Claims processing has become one of the most expensive, complex and resource-intensive processes in the insurance industry. Traditional health care claims processing systems, comprising core enterprise applications and databases located throughout the enterprise, can't keep up with today's ever-shifting market where customers are in the driver's seat.Competitive pressure demands insurers offer more flexible products and more responsive services. But claims processing systems aren't geared to support them. They were designed in the one-size-fits-all era when change occurred slowly. As a result, every change is a major undertaking.
The results are significant claims backlogs, low first-pass adjudication rates and sub-optimal processing statistics-all resulting in $3.2 billion wasted every year on this cumbersome process.
Similar to the investment required to deliver Y2K readiness, the replacement costs for core claims processing systems can virtually consume an insurer's entire capital budget for as long as three years.
However, new technologies that stop short of wholesale system replacement can affordably enable insurers to address changing requirements.
Processing by the rules
Few insurers have the flexibility in their IT infrastructures to support a full portfolio of change-oriented products. However, that inflexibility is artificial.
Corporate IT systems have more than enough bandwidth and processing power to process the claims from these products without the onerous overhead expenses companies endure today.
The reason they can't do those seemingly simple tasks is because systems are hard-coded in a data-centric architecture that renders them little more than glorified file cabinets. They're good at storing and retrieving data, but not at interpreting it.
Rules-based business process management (BPM) systems are quickly gaining popularity as a way to redefine IT systems and make them task-centric instead of data-centric.
BPM removes the boundaries created by multiple systems by addressing operations as a set of well-defined and integrated practice and process rules rather than isolated problems.
For example, a BPM system could target the area of claims processing, combining company-specific business rules with out-of-the-box functionality to automate the claims process from pre-adjudication through claims finalization. A BPM system might sit between front-end business users and back-end systems, enabling users to modify back-end processes-without help from IT staff.
This is perhaps BPM systems' most attractive dimension: They build smoothly on companies' existing IT infrastructures instead of angling to replace them.
With regards to claims, a BPM system might apply business rules that identify potential duplicate claims, evaluate timely filing or validate member and provider identification.
Likewise, it could subject suspended claims to appropriate business rules to automatically repair certain pend codes. This approach eliminates the drain of redundant processing while automating processes once done by hand-more slowly and at a much higher cost.
Claims exceptions
Despite technological gains, some claims will always be exceptions that require manual attention.
Specific rules-based BPM tools keep the manual handling to a minimum and increase operator productivity. They apply business rules to exceptions to create and maintain custom work queues based on business parameters. They route claims to specific work queues, optimizing work distribution based on claim processor skill and rules-based routing logic.
BPM tools can also prioritize claims to address aggressive employer or provider group service level agreements (SLAs). Integrated reporting capabilities help measure throughput, individual and department productivity, and compliance with regulatory, union, employer and provider group SLAs.
Rules-based BPM claims solutions can show significant ROI in as little as 120 days, depending on the size of the enterprise and the BPM deployment's scope. These results have been demonstrated across many functional areas of insurance enterprises, including:
- A 40 percent increase in claims processor productivity.
- A 10% to 25% increase in claims processing first-pass rate.
- Eliminating more than 65,000 pends per month.
- A 47% reduction in days of work on hand of pended claims inventory; and significant FTE reductions.
These outcomes translate into real savings. For instance, for every 1% increase in first-pass rate, the average health insurance plan can save $1 million annually.
Rules-based BPM solutions help insurance companies meet consumer needs for more efficient services, flexible products, and timely information. By automating the end-to-end claims process with rules-based BPM software, companies not only lower their administrative costs, but also sharpen their competitive edge in the marketplace while accelerating the speed in which they do business.
Tom Congoran is vice president of health care at Pegasystems Inc., Cambridge, Mass.
