College of American Pathologists
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Cleaning up those claims

September 2001
Kathleen Furore

Do you know how much money you are losing on unpaid medical claims? That’s one question lab consultant Christopher Young of Laboratory Management Support Services in Phoenix posed during his presentation on medical necessity checking software at the CLMA’s annual meeting in June.

"In most cases, it’s shocking the amount of money that sits in accounts receivable. And the cost to you is not just in pure dollars," Young says of the costs associated with receivables and revenue written off regularly thanks to medical necessity denials—denials made for reasons ranging from misunderstanding local medical review policies to receiving wrong ICD-9 codes to ordering incorrectly and submitting panels with overlapping tests. Reworking claims, for example, requires a commitment of resources. And every dollar you don’t collect is money someone else is making money on, he notes.

Automating medical necessity checking is one way to reduce the number of bad claims and ultimately put more money in your company’s, your laboratory’s, or your hospital’s coffers. "This is a big, important part from a business perspective," Young says. "If you get more clean claims that go through with one submission, you get paid in a timely fashion."

But it is imperative to know what going electronic can and can’t do for you before investing in one of the software solutions on the market, Young says. "You need to understand that if you’re having problems getting ICD-9 codes from your doctors, or problems getting your doctors to order tests or get ABNs [advance beneficiary notices] from their patients, no software product on Earth, Mars, or the moon is going to help you with that," he says. "There’s no magic here. This is just another tool in your arsenal to deal with that problem. It can help if you use it correctly."

Knowing the right questions to ask software vendors is also key, Young says. "If you don’t know what to ask, you’ll be told what’s in their product," he explains. "Ignorance is not necessarily bliss; ignorance is probably expensive in this case."

Evaluating the benefits

Getting what Young calls "decent information" from carriers and keeping abreast of local medical review policies that dictate how test claims must document medical necessity to qualify for Medicare reimbursement are two tough but important steps in filing clean claims. "Every other carrier newsletter has a correction, or adds a new little pile of codes to some existing LMRP. How do you keep up with that?" Young asks. His answer: medical necessity checking software, which can do front-end screening at the time of patient encounters, back-end checking to stop bad claims from leaving the system, or both. "One of the huge advantages of buying software and/or hardware from a vendor is that they’ll take care of those things for you," he says. "I have one client who does it internally and it’s a very
difficult process."

Such software—available as standalone products or systems that interface with a lab’s mainframe computer—can do a lot more than check LMRPs and ICD-9 codes.

In general, medical necessity checking software can bring consistency to coding across all sites, eliminate the need to train and continually update staff about the technical intricacies of codes and other medical necessity checking issues, generate ABNs, possibly get physicians and other clients to be more compliant, and keep personnel focused on taking care of patients instead of on medical necessity checking. It can also reduce liability by not letting bad claims out of your office and into the Medicare contractor’s hands.

"One thing we’ve been told over and over by the government is, ’Don’t submit claims you know you’re not going to get paid for,’" Young says. If you do it too often, you become a candidate for a focused medical review from HCFA, in which a government employee "brings your claims up from the previous day and looks at them.

"Reducing the number of things you send over that aren’t correct helps keep you off that list," Young says. "This kind of software helps you do that."

Software with more "bells and whistles" also is available, he adds. "Extras" can include the ability to do panel, profile, duplicate and calculated test and correct coding initiative checking; a database for all LMRPs nationwide; a feature that warns of system misuse; the ability to track noncompliant customers and compare compliance between providers; and even the ability to sort noncompliant clients by sales rep "to see who is and isn’t doing their job," Young says.

"You really want these systems to get your customers to give you this stuff up front so the software [ultimately] is not as necessary as it used to be."

Addressing the risks

While medical necessity checking software can lessen the liability that comes from submitting bad claims, it can increase your liability in other areas.

"If you put these things out there, in clients’ offices, there’s an increase in your regulatory risk in that these things can be improperly used," Young warns.

For example, anyone may be able to get into the system and access ICD-9 code files or subvert the software to make it useful to insert diagnosis codes, Young explains. "You can’t use it to suggest or to insert diagnosis codes. Before [software], those were called cheat sheets," he says.

