That’s a question I’m hearing more often these days, often one of the first voiced by payers wondering why their medical cost trends are escalating. I’m not sure that’s the right question to ask in most instances, but the answer can provide insights and direction into what’s happening with your costs, and why. For now we’ll leave aside the issues inherent in using BR savings as a ‘standard’ and focus on how- and why – vendors ‘game’ the numbers.
There are bill review benchmarks from national vendors, estimates provided by companies competing for your business, and ranges long viewed as industry standards. These ‘benchmarks’ can be gamed, inflated, distorted – and often are – but in the absence of any national public database, they’re all many have access to.
Bill review savings are reported as a percentage below the applicable fee schedule or usual and customary in non-fee schedule states. One would think this is an objective result, and therefore there should be little variation, and in an ideal world, one would be right. However, there is almost always a bit of judgment involved in determining what the ‘right’ fee schedule amount is and what state rules apply. The complexities are many, and the justifications, while often thin, are given to payers unequipped to refute the vendor’s statements.
The fact is, different vendors often deliver very different results processing identical bills from the same jurisdiction, with some showing deep reductions from applying FS and others not. Without getting bogged down in the niceties of methodologies – the ‘how’ , let’s look at the ‘why’ vendor BR savings vary.
Simply put, follow the money.
Most BR these days is priced on a flat charge per line or per bill; the days of BR fees based on a percentage of savings below billed charges are pretty much over – and good riddance. The results from my firm’s 2009 survey indicated fees run about $7-9 per bill (we’ll do another survey and publish results this summer). Most BR vendors also charge for additional ‘value-added’ services on a percentage of savings basis – typically 25% of savings delivered on top of fee schedule/UCR cuts. That’s where the…variation usually lies.
The financial motivation is obvious; the vendor gets the same fee for processing a bill whether they deliver $1 or $1000 in BR savings, but their compensation for the ‘value-added’ services is based on the savings that are delivered – the higher the ‘savings’, the greater the fees for the vendor.
Therein lies one explanation – perhaps the most significant one – for the wide variation in BR savings percentages. In my consulting practice I’ve had access to reports from several of the larger BR vendors, and the variation can be as much as 300 percent from vendor to vendor. Yes, you read that right – one vendor’s ‘bill review’ savings in a state can be three times higher than another’s.
Almost always the vendor with the lower FS savings delivers great results from ‘nurse review’, ‘complex bill review’, ‘coding edits’, ‘unbundling and upcoding review’, or whatever they call it – suffice it to say that the savings delivered from these ‘extra, value-added’ services – when added to the ‘standard’ bill review reductions – are usually only a bit higher than other vendors who don’t have all those extra, value-added add-ons.
That’s not to say that some savings can – and should – be derived from careful and professional review of bills – coding and clinical reviews are often helpful. One of my clients, FairPay Solutions, does a terrific job doing just that for facility bills in many states, delivering savings far above those provided by standard bill review. But these additional savings shouldn’t come from most – or even many – bills, and their contribution to total savings percentage should be in the single digits.
If they’re not, start asking questions and making comparisons.
What does this mean for you?
In bill review, you don’t always get what you pay for. Sometimes, you pay far too much for what you get.
Feb
21
Or as outlined in the Indiana Supreme Court Decision (see at this link http://www.in.gov/judiciary/opinions/pdf/06250903mpb.pdf) sometimes BR companies take discounts and can come up with how the arrived at the discount.
Also there is a preverse financial incentive for BR companies to increase the total cost of care, through use of providres who many not be as adept at efficiency of care and therefore have a higher utilization of healthcare resources. Since the BR company gets paid a percentage of savings by the insurance carrier, the higher the total bill, the greater the savings and the higher the pay day to the BR company.
Employers need to talk with their carriers and direct them not to use BR companies who are paid on a percentage of savings. If they fail to do so, they can very easily have their WC cost increased dramatically behind the scences
Joe – Great read. I think that there will be a lot of scrutiny going forward on BR results and charges. Either by customers, employers or State government. It always amazes me that BR companies are not consistently adjudicating bills equally within a given jurisdiction. I think that some are over aggressive may cross the line in order to show savings. It is usually those companies that are unsuccessful in provider appeals and if it goes farther any sort of outcome at a hearing. So if the BR Company’s savings is not upheld do they refund their customer or the employer?
I wonder what is the line of demarcation between “reducing the provider bill to the state fee schedule or U&C and a review of the medical necessity of the services rendered?
In the former, it is usually a data base against which the services are compared – a data base condoned by the jurisdiction in the form of specific fee schedule or an accredited “usual and customary” reference.
When it comes to the latter, “medical review” of the medical necessity goes to the heart of the issue – were the services and supplies rendered appropriate to remedy the patient’s condition AND were they the most affordable as well as efficacious remedy? Based on a review of the comprehensive medical record – a review performed by medical professional s hopefully – the result may very well be a more meaningful result.
Just wondering what we should expect BR firms to do!
In defense of BR companies I think the post along with the comments over simplify the process of Medical Bill Review and the role BR plays in managing the costs of WC care. The primary reason payors hire BR companies should be for the value added services they provide. Payors understand that even in states where there is a fee schedule in place there can be complex calculations or rules that can be interpreted or manipulated in any manner of different ways, otherwise why not just do it themselves?
Any reputable BR company would employ a contingent of nurses, auditors, IT professionals, legal staff, and customer support teams in order to do the research, program, and maintain the information needed to manage their medical bill review program. In addition they must have staff to attend state hearings and committee meetings trying to convince states not to implement policies that raise the cost of WC care and all this just to manage BR in a state where there is a fee schedule. If you are a national payor and try to process bills in states where there is no fee schedule then the amount of effort significantly increases across the board. Now this is not to say that all BR companies are perfect or without some level of scrutiny, quite the contrary, payors should be reviewing the performance of their BR vendor constantly but weighing it against the cost of doing it all themselves. So there is an intrinsic value to the services a BR vendor provides, before the add on services, which at $7 – $9 dollars a bill seems reasonable.
As for the issue of value added services I think it is important to note that a lot of the time these services are created in partnership with payors who are looking to maximize savings in areas where, based on the data the BR company has, there are seeing little to know savings. Also, it is important to note that the development of these programs are funded by the BR company themselves so the risk and resources involved in getting something running for a client is on their dime. Of course if the program is a success it is something they can market and use for garnering additional clients or sources of revenue. On the other side of that though clients will more often then not come back to their vendor and ask for deep cuts or concessions based on the savings so it takes longer for the BR company to have any return on investment of the new program. Also keep in mind that there is a lot of private labeling of bill review services going on as well and BR clients take that $7-$9 dollar charge and turn right around and charge the employer $10 – $15 dollars a bill, plus value added services.
Again, BR companies are not perfect and if you work with them through the prism of a true partnership and not just as another vendor the relationship can be beneficial to both organizations. In the end the relationship should be a benefit to your organization and not adversarial at all, the goals of each should be the same it usually the manner in which those goals are achieved that can be different or even be the cause of conflict. Any BR company should be working with you to help you understand how they can optimize the services they are providing you.