Payment audits can have costly impact on payer-provider relationships

Jan. 30, 2020

A new study, “Payment Integrity Programs: A National Study on the Impact of DRG Audits on Provider Sentiment and Abrasion,” conducted by Frost & Sullivan and commissioned and published by Change Healthcare reveals these “payment integrity” audits can cost providers as much as $1 million in administrative costs annually and damage the relationships between healthcare providers and their payers. The research also found high provider satisfaction with novel methods some payers are using to reduce audit costs and the administrative burden for providers.

Findings included:

·        The process of ensuring that payments to providers are accurate is a costly proposition for providers.

·         Payers or their third-party vendors routinely audit claims related to a hospital stay to ensure providers applied appropriate care, utilization, and billing codes to claims.

·         8% of providers are spending upwards of $1 million dealing with post-payment audits each year. Another 10% spend between $500,000 and $1 million, and 46% spend $500,000 or less annually.

·         4 out of 10 providers (37%) have no idea what the audit process is costing their organizations.

·         In addition to high administrative costs, nearly a third of providers (27%) report negative experiences related to audit programs.

·         A high number of requests for medical records, often used to validate accurate payment, was cited by 92% of respondents as a source of dissatisfaction. One quarter (24%) say they must respond to more than 500 to over 2,000 requests monthly. And 25% of larger providers consider the overall number of audits unreasonable.

The research points to new ways payers can help providers reduce the time, cost and discontent incurred by audits, including “Pre-submission notification,” a process some payers are now using to alert providers of potential errors before the claim is submitted for payment, which improves accuracy and reduces the potential for a post-payment audit. Nearly half of providers (43%) say this practice can help them reduce their organization’s administrative burden and associated costs.

“The message for payers is clear: Those that adopt innovative, provider-friendly techniques—such as pre-submission notifications—and deliver a positive experience in these areas can improve their relationships with providers, while still meeting their audit requirements,” said Dave Cardelle, RPh, vice president, Payment Integrity, at Change Healthcare. “You won’t find any disagreement among payers or providers that payment audits are tedious and expensive, but necessary. However, the challenge for payers is also the opportunity—to make something inherently objectionable to providers less intrusive and more cost-effective for both parties.”

Frost & Sullivan reached out to 1,100 short-term acute care hospitals in the U.S. via email and telephone for interviews. A national sample of senior-level decision makers from these organizations provided their opinions about payment integrity using a web-based interview methodology.

Change Healthcare has the story

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