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Medical bill reviews and audits can help employers lower health benefit costs

Posted On: Mar. 30, 2014 12:00 AM CST

Medical bill review services that audit hospital bills to identify errors and overcharges can help self-funded employers reduce their health benefit costs.

While no public data is available to determine the extent of such billing mistakes, the Chicago-based American Medical Association says $43 billion could have been saved in medical claims payments since 2010 if commercial insurers consistently paid claims accurately.

A 2009 study by Stephen Parente, health finance professor at the University of Minnesota in Minneapolis, found that 30% to 40% of hospital bills to insurers contain errors.

Medical bill review experts, who are paid based on a percentage of the savings they accrue, say they often find discrepancies to investigate when scrutinizing itemized invoices, which are far more detailed than “uniform” bills that hospitals typically provide to insurers and third-party administrators paying the claims on behalf of employers.

“A uniform bill is a single piece of paper or electronic document that summarizes the services provided,” said Mike Dendy, CEO of Advanced Medical Pricing Solutions, a medical bill review service based in Norcross, Ga. “It might have something like "pharmacy' with no details. Every payer in the country takes that uniform bill and writes checks on their clients' behalf.”


But eight out of 10 times, these bill summaries do not accurately reflect the actual services that were provided, said Pat Palmer, founder of Medical Recovery Services Inc., a bill review service based in Salem, Va.

Because of these undetected errors and overcharges, “there is a tremendous amount of financial loss to employers, and it all ends up with their having to decrease the benefits they offer to employees,” Ms. Palmer said.

The use of hospital operating rooms and recovery rooms, which are billed by the minute, is one area where Ms. Palmer said she often finds inflated charges.

“They may be billing for four hours, but the patient may only be in surgery for two,” she said. “And how many times have you heard stories where patients have been ready to go back to their rooms, but there's no one there to take them. So they sit in the recovery room being billed by the minute,” she said.

“For employers to save money, you have to start analyzing these medical bills that they're getting and bring them down to true and accurate charges.” Ms. Palmer said.

Since the beginning of 2013, Insight Enterprises, a Tempe, Ariz.-based self-insured technology company with 6,000 employees, has saved more than $1 million, or 4% of its total health benefit costs, using a medical bill review service, said Darren Skarecky, vice president of finance.

“We wanted to get a bit more aggressive in cutting costs without changing plan design,” he said. With the service, provided by Advanced Medical, “the employees don't know when their bills are being reviewed.” In most cases, the bills are reviewed prior to being sent to employees.


When reviewing doctor office bills, John Brogan, director of technical assurance at Rising Medical Solutions in Chicago, said the firm often identifies incorrect diagnosis codes, or “upcoding,” which he defined as the practice of billing for a higher level of service than was actually delivered, and “un-bundling,” or billing separately for each component of a service when one code would cover all the services provided.

“There are guidelines, but they either ignore them, are unfamiliar or they just default to the highest level of service routinely,” he said in describing many providers' billing practices.

And because many TPAs and insurers use automated systems to process payments for bills submitted by doctors and hospitals, many errors and overcharges slip through undetected, said Ad-vanced Medical's Mr. Dendy, who recommends a manual review.

“The TPA confirms what the billed charges are and (what) the discounted rate would be, but that's as far as an administrative payer goes,” he said. “Then they "pend' the claim and send it to us” to be reviewed in-depth. “We give it back to the administrative payer and tell them what to pay.”

Mr. Dendy said most of the time, hospitals accept the revised payment without question.

“Maybe 8% of the time there's a debate. The hospital will suggest that we don't have all the information, and they offer to send additional data,” he said.

But most of the time, bills are reduced even after the additional information is reviewed, Mr. Dendy said.