Medical Bill Review Fees

16 October 2017 By Eric Wokas

The Hidden Policy Premium

Every business knows that accident prevention keeps your workers’ compensation costs at a minimum. But when an accident occurs and a claim is made, what is the best method to maximize cost savings? With medical bills comprising approximately 60 percent of workers’ compensation claims costs, many third party claims administrators (TPAs) use managed care programs to control these costs.

Managed care programs consist of five major components: network strategies, pharmacy benefit management, clinical intervention, return-to-work strategies and medical bill review. As an insured, you would hope that the claims administrator’s managed care program would look out for your best interests as well as the carriers. After all, both the insured and carrier have the same interests—keeping claims costs to a minimum. However, this may not always be the case.

In this article, I will focus on medical bill review. The goal of medical bill review is to maximize savings by paying only the appropriate medical fees. A carefully calibrated program designed by workers’ compensation experts can produce average savings of around 50 percent.

Claims adjusters begin medical bill review by eliminating medical provider bills prior to the “formal” bill review function. Usually, the bills are unrelated to the claim. In many cases, a claimant may have a pre-existing condition that requires non-work-related treatment. On average, 10 to 15 percent of medical bills are excluded in this way.

Once legitimate bills are identified, a fee schedule reduction is applied. Typically, this is an automated process using a software program that compares each medical bill procedure code and fee to the appropriate state fee schedules and rules. Each state has different fee schedules, codes and rules that enable bills to be reduced further. These fee structures are continually changing which requires continual software updates. However, about 15 to 20 percent of billing codes are not fee scheduled.

Contrary to popular belief, the review of fee schedules and rules is not standardized. These software programs are highly individualized among TPAs. One of the main differences is the preferred provider organizations (PPOs) the TPAs use. The PPOs have different negotiated fee rates with the medical providers. In many cases, the PPO rates are below the state fee schedule. In addition, the same medical provider may belong to several PPOs and have different rates with each of them.

Additional savings are possible through a more sophisticated level of evaluation called complex bill review. Complex bill review starts with alerts that flag certain charges. The flagged bills are then assigned to specialists such as physicians, nurses and medical coders. They examine the medical provider used, the medical procedures, and miscellaneous medical codes.

Now this is all well and good for the carrier and the insured. But here is where their interests may diverge. If you have a deductible as an insured, you are paying the cost of claims out-of-pocket up to the deductible amount. One component of that claim is expense. Many TPAs collect a percentage fee of the medical savings. As an example, if the initial bill is $23,000 and after bill review is reduced to $11,000, a savings of $12,000 is achieved. Depending on the TPA, the fee can range from 17 percent to 40 percent ($2,040 to $4,800) of the savings. This will appear on the loss report as an expense which is paid by the insured.

Along with knowing the fee percent charge, it is important to note that some TPAs include rejected bills in their savings reports and may be using the savings from the full medical bill charged rather than the lower state fee schedule charge. This would be a false savings since the medical provider was not allowed to charge more than the state fee schedule in the first place.

If your workers’ compensation losses are averaging $350,000 per year in medical payments, you could be paying fees of up to $140,000. When comparing insurance programs, that lower premium or participation fee could easily disappear by the higher medical bill review fees. What makes insurance programs even more difficult to compare is that most insurers and captives don’t know or are unwilling to tell you what criteria they use for medical bill review fees.

This is where your insurance broker can assist in understanding the complexities of medical care management and in finding the program that best meets your needs.

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Last modified on Tuesday, 21 November 2017 19:57

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