Executing a balancing act: with the advent of electronic claims transactions, insurers and hospitals say they are working to streamline the medical claims management process to cut costs, while at the same time maintaining patients' privacy and data security.

Ever since the passage of the Health Insurance Portability & Accountability Act of 1996, the health-care community has been moving toward a more standardized format for handling claims. A key provision of HIPAA, titled Administrative Simplification, calls for improved efficiency in health-care delivery by standardizing EDI, or electronic data interchange, and protecting the confidentiality and security of health-care data through setting and enforcing standards.

In response to HIPAA, along with growth in new technology designed to automate the medical claims management process, an increasing number of health-care providers have begun accepting electronic claims transactions from providers, health-care clearinghouses, billing entities and other third parties involved in the claims-handling process. As a result, the claims management process is growing increasingly more streamlined, as payers aim to reduce administrative expenses and promote partnerships with providers.

"There has been a great deal of effort invested in the last five to six years by health-care payers assessing the capabilities of their current systems regarding the privacy, security and administrative simplification provisions of HIPAA," says Laurie Ringlein, director, health industries advisory practice, at PriceWaterhouseCoopers in Portland, Ore.

"As the medical claims management process becomes more automated," she says, "health-care organizations are developing their system strategies around enhanced protection regarding personal health information. Many are looking at ways to mask personal health information to protect members from identity theft and maintain privacy, such as rising coding other than Social Security numbers on member identification cards. In addition, payers are putting security protocols in place around EDI and electronic claims submission to comply with HIPAA and protect sensitive information."

Adds Jim Clark, president of Soft-Aid Inc., a Miami-based provider of medical management and electronic medical records software for the healthcare community, "Security is now a major focus of health-care payers and providers. A growing number of payers and providers are moving into an Internet realm for streamlined connectivity across multiple sites, providing real-time access to patient information, which needs to be appropriately protected."

Security provisions may include data encryption, electronic firewalls, access controls for confidential data and data activity monitoring.

"Payers are now beginning to (request) and receive claims in an electronic format as the preferred method of submission," says John Sarich, head of insurance industry marketing management at FileNet, a provider of enterprise content and business process management solutions, based in Costa Mesa, Calif. "The challenges lie in tracking individuals with multiple claims, limits on the medical provider's side--particularly in small practices--consolidation of faxed information into a single system, and the ability to process claims without manual intervention."

In the past, health plans and providers have used many different electronic formats to transact medical claims and related business activities. Under HIPAA, standards for electronic transactions are now being implemented to create one format, designed to simplify and improve the efficiency of such transactions nationwide. In addition, coding systems that describe diseases, injuries and other health problems, along with their causes, symptoms and actions taken, will become uniform.

"HIPAA's standardization of electronic claims transactions has helped health plans automate the claims management process and opened them up to accepting transactions via the Internet," says Gail Knopf, vice president, product strategy at the TriZetto Group, a Newport Beach, Calif.-based provider of software, outsourcing and consulting services for health-care payers. "Many payers are now moving toward point-of-service adjudication of claims, which will greatly reduce administrative costs and streamline the payment of claims."

The Internet is increasingly facilitating the sharing of information between health-care payers and providers.

"We're seeing a significant acceleration in health-care providers' interest in the direct submission of claims to insurance companies," says Marjorie O'Malley, president of Post-N-Track Corp., a software developer and services company specializing in Web-based transaction exchange solutions for the health-care industry, based in Middletown, Conn. "This direct connectivity greatly improves relationships and communication between payers and providers, increases the percentage of claims providers receive electronically and allows both payers and providers to realize significant administrative savings."

IMPROVEMENT ON THE RECORD

Cigna HealthCare recently teamed up with Post-N-Track to deliver faster claims submission and tracking for health-care providers, billing entities and other third parties involved in the claims-handling process. The HIPAA-compliant program allows providers to submit, or "post," their claims to Cigna directly and securely over the Internet and receive, or "track," processing results, such as claim status, receipt confirmations, acknowledgements and remittance notices, without an intermediary.

"The process works like Federal Express for health-care transactions," explains O'Malley. "Health-care providers can go online to track the status of their claims information and get an immediate response from the payer. If the provider doesn't have electronic claims submission capabilities, we offer direct entry of claims into the Post-N-Track system, which can then be forwarded to the payer, or if the provider has a practice management system that generates a print image, we can transfer it to a HIPAA-compliant format for processing."

Paul Keyes, director of EDI at Cigna HealthCare in Hartford, Conn., notes, "We're making significant improvements in the way providers are able to submit claims to us without the need for them to change technology or incur any other costs. Once a claim is submitted, the provider gets an immediate response, in real time, letting them know the claim has been received and whether or not it will be accepted for payment." The ultimate goal is to make it easier and faster for providers to do business with Cigna.

Dr. John Thayer, an ophthalmologist at Westfield Eye Center in Westfield, Mass., has been using the Post-N-Track system to submit claims to Cigna for the past year and a half. "The program is extremely easy to use and helps us process claims in a more efficient, cost-effective way," says Thayer. "Using P-N-T, we can submit claims directly to Cigna, rather than a bulletin-board system or clearinghouse, and we get a verification right away. We simply 'drop' claims into a folder on our computer system, and P-N-T will automatically pick it up and archive it. In addition, we receive an e-mail receipt once the claim is sent to Cigna, and receive another e-mail notification when remittances come through. The program provides a direct route to Cigna and greatly simplifies the process on our end."

Simplification of the claims management process is a key benefit of Web-based transactions.

"The Internet is truly helping to enable the electronic data-exchange process," says Ringlein of PWC. "Providers are beginning to embrace the services the Web offers, such as eligibility verification, benefit verification and tracking of claims status, although claims submission is being adopted a bit more slowly. In addition, health plans are increasingly using automation tools to turn paper claims into electronic records."

Last year, the Bush administration called for the widespread adoption of electronic health records for most Americans within 10 years. As part of that initiative, the U.S. Department of Health and Human Services issued a "Framework for Strategic Action," outlining an approach toward nationwide implementation of interoperability of health information. HHS is seeking to develop a national health information network--an Internet-based architecture that links disparate health-care information systems together to allow patients, physicians, hospitals, community health centers and public health agencies across the country to share clinical information securely. Both the federal government and private industry are being called upon to facilitate the deployment of an NHIN.

One of the ways in which health information is being exchanged--as a foundation on which to build an NHIN--is through Regional Health Information Organizations, or RHIOs, says Sarich of FileNet. RHIOs aim to establish electronic ties among payers, providers and other organizations involved in delivering health care.

"RHIOs encourage the coming together of payers and providers to share health-care information," says Sarich. "Doctors who live and work in a specific regional area, along with hospitals, insurance companies and other health-care delivery organizations in that region can then work together to design a records-management function everybody can use."

While it's too early to say how successful RHIOs will be in facilitating the development, implementation and application of secure health information across various health-care settings, more than 100 of the networks are in various stages of formation across the nation.

"Health plans are focusing on how to evolve their technical infrastructure to stay in step with new products, benefits and reimbursement arrangements," says Ringlein. "An increasing number of payers are focusing on how to improve electronic claims transactions to better service providers and customers, simplify the claims management process and reduce administrative expenses."

MINDY TORAN is a freelance writer in Huntingdon Valley, Pa. She can be reached at [e-mail].