SAN JOSE, Calif., March 8, 2013 /PRNewswire/ — The failure of workers’ compensation claims payers to properly audit medical bills for prior approval of treatment is costing upwards of $2 billion or more annually, in unwarranted medical payments.  This estimate is based on one firm’s analysis of medical payments over the past four years.

In the 2012 Survey of Workers’ Compensation Bill Review by Heath Strategy Associates (http://www.healthstrategyassoc.com/2012BillReviewSurvey.pdf), published in early 2013, the well-respected industry observer Joe Paduda reported three key findings:

• Claims payer executives view bill review as part of claims management and managed care service, but significantly more important than other elements such as provider networks or utilization review because it is the essential mechanism for enforcing decisions made by those elements.
• Bill review has reached the limits of what can be done working with negotiated discounts and the information on the bill.
• Survey respondents report a common failure of integration of bill review with other systems.  They want to eliminate the information silo in bill review and bring it together with relevant information from utilization review and case management systems.

Leakage between utilization review and bill review

Traditional bill review does little to enforce pre-treatment authorization decisions on appropriate care. Because most bill review systems operate in a disconnected data silo that is isolated from medical management decision systems, they allow denied treatments to be paid. Payees want bill review systems to ensure that they pay the right amount for appropriate care. Bill review systems must ensure that payment is only for medically necessary and injury-related medical care. .

Lack of integration between authorization and bill review has been studied for over four years. A 2008 study conducted by Navigant Consulting for the State of California examined several samples of closed cases, and documented overpayment levels of over 20%.

Starting in 2009, DataCare Corporation has automatically screened and compared a quarter million medical bills and medical determinations. It found that

• 4.5% had at least one treatment that was non-certified by utilization review
• 69% of the bills had at least one treatment that had either no authorizations or an expired utilization review approval

The 2009 Survey of Workers’ Compensation Bill Review, the first bill review survey conducted by Heath Strategy Associates, reported that most bill review systems are not fully connected with medical management systems.

In a 2010 article in Risk and Insurance magazine, Bill Zachry, now risk manager of Safeway, reported a substantial leakage in medical payments due to failure in the past to match bill review with prior authorization.  He confirmed overpayment that could have a significant impact to the company’s bottom line.

Again in its 2012 Survey of Workers’ Compensation Bill Review, Heath Strategy Associates reported that the continuing failure to bridge the bill review and utilization review silos.

How big is this leakage?

Health Strategy Associates is right about the leakage: it’s a big problem and a significant opportunity for further savings without compromising appropriate care.

In a detailed analysis of bill review results for several large clients, DataCare, using its UR Enforcer technology, has found an additional 8-18% of the bills should be not paid because they lacked valid authorization. Today, the national medical spend for workers’ comp is $30 B, the savings for linking bill review to authorization decisions is 8% of 30 B = $2.4 B.

Below is savings for a large sample ($10 million in 2012 medical bills). These results are representative of savings seen across many industries and insurer types.

Lack of integration between authorization and bill review has been a major issue for years and a significant opportunity for further savings without compromising appropriate care. Based on DataCare’s experience, national workers’ compensation medical spending of $30 Billion dollars could be reduced by $2.4 Billion dollars.