With states pressuring health plans to process claims quickly, many smaller managed-care companies are scrambling to make sure their information systems are up to the task.
Beginning next month, Missouri will join 19 other states with so-called prompt-payment laws. Under the new law, Missouri insurers will be required to pay all undisputed claims within 45 days. If a claim remains unpaid beyond that period, the insurer must pay 1% interest per month to the provider.
Complaints of late payments, which are becoming increasingly common across the country, prompted Missouri lawmakers to pass the law. According to the Englewood, Colo.-based Medical Group Management Association, only 40% of multispecialty groups' claims are paid within 30 days, and 40% are unpaid after 120 days.
Legislative efforts to address these complaints, combined with investigations by insurance officials in other states, are taking their toll on health plans' information systems.
"We all negotiate these wonderful contracts, but often the payers' (information) systems aren't set up to administer the terms," says Pam Waymack, managing director of Phoenix Services, an Evanston, Ill.-based healthcare consulting firm. "The systems aren't as sophisticated as the strategies we're developing."
Late payments led to a 1997 New York state investigation of Norwalk, Conn.-based Oxford Health Plans. After New York Attorney General Dennis Vacco ordered Oxford to pay 9% interest on all unpaid claims, the insurer revealed it had underestimated the amount it owed providers because of glitches in its computer system. The miscalculations led to Oxford's well-publicized financial free fall and losses of $291 million in 1997. In a major restructuring last year, Oxford hunkered down, scaled back and revamped its information system.
Part of Oxford's problem, Waymack and others say, stemmed from trying to do too much. Like many other managed-care companies, Oxford offered everything from HMOs to point-of-service products. Coordinating the claims processing, reimbursement and medical management of so many products can be overwhelming and usually is handled by independent departments and systems.
Whether health plans are trying to coordinate different products and branches of the same company or are trying to blend the information systems of two merging companies, their efforts are taxing outdated information systems, says Jim Hertel, publisher of the Denver-based newsletters Arizona Managed Care andColorado Managed Care.
"The biggest problem facing many of the health plans today comes about because of the plethora of health plan mergers and the (subsequent) conversion problems they experience as they make the move to a single platform," Hertel says.
He points to the example of Denver-based Blue Cross and Blue Shield of Colorado's implementation of a new information system. Rapid growth in recent years strained the Blues' existing information systems and necessitated an upgrade. Last summer, the Blues installed a new Amysis information system in an attempt to consolidate its claims processing. Soon after, Hertel says, providers started complaining about late payments and problems getting capitation reports. Colorado's prompt-payment law mandates claims be paid within 60 days.
In the health plan's defense, spokesman Neil Westergaard says some problems are to be expected in a project that involves consolidating six disparate systems, some of which are 25 years old, into a single integrated claims-processing and billing system.
"Ours is a $40 million project," he says. "When we have that many transactions going on, we're bound to have some problems, and we have. But we feel we're getting our arms around it."
Greg Killinger, vice president of operations for HealthNet, a provider-owned health plan based in Kansas City, Mo., says similar needs drove his organization to spend $10 million in 1998 on a new Erisco Facets information system, to which it is gradually converting. "We wanted to improve our timeliness, improve our quality and consolidate into one system," he says.
Other small plans and independent practice associations without the financial resources or the staff to invest in such systems often outsource their claims processing, Waymack says.
"Generally the smaller groups and start-ups -- IPAs, (physician-hospital organizations) or start-up HMOs -- will consider outsourcing, and they'll do it because they don't have the capital to invest in the systems they need. You're now talking about six figures as the cheapest (system available), and that's without hardware," she says.
Outsourcing is also a way for organizations to gain expertise they don't have, she notes.
Companion Healthcare, a 126,000-enrollee health plan based in Columbia, S.C., in 1996 purchased a wholly integrated, World Wide Web-based claims-handling system from Companion Information Management Resources. CIMR, a subsidiary of Blue Cross and Blue Shield of South Carolina, provides a software licensing agreement to health plans for its processing system and charges on a per-enrollee per-month basis. Some health plans hand over all aspects of claims processing to CIMR, at a cost of about $9 per enrollee per month.
CIMR Vice President John Tempesco says the key to any information system these days is electronic claims. About 40% of the claims coming into CIMR are electronically received, which cuts the turnaround time for an HMO claim to four days from between 15 and 20 days, Tempesco says.
According to a 1996 Health Insurance Association of America survey, nine out of 10 insurers use some automated claims-processing system, and nearly one-quarter of all claims are received electronically. The survey also says electronic receipt of claims decreases the processing time, and nearly 80% of claims received electronically are processed within seven days, vs. 57% for manually received claims.
Since insurers' ultimate goal is to move toward the highest percentage possible of electronic claims received, some health plans are promising physicians faster payments if they submit claims electronically. Aetna U.S. Healthcare, a Blue Bell, Pa.-based managed-care giant, unveiled its electronic claims-payment program last summer, after months of strained provider relations.
Still, electronic claims and sophisticated software systems are useless without a good operations department, Waymack says.
"Technology is not the total solution," she says. "You need to still put in good management, oversight, controls and audits."
David Pankau, vice president of operations for Companion Healthcare, says Oxford's missteps can help other plans. "I think the lesson everybody learned from Oxford, and what most good operations people already know, is you have to have redundant mechanisms to make sure you're balancing what's happening, and you have to be able to have more than one mechanism to make sure your claims are checked and balanced."