Why Expanding Into Outpatient IB Pre-Payment Makes Sense… and Money

Mar 26, 2024

Health plans are working harder than ever to avoid inaccurate claims payments upfront to minimize the cost and resources required to recover overpayments on the back end. Although pre-payment itemized bill review (IBR) is still in its infancy stages of mass adoption, it is proving to be an effective method of helping plans avoid post-payment loss, while also reducing administrative burden and the subsequent administrative cost. While post-payment recovery will always be a part of the equation in settling claims, there is a tremendous opportunity to maximize the pre-pay movement, especially expanding into outpatient claims. Here are three reasons why plans should expand into outpatient IB pre-payment.

The Need For Speed

In general, outpatient IBs are shorter and require less time to review. Typically, the policy allows for 3-5 days for pre-pay audits, a more narrow review window than post-pay audits. While IBs are often shorter, in most cases, you still have to consider the substantial task of evaluating potentially thousands of outpatient claims within a brief 3-5 day period.

With the current healthcare technology, IBs can be audited in a fraction of the time required for a manual review. Settling claims quickly after their filing facilitates faster attainment of rightful reimbursement for plans and expedites time to revenue for providers. It’s a game of speed that pays big dividends for health plans and health systems.

Cost Savings

In a 2020 audit of St. Vincent Infirmary, it was discovered that 103 outpatient outlier claims totaled $581,136 and contained 173 billing errors. In this instance, Medicare made the outlier payments directly influenced by the hospital charges. The audit found that the hospital charged high rates unrelated to cost, leading to excessive inpatient and outpatient outlier payments.

This occurred because St. Vincent lacked processes and control systems that would prevent these billing errors. The appropriate portion of each outlier payment was only determined with St. Vincent amending the claims. Medicare ended up paying an excessive amount more than what was considered appropriate reimbursement.

There is a tremendous cost saving to health plans when utilizing pre-pay methods because it eliminates vendor fees and administrative costs associated with recovering a claim that was paid erroneously. Depending on the vendor fees, the number of claims worked, and the final claims settlement, outpatient IB pre-payment can save health plans millions of dollars annually.

Diminished Provider Abrasion

Assuring accurate payments to providers is a costly endeavor, especially for health systems. In 2020, approximately 8% of health systems spent upwards of $1 million annually dealing with post-payment audits. Another 10% spend between $500,000 and $1 million, while another 46% spend less than $500,000 annually. In a stunning find, 37% of providers have yet to learn what post-payment audits are costing their company.

This research was also beneficial for plans by showing that payers could help health systems reduce the time and cost required for audits and greatly diminish the dissatisfaction associated with the process. This reduction in provider abrasion and administrative costs is accomplished via pre-submission notification. In fact, the study showed that 43% of providers say that pre-payment claims reduce their organization’s administrative burden and subsequent costs.

In addition to the cost savings for both payer and provider associated with post-payment audits, pre-payment claims offer an opportunity for an improved working relationship between payer and provider, ultimately benefiting the patient.

How TREND Can Help

With over one million completed case reviews, CAVO delivers technology proven to scale up your medical record reviews and increase your team’s productivity by over 400%.

CAVO is an enterprise technology platform that streamlines the medical record review process by providing solutions to your payment integrity challenges in one place. With an open API and a HIPAA-complaint-certified framework, CAVO reduces your organization’s time to revenue and improves efficiency across the board. The TREND Health Partners team has strong clinical and claims knowledge to assist your organization with mapping between siloed systems. Our data science team helps you break down complex processes with AI and machine learning.