Making a strong commitment up front to monitor and control the use of any system you provide is key to controlling risks associated with compliance software. "You now become the vendor," Young says. "You might be buying this from someone else, but you’re the one sticking it out in these offices. You’re giving it to that customer for their use, so you have some kind of requirement here to make sure you or the vendor are keeping the files up to date. You should have an agreement that you’re committed to maintaining the system. And you should think about these things in terms of your ability to apply resources to take care of that."

Young also advises investing in a system that can disable hackers and warn of misuse—especially with the arrival of Health Insurance Portability and Accountability Act rules for privacy and security. "There’s something called HIPAA coming down the pipe. So if you have systems that are providing patient information on them, you’re going to have HIPAA compliance rules to deal with," he notes.

Training sales staff to never even imply the lab suggests using one code over another is another safeguard. "The sales and marketing staff must be thoroughly trained in what they can and can’t tell clients about the hardware or software you are placing in their office," Young says.

Finally, he suggests creating a written agreement that spells out the rules involved in working with systems you provide. "Make sure they know who it belongs to, what’s going to happen if your relationship dissolves, and how they’re supposed to use it," he says. For example, if you provide hardware to use for your lab’s work, your clients shouldn’t "load their physician office programs on the same PC or software and use it for free," Young explains. "Put in the agreement that you have some ability to make sure they’re not loading other programs onto the system, that you can go to their site and audit what they do.

"Make it real clear what you’re talking about. If you’re going to have the vendor maintain all or some part of it, clarify it in the agreement so it doesn’t come up two turnovers of office staff later that you’re all of a sudden responsible for something you don’t have the resources for."

Questions to ask

Once you decide medical necessity checking software or hardware should be in your future, interviewing vendors is your next task. Young offers the following questions as starting points:

  • Who will take care of the hardware and how is it maintained?
  • How and how frequently are LMRP and ICD-9 code files updated and maintained? Does the vendor electronically blanket everybody, or is there a disk that has to be loaded so you update the files yourself?
  • How is a data exchange handled? "If you’re sending data back and forth between your computer and theirs, you want to know what’s going on there—and your IT guys are going to want to know really bad what’s going on," Young says.
  • Will their interface alter any information in your mainframe? "The records in your mainframe are your records and they’re your primary records," Young notes. "They shouldn’t be altered by any outside system. So if they are, you need to know how and why."
  • Is there an existing interface for your computer? "If not, there may never be," Young cautions. "Ask what their time frame is. They’ll tell you whatever they want to tell you, but you need to ask."
  • How are problems handled? Questions about claims and other issues are likely to arise. You might need to know, for example, why the system is rejecting claims. "You should know what mechanism is there to resolve those kinds of issues," Young explains. "It’s very important to check with the vendor up front about how they deal with these kinds of problems and the time frame for response turnaround."
  • Does the system have the ability to override system rules or are you totally at the vendor’s mercy? You want the ability to say, Don’t do this checking for us anymore until they get this problem fixed. "It’s not their data, it’s not their claims, and it’s not their information. It’s yours and you have the responsibility for it. So you should also have the ability to work with it," he says.
  • What are you doing about HIPAA? "If you’re talking to a vendor now and they don’t know what you’re talking about—if they think HIPAA is a big animal that lives in rivers in Africa—you probably should go to somebody else," Young says.
  • Are they aware of the new, mandated format for ABNs, and how are they handling that?
  • How many kinds of checking are available beyond LMRP checking?
  • Are your existing billing and laboratory systems compatible with the software offered?
  • How many processes will you have to change to accommodate a new software system? "How many people are you going to have to hire and train and re-orient? How much desk space are you going to need? And how many changes do you have to make to use this system to be its most effective?" Young asks. "You have to think about those things when you’re thinking about the system you’re going to buy."

Ultimately, any system you select must be based on your individual needs and how you interact with your customers and staff. But the benefits will outweigh the drawbacks if you choose the right product, Young says.

"Remember: If you’re good at this and use the tools correctly to educate clients and print reports and fix things, you’ll have a diminishing value with the systems. At some point there will be a plateau," Young says. "But I’m of the opinion that you will always need something like this. There will always be turnovers and changing rules. And you’re not going to have any more resources tomorrow to throw at this than you do today."

Kathleen Furore is a writer in Oak Park, Ill.