Moving health care data electronically

Pilot projects are experimenting with electronic data interchange and cutting the costs of administering claims in the process.

From Seattle to Memphis and at points in between, employers and other health care buyers, insurers, and providers nationwide are turning to electronic data interchange to eliminate the paperwork from health care administration and to help cut health care costs.

Evidence of this trend comes in the form of a report released in July by the Workgroup on Electronic Data Interchange. Late last year, Louis Sullivan, M.D., secretary of the U.S. Department of Health and Human Services, asked WEDI to examine how EDI could be used to reduce administrative costs in the U.S. health care system. Sullivan says electronic billing can save $4 billion in annual administrative costs, while the use of automated clinical information to reduce unnecessary care should save $20 billion annually by the year 2000.

Composed to representatives from the public and private health care sectors and co-chaired by Bernard R. Tresnowski, president of the Blue Cross and Blue Shield Association, a Chicago-based group that represents 73 independent Blue Cross and Blue Shield plans across the country, and Joseph T. Brophy, president of The Travelers Insurance Cos., in Hartford, Conn., the work group generated recommendations and a plan to "promote full implementation of EDI within five years."

Claims submission or billing, payment and payment posting, eligibility verification, and member enrollment are among the transactions initially targeted in the WEDI report for electronic transmission. An estimated $3.2 billion in administrative savings could be achieved by switching from the current, paper-bound environment to a full EDI implementation, WEDI says.

Employers could save $70 million to $110 million by using EDI for enrollment and to certify that a prescribed procedure is covered under the subscriber's health insurance contract, WEDI estimates. The fact that most of the savings go directly to the providers and payers involved with submitting, adjudicating, processing, and paying claims may be the reason that the most innovative efforts involving EDI go considerably beyond claims administration.

A community approach

For example, one innovative EDI effort is the Community Health Management Information System. Initial funding for developing such systems has been provided under grants from the John A. Hartford Foundation in New York. Founded in 1929, this private, nonprofit philanthropy provides grants to programs focusing on health care costs and quality.

Providers, payers, employers, laboratories, and research facilities in a community will access CHMIS via a single network designed to support electronic transmission of all health care data throughout a community. The results should benefit everyone involved in the community health care system. For employers, such electronic systems could mean improved benefit plan analysis and more cost effective health care purchasing decisions because the employers would have access to detailed health plan data and profiles that will, in effect, give a history of each provider's medical encounters. The ability of providers to access lab results and medication requests also will cut employers' health care bills by reducing the chances of redundant testing or prescribing. Additionally, payers and providers will benefit economically from electronic claims processing, since the procedure requires fewer staff administering claims in an office and thus fewer computer terminals. Researchers and physicians will also benefit from a vastly improved capacity for medical effectiveness studies once enough clinical data can be amassed to further outcomes research. And public health analysts will have improved tools for community health trend investigation.

The functional specifications for CHMIS, which outline what the system is designed to accomplish, have been developed by Benton International, a consulting firm in Torrance, Calif., with broad experience in electronic funds transfer and health care. The specifications call for building a shared repository of health care information based on detailed employer, patient, and provider profiles. Patient profiles will consist of demographic information, patients' encounters with the medical community--including laboratory tests ordered--and employment and health plan information. Provider profiles will supply a view of medical encounters by provider. The system also will give information on claims history, including remittance and reconciliation. The centralized repository also will carry comprehensive medical dictionaries of diagnosis and treatment codes, standard descriptions to be used on claim forms, claim transmission requirements, and specific health data, such as precertification requirements and benefits provisions.

Two coalitions of employers--the Health Care Purchasers Association, in Seattle, and the Memphis Business Group on Health--are moving CHMIS from a functional concept to a working reality. Since the requests for proposals from the hardware, software, and network vendors that will eventually implement CHMIS in these two locations are just going out and system pilots haven't yet begun, neither group is ready to estimate the final cost of implementing CHMIS. However, both groups concentrate on managing health care costs for employer members and both see CHMIS as a means of eventually achieving what Richard Sharpe, program director of the Hartford Foundation, refers to as true value-based purchasing of health care services based on effectiveness, appropriateness, and cost.

The association in Seattle represents some 100 employers covering approximately 650,000 lives. Washington-based providers and employers "haven't seen anything so far" in terms of savings from EDI, says Executive Director Andrea Castell. However, she sees CHMIS as a tool that will "mature our collective purchasing organization" to achieve "leveraged employer buying."

The MBGH's 35 employer members represent about 50,000 employees and have a record of using aggregate buying power to negotiate cost-effective contracts with Memphis hospitals. Donna Miller, president and CEO of MBGH, sees CHMIS as another way to "help members achieve cost containment objectives while ensuring access to high-quality care."

The technology developed as a result of CHMIS will be in the public domain for community organizations to use at no cost.

