'Inefficient' Claims Processing Errors Costing Physician Practices

June 20, 2011

Claims-processing errors by health insurers are costing physicians unnecessary amounts of time and money, according to AMA’s recently released 2011 National Health Insurer Report Card.

Claims-processing errors by health insurers are costing physicians unnecessary amounts of time and money, according to AMA’s recently released 2011 National Health Insurer Report Card.

Physician’s practices are diverting nearly 14 percent of gross revenue per year to ensure accurate payments for their services, AMA board member Dr. Barbara McAneny said while presenting this year’s findings.

The claims system is “inefficient” and “unpredictable,” she said. “The wasteful cost of unnecessary billing conflicts and administration activities needs to be addressed.”

In fact, the AMA estimates that health insurer claims-processing errors are costing the healthcare industry an estimated $17 billion in unnecessary administrative costs per year.

And that staggering number is only increasing. The average claims-processing error rate for commercial insurers is nearly 20 percent, two percent higher than last year.

Mark Rieger, CEO for the electronic billing system interchange company National Healthcare Exchange Services, served as a consultant to the AMA as it analyzed the claims-processing findings for its report. The administrative costs due to payment inaccuracies are the “low hanging fruit for significant savings in the claims process,” he said during the presentation.

Physicians need to make sure all claims submitted to payers are complete and accurate, Reiger said, but payers also need to help physicians through that process.

A problem for physicians, he said, is “inconsistency and confusion” resulting from each health insurer using different rules for processing and paying medical claims. This burdens physicians, because it requires them to maintain a costly claims management system for each health insurer.

“Reason and remark codes must be reported by all payers to the highest level of specificity,” he said.

McAneny stressed that effort needs to be made by both physicians and payers to fix the issue of unnecessary spending.

“If we all commit to efficiency, transparency, and accuracy at every step of the claims process, we will achieve an incredible savings of time and money - time and money that can be better spent doing what we as physicians were trained to do in the first place - care for our patients,” she said.

The Findings


The AMA report card is based on a random sampling of 2.4 million electronic claims for four million medical services submitted to insurance companies between February 1 and March 31, 2011.

The insurance companies included in the report card are the eight largest in the country: Aetna, Anthem Blue Cross Blue Shield, CIGNA, Health Care Service Corporation, Humana, The Regence Group, UnitedHealthcare, and Medicare.

The report card focused on seven performance measures: timeliness, cash flow, accuracy, administrative requirements of prior authorization, code edit sources and frequency, denial, and improvement of claim cycle workflow.

Payment Timeliness: The response time for all eight insurers varied from six to 15 median days. CIGNA and Humana had the most significantly reduced payment lags since 2008. Both companies cut their median claims response time in half during the past four years.

Cash Flow: Physicians received no payment from insurers on nearly 23 percent of claims they submitted. The most common reason was due to deductible requirements shifting payment responsibility to the patient.

Payment Accuracy: The eight insurers had an average claims-processing accuracy rate of 80 percent, down two percent since last year. UnitedHealthcare, with an accuracy rating of 90 percent, was the only insurer with accuracy improvements. Anthem Blue Cross Blue Shield scored lowest with 61 percent accuracy.

Frequency of prior authorization: At six percent, CIGNA had the highest rate of claims requiring prior authorization from the physician. According to McAneny, prior authorization approval takes up an average 20.7 hours of administrative staff time per week.

Denials: Anthem had the highest frequency of denials, 3.62 percent. CIGNA had the lowest denial rate of less than one percent.