There are major healthcare regulatory mandates going into effect at both the federal and the state levels that will significantly impact workers' compensation insurance medical bill payers. The Administrative Simplification provisions of the Federal Health Insurance Portability and Accountability Act of 1996 (HIPAA, Title II), states' mandates for workers' compensation e-billing, and targeted regulatory initiatives are forcing payers to implement new processes and technologies in order to be compliant.
Few insurers are truly ready for this compliance challenge, and many fail to recognize that the real cost of non-compliance is lost opportunity cost, not penalty dollars. Federal healthcare administrative simplification offers payers a rare opportunity to prepare for compliance while meeting cost containment and operational efficiency objectives, empowering workers' compensation payers to prepare for an all-electronic American healthcare future.
Payer Challenges
The workers' compensation insurance industry is experiencing a number of challenges in the current economy, a circumstance that is unlikely to change anytime soon. In addition to recent increases in claims and lower investment returns for insurers, there is a very real fear that federal monetary policy may spark inflation. Medical cost inflation is now a quantifiable factor in the workers' compensation marketplace, and rising costs in the U.S. healthcare system are set to continue for demographic, liability and other largely intractable structural reasons. The only way insurers can directly address these challenges is to control workers' compensation costs by managing claims and medical costs.
Reducing workers' compensation claims costs is necessary to procure the best possible outcome for the injured worker, employer and insurer. Insurers are starting to deploy the tools and technologies that help them deliver quality medical outcomes cost-effectively while reducing medical bill processing costs. The best claims management solutions enable insurers to select providers most likely to produce the best medical outcomes and optimize bill review to ensure that appropriate billing practices and fee structures are implemented. As the workers' compensation market continues to face challenges on multiple fronts and federal healthcare administrative simplification efforts increasingly emphasize the need to leverage technology, the use of technology solutions to reduce costs and improve medical outcomes will continue to expand.
Meeting today's compliance standards and maintaining operational efficiency goals can be achieved with a complete understanding of the implications of healthcare administrative simplification initiatives and the state mandates that are underway. A commitment to putting into place the technology capable of optimizing medical bill handling environments will help payers create claims cost containment opportunities out of compliance requirements.
Opportunity in the Challenge
There are three federal mandates that will significantly impact the workers' compensation industry in the future:
- Health Insurance Portability and Accountability Act (HIPAA, Title II). First adopted in 1996, HIPAA essentially provides administrative simplification for electronic data interchange, establishes the standards to make electronic transactions possible and mandates the privacy and security of protected health information. In 2009, new transaction sets and ICD-10 data sets for all HIPAA-covered entities were adopted with required compliance dates of January 1, 2012, and October 1, 2013, respectively. Compliance requirements under HIPAA 5010 and ICD-10 compliance requirements are a huge undertaking.
- American Recovery and Reinvestment Act. The HIPAA expansion of February 2009 extended the privacy and security requirements to "business associates" (who, on behalf of a covered entity, perform certain functions or services involving protected health information of covered entities). Civil and criminal penalties were expanded to "business associates" as well. The act includes grants and funding for expansion of electronic health records, plus incentives for their "meaningful use" by healthcare providers.
- Patient Protection and Affordable Care Act. The healthcare reform act of March 2010 includes considering whether the standards and operating rules should apply to property and casualty insurance lines of business, including workers' compensation programs, among other non-covered programs.
Looking on the Bright Side
There are benefits to complying with upcoming federal mandates. Take ICD-10: HIPAA-covered entities must comply with ICD-10 and are required to make a "clean cut" switch from ICD-9 to ICD-10 for dates of service on and after October 1, 2013. Believe it or not, there is a silver lining to the expanded data set of diagnostic codes (to 69,000 from 13,000) and procedure codes (to 72,000 from 4,000). Payers and providers will be able to obtain a more comprehensive and detailed diagnosis and a more accurate one, too. Benefits are also expected to include improved communications and improved cost-estimate accuracy.
What happens if HIPAA 5010 is not implemented? Process inefficiencies come to mind, as well as the potential for fines (in Minnesota and Texas it is mandatory for the provider to send e-bills, and payers must have the ability to receive them electronically). But the real losses will come from opportunities forgone.
Adopting workers' compensation e-billing to satisfy HIPAA 5010 requirements offers another good example of meeting compliance directives today to cut costs and improve outcomes tomorrow. Industry estimates indicate that administrative work related to healthcare provider billing and collection efforts represent about 10% of gross collections. Clinicians (not including back-office staff) spend 35 minutes per day on insurance-related tasks. This represents a cost of approximately $200 billion per year for administrative functions. Electronic transactions can reduce this cost from 10% to 1%. Additionally, administrative simplification and electronic transactions can reduce costs for the payer and provider.
In addition to the significant federal moves to simplify the nation's healthcare system, there have been a number of initiatives, at both the state and federal levels, that have identified the need to expand health information technologies, emphasizing how electronic medical records and payment systems are key to successful healthcare simplification. Payers will benefit by establishing workers' compensation e-billing best practices now when there are few penalties associated with non-compliance.
Although workers' compensation is just a small sliver (see Table 1) of the overall medical cost pie, it will likely be a significant burden for medical bill payers and providers to comply with entirely separate standards for workers' compensation versus other healthcare sectors. There is true efficiency and cost savings in adopting the HIPAA 5010 standards for electronic healthcare transactions. Note that, in creating standards based on 5010, practice management systems will be updated to 5010 requirements. Since workers' compensation is typically less than 3% of a doctor's office business, the same dynamic applies here as in the medical cost arena. Taking the time and the opportunity offered by impending federal healthcare simplification initiatives, payers will avoid having the tail wag the dog when it comes to the costs of doing business in the workers' compensation medical bills marketplace.
Complying Correctly Requires Good Partners
Keep in mind that most entities have already implemented electronic transactions in healthcare. The tools to accelerate adoption are already available and tested. Consistency is the key to efficiency and reduces the need for federal oversight. For example, in complying with state e-billing mandates, payers must work with a vendor offering best-in-class technologies, including bill review vendors, clearinghouses, e-bill agents, and others with the compliance expertise to stay on top of requirements and understand changes.
To best meet and leverage the opportunity inherent in federal healthcare administrative simplifications, exploit the knowledge and expertise of your technology vendors. Look for those with release cycles that address regulatory compliance issues in an up-to-date and comprehensive manner. Look for a workers' compensation medical bill vendor that can be your business partner in preparing for regulatory compliance—not only with respect to current requirements, but also with regard to each change to the regulatory landscape implemented thereafter.
Tina Greene is the regulatory affairs specialist at Mitchell International.
