Optimizing Claims Payments

By Ken Brown

Cash flow problems can sometimes sneak up on health plans. Unanticipated events can impact cash flow and, consequently, the ability to pay claims. These events could include a catastrophic group of claims from an employer, an unanticipated increase in seasonality factors, or a sudden change in the federal and or state law that would require the need for immediate unanticipated expenditures to come into compliance. The ability of the health plan to pay out claims in these instances isn't an issue of solvency, but one of timing.

A seemingly never-ending spiral of complaints from members and providers often starts once you begin to delay payment of claims. Many times the complaints actually result in the increase in costs as phone traffic volume picks up.  How do you deal with the underlying problem of deciding which claims to pay and when -- in order to make the available cash go further.  Another issue is that many jurisdictions have mandatory time frames for payment.

The secret is to plan in advance. Advanced planning should be part of a comprehensive contingency plan that takes into account these issues.  Thinking the unthinkable in advance often can smooth the road for you if circumstances conspire against you. The Robert E. Nolan Company brings claims payment and cash under control by optimizing our clients claims payment cycle.

We have found that in most cases, if you consider the top 10 percent of providers who are sending claims, you've resolved over 80 percent of the problem.  In some cases the answer can be that simple.  But in most cases, the answer requires knowing more than just that one factor.

You'll need to categorize those providers who are capitated and those who aren't.  Do the providers who are capped have a cash balance? Of those who aren't capped, have you done any creative financing with them such as advances?

What is the bill-to-pay ratio for each of your providers?  Are there some that you manage closely and others that you do not?  Are there contract issues at stake?  What's the historic reimbursement rate by provider?  Are there providers that you've had historic duplicate claim problems with?

It's always better to pay claims than to withhold payment.  What are your existing business rules regarding payment of claims?  What are the normal turnaround time frames you've historically enjoyed, and is there any historic seasonality to those turnaround time frames?  Where are you now?

What's the amount of cash you have available for paying claims?  Will this amount change each time claims are paid or is it standard?  Are there any seasonality factors involved in this as well?

You should ask these questions and get answers before you ever have an issue regarding slow pay of claims. If you have reached that point, however, there are a few more things that you'll need to do -- and do immediately in order to keep your good name in the marketplace.  Let's assume that for whatever the reason, claims are now being paid slower than in the past, phone call volume is up, complaints are rolling in and providers are finding your home phone number.  It's time to optimize claims payments in order to optimize your available cash.

The goal is to pay claims within the available amount of cash and, hopefully, pay them all prior to the expiration of the ideal turnaround time for the period in question.  All of the above questions need answers now as they will be constraints in a model.  The Robert E. Nolan Company can help you to put those answers together into a model that will show which claims need to be processed now, and which ones can wait.  The goal is to pay all of the claims, keep the members and providers happy, and have the immediate cash needed to operate and to maintain reserves.