As a quick search of the Internet or a visit to a trade show will tell you, there are hundreds of companies selling software to help physicians' offices process medical claims. Each one promises that it can help you increase revenues, slash administrative overhead, speed up your revenue cycle, and even achieve the ultimate goal of a paperless medical practice.

With so many vendors to choose from, how do you separate fact from hype? Let's start with the obvious: Whichever system you use should help you submit the greatest number of clean claims to payers as quickly as possible.

"Assuming the entire system is set up correctly, 95 percent to 98 percent of claims should go through the first time," says Dan Marino, director of operational consulting for Health Directions, LLC. "For each percent of work you have to redo, it adds about 10 days to your accounts receivable, which cuts your cash flow."
The need to improve cash flow, as well as regulatory compliance and the increased complexity of procedure and diagnostic coding, have encouraged physicians to turn to their computers to improve the billing process.

Billing software can be a stand-alone solution or part of a larger practice management package. In either case, the industry trend is toward more powerful interactive financial tools that fully integrate with practices' administrative and clinical software and databases, according to Steve Sedlock, vice president of marketing for Alteer, a medical practice software developer. The primary benefits of interactive claims tools are their ability to automate data entry, find mistakes, and help users fix them — all of which help prevent claims from being denied in the first place.

Problems and solutions

The majority of claims get kicked out because of avoidable mistakes like misspelled patient names, incorrect addresses, and incorrect provider numbers, according to Marino. "About 50 percent of problems are due to registration. Coding is another 35 percent to 40 percent," he says. "If you're not catching it on the front end, you're getting denied on the back end."

A good claims system can eliminate many errors by automating much of the manual data entry related to claims generation. Financial systems that are properly integrated with clinical and administrative databases can recall patient, provider, and last claim information, then use that data to prepopulate new claim forms and other documents such as worker's compensation status forms, and to add new information to the patient's electronic medical record. Additional options include electronic links to other data files and office areas, such as an on-site laboratory, allowing users to obtain billing information directly from those separate data systems.

The Webster Orthopaedic Medical Group, a three-clinic, 11-physician practice in Oakland, Calif., implemented such a system in mid-2002, according to the group's administrator, Gerri MacGregor. Financial, administrative, and clinical data are integrated via a single program, Alteer Office. Webster's physicians can enter diagnostic and procedure coding directly into computers in the examination rooms while they are seeing patients. The system automatically prompts users for information to complete claims. Patient encounter data then goes into both the claims system and the electronic medical records. MacGregor says the claims part of the system automatically requests and delivers the proper documentation for claims submission to the billing system's users.

"This saves the billing department from having to ask the records department to pull documents to send with claims," she says. When the electronic encounter documentation gets to the billing and coding staff, "They just verify data and submit the claim."

So far, the practice has been able to improve cash flow by about 20 percent and reduce its turnaround time for payment from over 120 days to less than 45 days, MacGregor says.

Because some practices have financial and clinical systems from separate vendors, Sedlock says those practices must ensure that their systems integrate, face a greater risk of data entry errors when information has to be re-keyed, or worse, changed to meet different requirements of incompatible systems. Each time information changes hands or is acted upon outside automated systems, the risk of error increases.

Even for integrated technology systems, quality data entry is important because incorrect data in one spot will be wrong everywhere. But it may be even more important in practices that still use paper documentation.

Claims errors such as incorrect diagnosis or procedure coding generally happen between the time when the doctor sees the patient and someone in the billing office files the claim. 

To mitigate these errors, Debbie Burress, business manager for Surgical Associates of Richmond (Va.), a general and vascular surgical practice, relies on the claim-scrubbing software in Payerpath, the Internet-based claims management system her practice began using in 2001. Claims scrubbers check for obvious mismatches between procedure and diagnosis codes. The function can recognize multiple insurance payers and each payer's different coding logic. For example, a private insurance carrier may require the use of procedure code 36145 when billing for venipuncture. Medicare requires G0001 for the same service. The software automatically selects the right code for the right insurer.

Marino likes claims scrubbers, too, with a caveat. Practices that use them should have someone on staff with the right expertise to customize the tools to conform to the claims logic of each payer. The person assigned to the task ideally should have experience in both coding and healthcare information technology.