Financial Sustainability and COVID-19: Strategies to Avoid Health Plan Budget Shortfalls

February 9, 2021

The economic impact of the COVID-19 pandemic has been devastating for individuals, governments and businesses alike. At the state government level, income and sales tax revenues are plummeting due to unemployment and lower levels of consumer spending. In response, many states have been forced to cut spending at the same time that more people are qualifying for programs like Medicaid.

In the healthcare sector, providers and payers have also seen the economic effects of the pandemic. Many are now concerned about their financial well-being. A 2020 survey of chief financial officers of health systems and health plans conducted by Deloitte Center for Health Solutions found that the biggest concerns for over half (53%) of health plan CFOs were financial viability and planning. In the months ahead, health plans anticipate many members to shift from employer-sponsored plans to Medicaid, individual insurance exchanges or to simply to go without insurance at all. This loss in revenue could translate into budgetary shortfalls at health plans.

Addressing Budget Shortfalls With Pre-Pay Clinical Claim Reviews

As health plan leaders seek strategies to maintain financial sustainability, many are adding pre-pay clinical claims reviews to their playbook. Here’s why:

  • Pre-pay clinical claim reviews expedite savings and recover more funds compared to traditional post-payment reviews. On average, HMS has found that pre-payment clinical claim reviews generate savings in 30 days, compared to the six to twelve months required for post-payment claim reviews. In addition, health plans nationwide recover only 80% and 90% of post-pay identifications. In a pre-pay setting, the savings realized is 100%.
  • Pre-pay clinical claim reviews are less resource intensive. Post-payment claim reviews are synonymous with “pay-and-chase” work: sending multiple letters, paying lockbox fees, managing lockbox inventory, monitoring accounts receivable and collections and more. Pre-pay clinical claim reviews do away with all these tasks.
  • Technical denials are eliminated. In a post-payment claims review model, many health plans experience a high percentage of technical denials from facilities that fail to submit medical records. Technical denials are typically in the range of 15% to 25%. This challenge disappears in a pre-pay environment.

Conducting clinical claim reviews before payments are made aligns payer and provider incentives. Providers are motivated to submit medical records in a timely manner to support rapid completion of claim reviews. Meanwhile on the payer side, teams need to review claims and medical charts rapidly to comply with prompt payment guidelines.

HMS recently conducted a pre-pay clinical claim review for a client with 500,000 Medicare members. This project generated over $20 million in projected savings in nine months and savings were recognized within 20 days of receipt of the first medical record. The plan also experienced a decrease in appeal rates and fewer calls to Provider Services.

Tips for Establishing an Effective Pre-Pay Clinical Review Program

To implement an effective pre-pay clinical claim review program, health plans should adopt three best practices:

  1. Focus on high quality findings. Plans that target claims with a high likelihood of improper payment see lower appeal turnover rates, higher dollars recovered per claim and lower levels of provider abrasion.
  2. Develop collaborative partnerships. When working with a vendor on pre-pay clinical claim reviews, plans must keep the lines of communication open. Weekly implementation meetings and monthly reporting meetings are advisable. Collaboration is also essential between clinical staff on the payer side and the management team at provider organizations.
  3. Implement a sound process. The best payment integrity partners offer proven systems and workflow, as well as a team of clinical experts. Savvy health plans seek partnerships with firms that understand prompt payment guideline compliance, Medicaid reclamation and flexible program configuration.

Conclusion

It’s unclear how the pandemic will unfold in the months ahead. Leading health plans are dealing with the uncertainty by keeping a close eye on their finances and developing strategies that will avoid budget shortfalls whenever possible. To learn more about how your organization can incorporate pre-pay clinical claims reviews into your toolbox, please contact us.

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Looking Ahead to 2022: Payment Integrity, Claims Accuracy, and Premium Protection Will Be More Important Than Ever for MA and Part D Plans
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Pre-pay Clinical Claim Review FAQ
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