A Primer on Bill Review

Friday, August 8, 2008 | 0

By Barry D. Bloom

Before the workers’ compensation system became as complex and costly as it is today, the payors (insurance companies, third party administrator’s (TPA’s) and self-administered employers) included the bill reviewing process in their normal claims handling. Bill review was a manual, administrative procedure and merely one of the claim adjuster’s many responsibilities.

The need for clinical oversight and cost containment increased as medical treatment became more complex (as the advance of medical technology exploded) and medical costs increased. As the laws and regulations evolved, the regulatory and legal requirements of claim administration became increasingly complex. Payors were forced to look for a more credible, clinically-based, cost-effective method to ensure the appropriateness of medical treatment and the accuracy of the medical bills.
Out of this need grew what we now know as the bill review industry.

As medical bills get reviewed, "downcoded," and payments are delayed, frustrated medical providers believe that their services are not valued and are confused about how to navigate the bill review process.

Currently there are financial incentives that encourage excessive medical treatment and discourage accurate billing practices. For example, "upcoding" and "unbundling" are not penalized, and often are missed by payors and bill review systems alike and thus it is profitable and without legal risk to pursue these practices.

Employers, insurers, medical providers, and regulators are currently saddled with a bureaucratic, inefficient and wasteful billing process.

Medical billing is broken and dysfunctional even at a time when reforms have delivered positive results for patients and payors alike. The time is right for thoughtful, balanced and meaningful change in how workers’ compensation medical bills and payments are processed.

This paper is intended to provide a greater understanding of the bill review process to allow all of the interested parties to make informed decisions on changes in the system.

Regulatory and legislative environment

Regulators and legislators have faced the following conflict: the fear of driving employers out of their state with escalating medical costs, or the risk of limiting patient choice and access to high quality medical care because physicians may refuse to participate in a system that does not adequately reimburse them.

Historically legislators and regulators have limited their involvement in the medical billing and payment process to the setting (or adoption) of medical fee schedules in their attempts to control medical costs. (In some jurisdictions this is mandated by the legislation or regulations.) Throughout the United States, most of the fee schedules have been loosely based on the Medicare fee schedule or based upon “normative data”, (such as the recent fee schedule implemented in Illinois), in other words, what the general “traffic flow” of medical billings have been. Relative value – based options (so called RBRVS) have been applied attempting to accommodate the varying cost bases of geography and medical specialty.

Some jurisdictions (such as California) have set their own standards and attempted to accommodate their competing constituencies (employers, claims administrators, and medical providers). Prior to the passage of SB 228 in 2003, the pharmacy fee schedule was the "Average Wholesale Price" multiplied by 1.1 or 1.4 for brand name or generic drugs, plus a $7.50 dispensing fee. No outpatient surgery facility fee schedule existed until the passage of SB 228. The lack of fee schedules for these medical expenses resulted in greater costs and complexity in the bill review process and inconsistent awards at the Workers Compensation Appeals Board (WCAB) courts. The WCAB is still wrestling with the appropriateness of pre-2005 medical liens from outpatient surgery centers.

Data from the California Commission on Health and Safety and Workers’ Compensation (CHSWC) suggest that the workers’ compensation system spends significantly more for bill adjudication than is spent in the group health system.

In California, medical costs represent over 51% of every dollar spent in workers’ compensation; nationally the percentage is estimated at 50%. In California for the year 2006, the WCIRB reported medical cost containment expenses for insurers of 4.6% of all medical loss payments or approximately $175 million. There are no specific figures reported for the bill review process alone, but it is a significant expense for payors.

Although this paper is not intended to delve into medical treatment guidelines, it should be noted that medical fee schedules alone do not effectively control medical costs within the workers’ compensation system. In fact, very restrictive fee schedules may drive over utilization to "make up for" reduced fees through over-utilization of physical therapy aides, physician assistants, nurse practitioners and pharmacy aides instead of the oversight by the physician or physical therapist. Effective control of medical costs and the provision of quality medical treatment, require both evidence-based treatment guidelines and a reasonable fee schedule.

