A million a month: Pennsylvania health system customizes software not only to strengthen claims processing, but also to improve its payment posting process. (Claims processing: case history).

Linda Zang, director of treasury operations at the University of Pittsburgh Medical Center (UPMC), remembers when most claim payments were posted by hand and did not require a clerk with detailed knowledge of payer contracts and reimbursement technologies.

"Payment posting used to be the easy part of the billing cycle, the part to which you would assign new or less experienced staff," she says. "Those days vanished when managed care became the dominant form of insurance. Applying payments correctly is now a complex process with significant financial consequences if not done correctly."

As the complexity of the posting process grew, so did UPMC--from a single hospital in 1990 to 20 tertiary care, specialty and community hospitals in 2002. UPMC's network also includes more than 5,000 primary and specialty care physicians in western Pennsylvania. Market pressure to continually reduce costs has created a challenge in all aspects of healthcare operations, especially in claims administration.

As manager of the payment posting function for the 12 hospitals (of the total 20) included in the central billing office, Zang has seen volume grow from 400,000 payments per year in 1995 to 1.7 million in 2002. In 1999, the hospital posting staff changed from claim-level posting to service-level posting as the proportion of managed care claims increased. "Because UPMC includes teaching and research hospitals and specializes in transplant procedures, a single claim often includes many services, and the resulting remittance information is lengthy. Increased denials forced posting staff to post more detail to the billing system so billing staff could understand which services were paid and which were denied," she explains.

Staff size grew from five FTEs to 16.5 FTEs, but backlogs of unposted payments also grew, reaching an average of $1 million per day at its highest point.

Rework was common due to inaccurate contractual adjustments that had to be manually corrected, and delays in billing secondary claims caused impaired cash flow.

Payment denials increased as the proportion of managed care contracts grew, reaching a high of 8 percent of all dollars billed in 2000. The billing system did not provide necessary fields to store denial data by service, making it difficult to identify root causes of claim denials.

Search for a Solution

Management recognized the need to improve, but internal system resources were limited, so in late 1998, UPMC began a search for an external partner who could deliver a solution with:

1. More sophisticated rules-based payment posting logic;

2. Flexibility to accept payer data in any format, including print images, ANSI or proprietary formats;

3. Imaging of checks and remittance data;

4. The ability to handle growing volumes without adding to staff or overtime;

5. Improved denial reporting.

UPMC found many companies that offered claims processing software, but few that focused on the payment posting process. After identifying two vendors, conducting site visits with their clients and analyzing product abilities, in mid-1999 UPMC selected the Virtual Remittance Processing System from Cleveland-based Virtual Information Systems (VIS). The software accepted payment from varying formats, converted it to a standard form and stored it in a database, using customized posting logic to post data to the billing system using terminal emulation. While the software did not contain an imaging solution, the vendor worked with UPMC's existing imaging system (Filenet) to develop the interface for remittance data and pictures.

In 2001, Atlanta-based Per-Se Technologies acquired VIS and, with it, the remittance software that has since been renamed Virtual Processing System (VPS). PerSe also took on the role of supplier to UPMC and today continues to work with UPMC in its ongoing pursuit of software customization and ever-increasing returns on its technology investment.

Initially, to make sure the software would function in a high-volume environment, UPMC required a test before finalizing the contract. UPMC selected its most difficult payer and provided posting logic to the vendor, who wrote the data conversion and posting program. UPMC tested the program and ran it in production for a month, by which time the product and process proved superior.

A weekly remittance with 2,000 claims that required more than three man-days of labor to process was posted and reconciled to the check in a single day with the software. Assured by this test, UPMC signed the contract with the requirement that both hospital and physician payment posting would be implemented, even though the groups used different billing software. (The hospitals used McKesson and the physicians used Epic.)

Measuring Benefits

What is now VPS software has been in use for more than three years. Today, more than 4.5 million payments are posted annually (including physician billing offices' payments). Some of the benefits include:

Payer-specific posting logic. Rules-based posting logic is tailored for each payer and its remark codes, using tables the organization can modify. Data-based posting logic is also used in instances where a UMPC hospital and physicians sign a payer contract, after which point discounts are granted. Now the entire staff posts to all 12 hospitals; work is processed more quickly, and backlogs have largely been eliminated. Line-item posting supports proficient billing practices.

Conditional posting logic. A claim that contains a denial of one or more services can be posted differently than a claim without denials. Previously, this would have been worked subsequent to payment posting by trained billing staff. Now, denials are posted, and with the system's logic, "next actions" are completed.

Scanning paper remittances to create an electronic file. UPMC has several payers with substantial claims volume that are unable to generate electronic files. Through the use of optical character recognition, paper remittances are scanned to create an electronic file. Approximately 70 percent of manual keying to correct misread data has been eliminated for these remittances.

Imaging of remittance data. Staff from the original vendor worked with UPMC's imaging software to interface payment images. In the first two years of operation, more than 8 million images were stored. Six billing staff (four hospital and two physician payment staff) who formerly retrieved paper remittance documents have been reassigned to other duties.

Standardization of denial data. Each payer has unique remark codes on the remittance advice that explain why a claim was not paid or was underpaid. UPMC has developed a set of standard codes and has mapped payer codes so staff can produce reports showing the distribution of denials (e.g., failure to obtain authorization, services not covered, benefits have expired, wrong payer). Reports can be trended by hospital, by payer or by time period to enable management to focus on specific problems and corrective action.

"While the payment posting software alone did not reduce our denials, it provided data that enabled us to diagnose and correct many of the root problems," says Zang. "Denials have dropped from 8 percent of claims billed to 5 percent, increasing cash flow by $1 million per month." She says the physicians division experienced similar results.

Customer Modification

UPMC staff have worked with the vendor to develop new capabilities for the software. One of the most useful functions was the design of an Excel spreadsheet that can be imported into the software for subsequent action. Logging of refunds is one area where this is in production today.

Previously, billing staff would complete a manual form with details of the refund, attach documentation and forward to a supervisor to approve, who would then send it to the payment posting group for data entry. Now, refund data is put into a spreadsheet and e-mailed to the supervisor who consolidates the daily e-mails, then forwards them to the payment posting group to import into the software for automated data entry into the billing system. Checks are created at least three days sooner than before, thanks to reduction of the cycle time.

A recent enhancement is the ability to write off small payment variances automatically. Payments are often received that are pennies more or less than what was anticipated, due to rounding. The software reviews the insurance balance after payment posting; if it is less than a specific amount, the difference is automatically written off so the secondary claim can be created. This was previously a process of manual review.

"VPS software has allowed UPMC to dramatically re-engineer its payment posting process, and we continue to identify new uses for the software," says Zang. "We have a wish list for manual processes that we want to automate in 2003 so our staff can focus even more on value-added activities."

SOURCE

Linda Zang
Director, Treasury Operations
University of Pittsburgh Medical Center
Pittsburgh, PA

PRODUCT/COMPANY

Virtual Processing System
Per-Se Technologies Inc.
Atlanta, GA
www.per-se.com