An integrated approach

Other groups are working with vendors to implement new applications of EDI. For instance, a partnership between the National Electronic Information Corp. in Secaucus, N.J., and PCS Health Systems Inc., a vendor of managed care pharmacy services in Scottsdale, Ariz., is expected to result in the creation of the Health Care Information Network. NEIC functions as an electronic commercial claims clearinghouse for some 60 major health insurers, third-party administrators, and managed care entities. Currently, provider transactions sent to payers on the NEIC network are processed at the end of each day. When HCIN is implemented. mented, coverage confirmation, payer billing, and precertification, among other activities, will take place nearly instantaneously.

PCS has electronically adjudicated drug claims instantaneously (in real time) nationwide since 1987. Its RECAP system, a nationwide electronic link to computers at PCS headquarters, enables pharmacists to submit plan members' drug claims in a few seconds, without written claim forms. Pharmacists enter information for covered plan members on in-store terminals and, based on such data, the PCS system immediately verifies eligibility, calculates the appropriate claim amount and customer copayment, and transmits the information to the pharmacist. Customers pay only their portion of the bill. Eliminating paperwork via electornic claims filing and payment cuts administration costs by about 50%, PCS estimates.

Kenneth J. O' Donnell, NEIC president and CEO, cites PCS's experience in on-line health information processing as evidence that the company can make this networking technology and instantaneous communication available to hospitals, physicians, and other providers. Neither PCS nor NEIC, however, would provide data on HCIN cost projections or on exactly when the system will be operating.

EDI and the employer

In a variety of industries--automotive and manufacturing, particularly--EDI is already well established as the most efficient and cost effective means of placing orders and paying vendors. But employers are just beginning to recognize the cost-cutting potential of EDI in claims administration.

On group of employers that is moving to take direct advantage of what EDI can save in terms of claims administration is the Savannah Business Group. Formed in 1982, the primary purpose of the business coalition located in Savannah, Ga., is to provide member employers with effective health cost management. Through SBG/Preferred Health Resources, a preferred provider program developed solely for its employer members, SBG has generated an average of 8% savings on physicians' fees for the 17,000 employees at 18 employers covered by the PPO. "We don't think that's good enough," says executive director Ewing Barnett. "We would like to have all the codes under contract because if we did that we would have a better percentage of savings."

To increase those potential savings, SBG is implementing a Statlink EDI system, an electronic health care information services product from Cooperative Healthcare Networks in Alpharetta, Ga. The system is expected to include electronic repricing of claims and billing. Currently, physicians' claims for SBG/PHR members are repriced manually to reflect a preferred provider discount. The charge from SBG's third-party administrator for repricing physicians' claims is $1 per employee, applied monthly. A physician has the option of either billing by contract price or submitting a bill based on regular item of service charges. Bills that are priced regularly are repriced to the contracted price and that produces a percentage savings, Barnett says. With Statlink, physicians will send claims electronically to CHN for repricing based on their agreements with PHR. The repriced claims will then be sent to the TPA and a utilization review company with appropriate responses transmitted to the physicians via the network. The charge will be 35 cents for each claim processed and repriced. Based on a feasibility study comparing the number of employees with the number of claims filed at several member firms last year, Barnett expects administrative savings from using Statlink to be substantial, although he declined to be more specific. The 20 firms covered by SBG/PHR will pay $495 for Statlink implementation and training in each of the first 34 physicians' offices where Statlink is installed.

CHN is not yet providing the repricing service for SBG/PHR claims. However, physicians who have already signed up are using the EDI technology to file claims, and CHN President Joe Bigley says the repricing feature will become available as more physicians participate in the Statlink. He is projecting that most, if not all, of the 100 physicians and physician groups included in SBG/PHR will be participating by the end of the year.

David Deason, corporate benefits manager at Savannah Foods & Industries Inc., maintains that "the benefit of the whole thing is for the physician." The sugar refiner is located in Savannah, and provides health care benefits to 12,000 employees through SBG/PHR. "The physician gets to transmit claims electronically, handle precertification electronically, take care of eligibility electronically. All of EDI is geared to reduce his paperwork and to speed up his claims payment process," says Deason. He also says that if insurers save administrative costs with EDI, "they ought to be able to pass it through to employers. You won't see reduced premiums, but maybe it will slow the increase."

K. James Ehlen, M.D., CEO of Medica, a Minneapolis-based HMO with more than 540,000 members, thinks that will happen. "There is no direct pass through of [EDI-related] savings [to HMO members]," he says. "But savings come through in an aggregate fashion as we strive to minimize the premium increases that we pass along. I think you'll see an amelioration of premium increases with EDI."

Jim Grenier, director of compensation and benefits for Amphenol Corp., a manufacturer of telecommunications components and fiber optic and interconnect systems in Wallingford, Conn., cautiously agrees. With EDI, "I think that, over time, the trend line on premium increases won't escalate quite as dramatically." Amphenol and its parent company, LPL Technologies Inc., provide health benefits for about 6,100 employees and retirees through a managed care program from The Travelers.