How a bill is created

The injured worker who visits a medical facility is required to provide detailed personal and demographic information. (It should be noted that many times, the doctor has better and more current information about the patient than the employer.) Additional information collected by the provider includes the name of the employer, and the insurance carrier or claims administrator that will pay for the visit.

During the visit, (after the examination and diagnosis) the doctor or a billing clerk will fill out what is commonly called a "super bill." The super bill historically was a manual form with pre-printed common diagnoses and treatment codes. Currently many clinics now have the super bill online and the information is put directly into the medical facility’s computer billing system. The super bills rely upon several established codes to define the injury, diagnosis and treatment prescribed. These codes are based on the American Medical Association’s (AMA) Current Procedural Terminology version 4 treatment codes (CPT-4) and International Classification of Diseases, Clinical Modification 9th edition diagnostic codes (ICD-9-CM).

There usually is little done to ensure the quality, timeliness and accuracy of the codes that are used on the forms. Many clinicians doing retrospective review and oversight of programs cannot use certain approved codes because they are not definitive enough for a second clinical opinion; the ICD-9 code 724.2: ("Low Back Pain") is an example of an approved billing code which is too imprecise to allow for meaningful clinical oversight. However, if the diagnosis and treatment are not consistent with the injury type it may or may not be detected in the bill review process. Historically the injury codes in the claim file are not clear, concise or current, so that a match between body part and diagnosis is meaningless beyond general body geography.

The ICD-9 and CPT-4 codes are designed to allow for some electronic matching of diagnosis and treatment. Providers simply learn what ICD-9 code is required to match the treatment they want to perform. There is no process in bill review and very little in claims management to assess the validity of the changes in the ICD-9 diagnosis across the continuum of injury treatment for the claim. If the body part is initially accepted, the diagnosis code may or may not follow the treatment plan. Utilization review (UR) has provided a methodology to clinically assess the validity of the treatment AND the diagnosis code. For example, if there are no clinical findings for a diagnosis, the utilization review process may question that aspect of the treatment as well.

Many of the large clinic groups have internal billing offices. The smaller practitioners usually use an external billing service to send out bills and collect and reconcile the receivables.

In private-sector Group Health programs, and public Medicare and MediCal programs, bills are usually reviewed and processed electronically. Pharmacy billings also are adjudicated electronically through software developed by the National Council for Prescription Drug Programs (NCPDP). However, the NCPDP program does not always collect nor display the ICD-9 code on the prescription, so the pharmacy cannot oversee the pairing of the diagnosis with the medication prescribed. Also, if the patient has had a prescription for a particular drug in the past year and the physician orders it again, possibly for another reason, the pharmacy may simply add refills to the prior prescription rather than require a new prescription; thus it is difficult and cumbersome to know the diagnosis/drug relationship.

Workers’ compensation typically is billed using hard-copy. The billing for non-hospital treatment usually is on the HCFA 1500 form and the billings for hospitals usually is on a UB-92 form. Most states have not mandated the use of a standardized billing form. Texas and California currently are working on implementing a mandatory standardized electronic billing process. As expected, it has not been easy to get providers to utilize the standardized forms voluntarily. In addition, many of the payors are not set up to receive electronic billings. This is further complicated by the fact that smaller physician offices often do not have access, or access is limited, to the internet in the workplace. Yet they are able to bill private group health and Medicare successfully.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) set a standard for sending and receiving electronic billings for medical treatment. This format currently used is for most non-pharmacy billing in group health and can reasonably be assumed that even though HIPAA does not apply to workers’ compensation, it may be the basis for the standardization of transmitting and receiving workers’ compensation medical billings and records.

In workers’ compensation, it is the creation and handling of the hard-copy bill that is a significant source of inefficiency, inaccuracy and added expense to the system. Workers’ compensation providers and payors alike should take advantage of the efficiencies of existing processes in group health billing practices.

How a bill is processed

Currently, the payor (insurance company, TPA or claims department) receives, opens and date stamps the bill in the mailroom. Many times the bill has to be "indexed" to make sure that it has the correct identifying information such as date of injury, claim number, employer name, etc. In the past, most of the bills also included the social security number of the employee; today, standard security, HIPAA regulations, employer concerns and injured worker concerns require additional and different identifiers to protect against fraud including identify theft.

