecting Leakage - Retrospective • Data mining and pattern analysis • Systems analysis & testing • Benchmarking, profiling of providers, service items, members and Fund staff • Targeted provider, member, and Fund staff audits • Contract compliance reviews • Chart to bill targeted audits on site • Hospital coding targeted (& random ? ) audits on site • High dollar claim reviews • Member surveys to validate medical services, billing and So. F compliance (medical)

Deterring Leakage • Terminating contracts • Seek recovery of funds overpaid to hospitals, clinicians, members, Fund staff • Removing medical providers from Schedule of Fees schemes • Referral of medical providers to Medicare’s Professional Review Division for deregistration/prosecution • Cancellation of memberships (OVC) • Referral of providers, members, and Fund staff to the courts via the Police where considered relevant and there is a cost benefit

Financial Recoveries • Asking for overpayments discovered – in one tranche or by agreed scheduled payments • Knowing authority levels may determine the size and timing of individual tranches requested • Deducting from future cheque runs • Offsetting against future contractual increases

The Future ?

The Future - Automation & Hospital Leakage • In the case of existing manual assessing using mainframe systems, “automation” encompasses: • • system controls, business & clinical rules (encompassing contract provisions), clinical schedules, alerts/flags, etc As automation increases due to Eclipse, and to a lesser extent, Fund EDI transmissions systems with hospitals, it becomes even more critical and encompasses: • • • the accuracy of programming logic and parameter controls in a world where trained assessors do not supplement the system controls (encompass contract, medical schedules, product rules, reference tables) that work and cannot be over-ridden data is captured (mandated) and not “destroyed”

The Future - Automation & Hospital Leakage • Hold claims for 24+ hours before payment – but pressure on targeting and quick reviews by knowledgeable staff • Pull a small percentage (5% ? ) off line for review – a variant on the preceding • In Bupa Australia, the level of automation accounts for: – 41%of hospital claims (EDI and Eclipse) – 36% of medical claims (EDI and Eclipse)

Medical Claim - Example Controls

Hospital Claim - Example 1 Controls

Hospital Claim - Example 2 Controls

Hospital & Medical EDI

Automation & Medical Claim

Staff Skills Sets & Tools • Depending on the value/ROI individual Funds believe they will receive from an investment in this area, Funds will be resourced differentially Staff Skill Sets Fund Size Resources Small Medium Large Team Separate ? ü ü Shared ü x x Programming skills ? ü ü Statistical/Financial skills ? ü ü Clinical skills ü ü ü Consultants (clinical) ü ü ü Consultants (Technical) ü ü ü Data Source Mainframe ü ü ü Data Warehouse x ü ü Hardware Own server Software Data Mining (SAS Enterprise Miner, SPSS Clementine, etc) x ü ü x ü ü Programming eg SAS (base & EG) ? ü ü OLAP (Futrix, BO, etc) x ü ü Microsoft Access ü Microsoft Excel ü

Tools examples

ROI – Measuring & Tracking Savings • KPIs – Dollars saved, % of benefits paid, multiple of operating costs ? • Inclusions, exclusions, duration, causation or correlation • Raw dollars saved/decreased, claiming patient/item ratios, delta between State average benefit per patient and provider average benefits per patient ? • Do more savings represent success or failure ? Good practice • Funds actually recovered • Funds not paid out as a result of new rules, changes to product, changes to contracts, provider intervention • A deterrent effect on rest of industry (Hawthorn effect) is not calculated as part of the savings

Hospital Leakage Success

Major Areas with ROI

References - 1 Sparrow, M Corr, W Selden, TM DHSS Maclntyre Hudson LLP NHCAA Testimony to the Committee on the Judiciary: Subcommittee on Crime and Drugs, U. S. Senate, May 20, 2009. “Fraud in the U. S. health-care system” Social Research Winter 2008 License to steal (Westview Press, 2000) Testimony to the Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies United States House of Representatives Thursday, March 04, 2010 “The distribution of public spending for health care in the United States, 2002” Health Affairs 27, no. 5 (2008) Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2009 The financial cost of Healthcare fraud (2009) The Problem of Health Care Fraud (2010) http: //www. nhcaa. org/eweb/Dynamic. Page. aspx? webcode=anti_fraud _resource_centr&wpscode=The. Problem. Of. HCFraud

References - 2 U. K. - NAO Medicare Aust Professional Services Review Mason, P & Street, M Mason, P & Mc. Qualter, L International benchmark of fraud & error in social security systems 2006 Annual report 2008 – 2009 Annual report 2008 - 2009 Hospital Audits (AHIA Fraud Conference, 2008) Prostheses Utilisation Analysis & Reimbursement (AHIA Fraud Conference, 2008)

The End QUESTIONS

Appendices

Hospital Leakage Checklist (1) Hospital Claims Leakage Checklist Issues Certificates ICU Category upcoding Type ACC (3 B) Type C Type B SCN Rehabiitation Contract Compliance Non compliance eg CEP & not FFS & vice versa Step downs Readmissions Resubmission of adjusted claims Harvesting (IVF, kidney) Dual admissions Overnight chemotherapy ER admissions Transfers to and from hospitals Claims General Duplicates System controls not working IFC in public hospital Shared room Private Public Comments ü Only if FFS episode ü ü ü ü ü Only if FFS ü episode ü ü ü ü ü ü ü Hospital Claims Leakage Checklist Issues Private Public Comments Condition Upcoding/overcoding of services provided eg DRG, RVU, etc Hospital & Clinician MBS mismatch MBS and OR band mismatch ICU with missing ICU items (MBS) Pre existing ailments Cosmetic Prostheses Billing multiples when one item used eg packs Billing for multiples when covered by warranty eg defibrillator Billing for multiples when provider mistake eg Orthopaedic hip (unilateral) Service not provided eg patient dies in OR & pacemaker not implanted Programs Day and half day programs Non contracted services ü ü Only if FFS episode ü ü ü ü Only if FFS ü ü

Hospital Leakage Checklist (2) Hospital Claims Leakage Checklist Issues Private Public Comments Prostheses Billing one at pack price ü ü Billing multiples when only one required eg hip prosthesis for unilateral hip ü ü Billing multiples where warranty cover exists eg defibrillator ü ü Prostheses (ranked) Orthopaedic (Hip, Knee, Spine) ü ü Cardiac (defibrillator, pacemakers, stents, valves) ü ü General Surgery ü ü Vascular ü ü Neurosurgical ü ü Ophthalmology ü ü Urogenital ü ü ENT ü ü Methods Chart to Bill ü ü Coding Audits ü Medical Claims Leakage Checklist Issues Principal MBS/ICD 10 incorrect Principal Dr invoice does not match assisting Dr invoice Gap doctor charging added fee ICU Category Type ACC (3 B) Type C Type B Anaesthetic RVU Duplicate invoices Non Inpatient treatment Pathology, Diagnostic “add ons” Private Public Comments ü ü ü ü ü ü ü

Futrix Drill Down Example Claim lines Not all Fields shown