Claims Made Fast and Easy

November 15, 2003

How to select an electronic claims processor

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.


"It can really make or break your whole edit process," Marino says.

Additional features

An ideal system should also be user friendly, customizable, and able to deliver reports to help practices improve their performance.
"I want it to be simple -- click, click, done," says Gordon Moore, MD, a part-time solo family practitioner in Rochester, N.Y. He performs his own billing electronically -- 15-20 claims per week.

"If I'm spending more than half an hour a week at it, something's wrong."

Moore likes the fact that his system does more than tell him that something is wrong or missing in a claim. He has customized his system prompts to provide him with correction options that he has selected based upon his particular patients. The software also "learns" from his past claims activity which claims will be paid or denied and why.

"I get drop menus for ICD-9 codes and CPT-4 codes, and the system knows that the diagnosis and the CPT-4 must be linked," he says. "I can even customize lists of diagnoses for patients." Moore also has tools to assist him with evaluation and management (E&M) codes. "I probably have uncommonly high coding for my type of practice, but I get away with it because it's all documented."

Many systems also provide reporting that allows users to analyze how well their billing processes are working. For instance, many provide real-time reporting on which claims have been rejected and why, and this information can be sorted by payer and type of claim. Additional reporting functions include account aging, which lets you know, by payer, who's paying on time.

To facilitate claims for patients with multiple insurers, another add-on is a secondary billing function, which electronically generates secondary claims, applies secondary specific payer edits, and provides explanations of benefits for each payer. Then those claims are automatically filed electronically.

"I was able to reduce my staff by two," Burress says. "Because they remit those files automatically, there's no more printing, folding and mailing."

Future advancements

The prevailing wisdom of a paperless medical practice is to control data as close as possible to the point of origination because all other processes (e.g., medical records and billing) depend upon the accuracy of the source data. That's why data origination and source documentation are thought to be the upcoming "hot" areas of technology for medical offices.

Voice recognition software can be used in place of paper documents and dictation, thus eliminating the need for paper charts and transcription.

Bar coding, which is already widely used to eliminate medical errors, could also be used for electronic diagnosis and procedure coding. Physicians could use a light pen to scan barcodes from diagnosis and procedure lists in the same way the clerk at the Home Depot can scan a barcode for the price of nails from a product list.
Currently, PDAs have the most software available to support coding and billing at the point of care. Some programs simply offer lists of codes; others can perform more sophisticated tasks like auditing physicians' coding for errors.

Prior to implementing any new technology, practices should evaluate their technology and processes to determine how they are related before making any changes to either. For example, practices that have experienced coding personnel who have been around for a long time may not need to invest in high performance software at this point. Practices where staff turnover is higher and billing staff may have less experience may benefit greatly from automated tools.

Technology, in Marino's opinion, is a means to an end. But by looking at tools and processes, practices can determine the best way to set up operations to accomplish goals instead of treating technology as an end in and of itself.


"You need to evaluate what works best for the practice," Marino says. "I am a firm believer in technology, but if the operation does not support the technology, the technology will fail."

Sandy Campbell can be reached via editor@physicianspractice.com.

This article originally appeared in the November/December 2003 issue of Physicians Practice.