Sometimes the bill is reviewed by the claim examiner before sending it to the bill review company for adjudication. Most times the bills are separated from the medical reports, copies of the reports are made for the claim examiner, and the bill plus the medical reports are sent off to the bill review company for handling. The bill review company usually needs the supporting documentation of the medical report to accurately review and process the bill. If the bill review company cannot efficiently match the report to the bill, this can be an additional expense.

When the hard-copy bill is received at the bill review company, it is again date stamped, and is usually imaged. If the bill is a “red copy” of a HCFA or UB, it can be directly scanned for the data, as the "red" lines are not picked up by the scanning machine so the remaining black numbers and codings are picked up by the scanner. The information is then quality reviewed for accuracy.

If the bill is a "black copy" of a HCFA or UB, it has to be manually converted to soft-copy before processing. This additional manual step is one of the bigger cost drivers in the bill review process; not only does this increase the time involved in the process, but it creates another opportunity for errors to occur, reducing the quality and accuracy of bill review.

After the bill is converted to an electronic format it is then reviewed for accuracy, including "upcoding" and appropriateness of the treatment as compared to the attached medical report. The bill review company also reviews the bill against its database of prior bills submitted to eliminate duplicate line items or duplicate bills. In some states (Illinois for example), providers, especially physical therapists and chiropractors, bill for each day of service separately (a so-called "episode of care"); therefore, for one month of physical therapy, a claim office might receive 12 separate paper invoices, all with the total balance due included on each bill. Some payors have tried unsuccessfully to get their preferred providers to bill twice per month (on a "continuum of care" basis) and avoid the redundant bills and the bill review fees associated with them.

A common practice for medical providers is to send a duplicate bill automatically from their billing system if a bill is not paid within 17 days. Since it typically costs approximately $16 - $20 per bill to receive, review and pay a bill, there is actually a financial incentive for the payors to pay on a timely basis. (It is a common misperception that insurance companies do not pay their bills timely because they get investment income for the delay. Usually the delays are due to inefficient bill review processes and the lack of appropriate controls on the front end of the bill review process.) Many states have penalties imposed if the bills are not paid or contested on a timely basis.

The bill review companies receive fee schedule information from the various jurisdictional bodies, and network membership and contracting rates come from their respective network partners (hospital and provider networks including MPN, PPO and HCO’s).

The bill is then reviewed for compliance with the fee schedule or RBRVS, and any possible reductions for membership in a medical network (hospital and medical provider networks, such as PPO or MPN, etc). Certain large PPO’s implement their own contract reductions rather than providing their contracting database to the bill review companies. The net effect is that the bill review vendor must send the bills from that participating provider to the PPO and the reviewed bill and discounts are then sent back to the bill review company electronically. This additional step may be one way for the PPO to ensure that they are collecting all of the leasing fees from the bill review companies that they lease their networks to, as well as "protecting" their proprietary contracting arrangements with the participating providers and hospitals.

The bill review company produces a hard-copy check and an Explanation of Benefits (EOB)/ Explanation of Review (EOR) or they electronically transmit the reviewed bill back to the payor (hard-copy or softcopy) for processing. Some payors currently provide Electronic Funds Transfer (EFT) or electronic payments back to the provider. (One problem that providers have is that many times the EOR or EOB is not attached to the check when it is sent back to the provider, and this increases the difficulty in reconciling the accounts and provides an unnecessary administrative burden on the provider.)
As the technology of bill review has progressed, the more advanced process now includes all of the above, and adds additional automated duplicate billing checks, hospital network access, fraud analyses, regulatory data reporting compliance and limited user-defined reporting. Some leading-edge systems offer pharmacy and durable goods networks, customized private networks, utilization review and clinical case management components. Many of the more sophisticated payors require a reduction in the amount of actual hard-copy document handling. Certain levels of electronic data exchange are taking place on a limited basis amongst certain bill review systems and large payors.