Although Amphenol is not directly involved in electronic claims administration, the manufacturing firm has an interest in EDI via the Travelers Link, a network that links personal computers in nine Amphenol offices with the employee benefits information that resides in The Travelers' computer system. The system provides direct online eligibility, enabling the company to enroll new employees in the plan on the same day.

Amphenol tied into the network in 1990, and Grenier maintains that "there's no question that we're saving money" with this EDI implementation. For example, the overtime required of the Amphenol benefits team in the corporate office has been cut by five to 10 hours each week.

Maybe even more significant, according to Grenier, is that convenient access to up-to-date information makes it possible to "get a great handle on medical costs" as well as to perform the research required to help design new Amphenol benefits plans.

Proven cost savings

The cost of manually processing each health care claim is between $2 and $5, depending on the administrative efficiency of the health care provider and the organization paying the claim, NEIC says. The number of health care claims filed in the United States currently hovers at the four billion mark annually, says Sullivan.

Most EDI links are currently between provider and payer. Therefore, it comes as no surprise that commercial insurers and HMOs experienced with EDI have seen direct savings from using EDI for claims administration.

Last year, 2.05 million claims were paid electronically by Medica. "We've calculated savings compared with paper processing of 70 cents per claim--a savings to Medica of $1.4 million," says Ehlen.

Medica uses ProviderLink, a nationwide network linking providers, payers, clearinghouses, and financial institutions. ProviderLink was developed by United HealthCare Corp., which manages Medica. Also headquartered in Minneapolis, United Health Care manages multiple HMOs, PPOs, and specialty care management companies. As a claims administrator and payer, United Health Care sees even more substantial savings than Medica from using ProviderLink for electronic data transmittal. "Our research has shown that United Health Care saves $1.09 for every claim received electronically versus a paper claim," says Joel Ackerman, director, advanced technology for United Health Care and a member of WEDI.

Commercial insurers also benefit from administrative savings from EDI implementation. Last year, the data networks of Metropolitan Life Insurance Co., in New York, carried more than two million electronic claims, and MetLife expects to handle more than three million claims on the network this year. Kuen Ling, manager of group claims operations for Metropolitan Life, was "not at liberty to provide what we think are the exact savings" from EDI. However, he said, "I can tell you for a fact that overall, there are savings."

For comparison, NEIC charges 65 cents to process a claim that, if submitted on paper, would cost $2 to $5 to process, says NEIC's O'Donnell. Providers also benefit substantially from the elimination of clerical functions, data redundancy, and extensive paper shuffling that come from handling claims via EDI.

Last year, Blue Cross Blue Shield of Massachusetts implemented the Statlink network, which now provides EDI services to physicians, hospitals, insurers, and Medicare and Medicaid programs in four states. Executives at BCBS of Massachusetts believed the network's EDI technology would enhance its claim submission process. Since connecting to the Statlink system, BCBS of Massachusetts providers are experiencing a reduction of as much as $6,000 annually per physician office, says George May, director of research technology at BCBS of Massachusetts, in Boston.

Improving quality

Those experienced with EDI make it clear that handling claims electronically is only the first step. "Most people see EDI as improving operational processes and reducting administrative costs," notes Ackerman. "The real potential is in improving quality," which, he says, "cuts the true costs of health care."

One way to improve quality involves using the EDI network to eliminate or reduce the chances of redundant lab work. Rather than transmitting a physician's order for tests directly to a lab, network monitoring software could be developed to "identify that the tests have already been done on that patient and can communicate those results back to the doctor," resulting in a significant cost saving. "The $1 or $2 per claim you save in paper costs with EDI doesn't compare with the cost of a lab test," Ackerman points out.

Another possibility might invovle passively monitoring claims to identify high-risk, high-cost cases in the making. In this scenario, the network could potentially alert physicians and the managed care organization that a patient may need a liver transplant unless alternative treatment is initiated.

Despite the billions of dollars in health care costs that can be saved via EDI, only about 10% of claims sent to commercial insurers are processed electronically. Medicare programs and several BCBS plans have moved further. Based on the WEDI report, Medicare contractors recieve nearly 80% of hospital claims and 45% of physician claims electronically, and several BCBS plans get about 60% of non-Medicare hospital claims and 20% of non-Medicare physician claims through EDI.

The future of EDI

Industry leaders expect the use of EDI for claims processing to increase in the next few years. Insurers say the fact that the HCFA is behind EDI makes it more urgent for the rest of the industry to follow suit. O'Donnell, for example, predicts that 30% of claims will be filled electronically with insurers by 1994. (See "Claims filed electronically by commercial insurers," page 44.)

Some experts specualte that government intervention in the form of requiring that all Medicare and Medicaid claims be filed electroncially will be necessary before providers wholeheartedly embrace EDI technology. Others believe that the passage of time and the increasing number of physicians who are comfortable with computer technology will be sufficient to achieve administration via EDI in an acceptable time frame.

COPYRIGHT 1992 A Thomson Healthcare Company
COPYRIGHT 2004 Gale Group