The finances / economics of the process

Historically, to respond to the evolving regulatory and legal environment and to help offset the cost increase to its customer base, payors deployed bill review systems and only charged the customer if savings were realized. This percentage of savings pricing (which ranged from as low as 15% and as high as 40%) allowed for a "no risk" cost increase to employers and insurers..if an employer or insurer did not save money it would pay nothing; for every dollar of savings to the employer or insurer, the payor would be paid a percentage. The percent of savings was calculated as the gross difference between the amount billed and the amount paid; it was not calculated by the “net savings” achieved by the paid amount below the fee schedule.

This percentage of savings pricing method still is in place today, although there are differing definitions of savings (gross, net, after-fee schedule, network, etc). In addition, today there is price-per-bill and price-per-line pricing methodologies for bill review services. Typically the price ranges from $9.00 to $15.00 per bill and between $0.70 cents and $1.25 per line, depending on volume.
These bill review fees are passed on to the employer as an unbundled fee for self-insured employers. In California, the insurer’s bill review costs are paid as a medical expense, and in states where the NCCI regulates the workers’ compensation program, the expenses are considered an allocated loss-adjustment expense.

It is estimated that the total national medical services bill volume is between 75 to 80 million bills per year. Since it typically costs approximately $16 - $20 per bill, it is estimated that nationally payors have paid between $12 and $16 billion dollars in bill review fees over the past 10 years. Over the same time period in California, the estimate could be as much as $2 billion.

Data collection, sharing and analysis

Data collection is one of the most critical aspects of the medical payment process. With $0.51 cents of every workers’ compensation dollar in California spent on medical expenses, controlling medical costs is vital to employers. To manage these dollars and more importantly provide quality medical care to injured workers, employers need accurate and timely information.

The information supplied by bill review analyses can provide an indication of what injuries can be prevented, which providers are getting the best results for their patients and where there may be abuse or fraud in the system. What data are collected must be studied and expanded in order to have meaningful analyses. The NPI (National Provider Identifier) number for physicians is a prime example. Without collecting this number one cannot evaluate provider outcomes. Nurse practitioners and physician assistants also have NPI's so we could track % of care by ancillary providers and outcomes. Tax Identification Numbers (TIN) and NPI's for groups only provide general location information about a practice.

According to the website of the American Academy of Nurse Practitioners (AANP), "Currently, there is no universally accepted national identification and enumeration system for health care providers. Providers must use multiple identifiers for programs and organizations with which they do business. Data is not readily transportable among systems and, thus, must be collected redundantly. The problems and costs of exchanging provider data are great, hampering coordination of benefits and fraud and abuse detection efforts."

In May 2008 all businesses, large and small, will be required to use a NPI.

The old system requirements of merely paying a reduced bill to fee schedule or the application of a preferential discounted price from a network have been replaced by the need for clinically-based analyses of best practices, including prevention and predictive modeling. Questions about what the data show about the efficacy of treatments, the quality and costs of a particular treatment or
facility, or the impact on disability and return-to-work, are now being asked by sophisticated payors and their partners.

Although the bill review systems are collecting massive quantities of valuable data, this "black gold" running through the systems and being subsidized by payors is barely being utilized for the benefit of the patients or their employers. The efficiency and speed of the internet age and web-based technology have yet to be applied on a grand scale to the workers’ compensation bill review industry. The comparison of key medical data (utilization, treatment, diagnosis, disability, and prescription utilization, etc.) undoubtedly will allow employers and payors to make improved decisions.

Conclusion

A thorough understanding of the bill review process will allow users to make improved decisions concerning the selection of a bill review vendor.

The contract for bill review should provide a detailed breakdown of the services and costs for at least the following items:

• PPO access (what is the contract rate or percentage discount below fee schedule)
• MPN access
• Hospital network access
• Bill review
• Conversion of the bills from hard copy to soft-copy
• Checking for duplicate bills
• Checking for Upcoding and Unbundling
• Data analysis and reporting
• State reporting
• Outcome and accuracy data from “standard” programs currently in place
• Pharmacy formulary and discounts
• Durable Medical Equipment (DME) formulary and discounts