Transformative payment integrity: Five ways that plans can reinvent their cost-containment efforts

Healthcare spending in the U.S. continues to rise at a significant pace. In 2021 alone, national health expenditures grew by 2.7 percent to $4.3 trillion, or nearly one fifth (18.3 percent) of U.S. gross domestic product. That translates to healthcare spending of $12,914 per person¹; other wealthy countries have historically averaged half that amount.

But the statistics, while daunting, also represent a significant opportunity for every segment of the healthcare system, including health plans: a chance to invent — and reinvent — solutions for controlling costs while maintaining quality of care. Fortunately, one of the most effective cost-containment strategies for health plans is also ripe for transformation: payment integrity.

A surprising portion of the nation’s overall healthcare costs are driven by claims that are paid incorrectly due to fraud, waste, or abuse. The U.S. General Accounting Office has estimated that healthcare fraud, waste, and abuse may account for as much as 10 percent of all healthcare expenditures each year². In 2021, the U.S. Department of Health and Human Services identified nearly $154 billion in improper payments across federal healthcare programs, including Medicare Fee-For-Service, Medicare Parts C and D, Medicaid, and the Children’s Health Insurance Program³.

Fraud, waste, and abuse impose an enormous cost on our nation’s economy and compromise the cost and quality of healthcare provided to individual patients.

What is payment integrity?

Simply put, payment integrity is the process of ensuring a health claim is paid appropriately. Payment integrity can help plans manage cost of care by finding and addressing unnecessary medical expenses resulting from fraud, waste, and abuse, including:

• Providers’ non-adherence to their contractual terms
• Duplicate claims payments
• Coding inaccuracies and unbundling of services
• Payment of claims other parties may be ultimately responsible for, either wholly or partially

Payment integrity solutions generally focus on two parts of the claims lifecycle: pre-payment or post-payment strategies. Pre-payment solutions help plans eliminate errors before they happen, minimizing providers’ administrative work and avoiding the time-consuming process of identifying and collecting overpayments (also known as “pay and chase” work). Post-payment strategies recover funds that were paid incorrectly.

One important post-payment strategy is subrogation, the recovery of money from another party who is liable for a claim. Suppose a plan member is involved in a car accident, and their health plan pays a claim that was actually the responsibility of the member’s auto insurer. Subrogation helps plans identify claims like these and recover lost funds from the responsible third parties.

Reinventing payment integrity

While payment integrity has existed as a discrete function within healthcare for nearly three decades, the rise in healthcare spending, coupled with recent technological innovations, workforce challenges, and an increased focus on relationship-building are prompting health plans to take a closer look at their efforts. Plans that approach payment integrity with an eye toward strategic reinvention can reduce their own wasted costs while also improving the healthcare system and care affordability for all. Chris Hajzak, President of Carelon Payment Integrity, and Aaron Browder, President of Carelon Subrogation, shared five ways that health plans can maximize the power of payment integrity.

1. Focus on an end-to-end strategy

Payment integrity is a crucial tool for managing healthcare costs — but it wasn’t always that way. In her 20-plus years in the industry, Hajzak has seen payment integrity evolve from an under-sourced operational niche to a strategic tool that health plans use to manage medical expense. “In the past, payment integrity was built on what I call ‘point solutions,’” Hajzak said. “A vendor had a good idea about how to find a particular type of claim overpayment and implemented it. Another vendor had a good idea and implemented it. Plans used these solutions to build their payment integrity programs one square at a time, the way you would assemble a quilt. The goal was simply to cover as many areas as possible — essentially, ‘more is more.’”

Today, Hajzak’s quilt analogy perfectly describes the challenge this piecemeal approach creates for plans. “From a programmatic standpoint, it makes it very hard to answer strategic questions about their payment integrity efforts,” she said. “The ‘more is more,’ coverage-focused method of payment integrity was fine years ago. But now, as our programs all mature, it's not necessarily sustainable.”

Data analysis tools like artificial intelligence and machine learning can bring together independent programs, helping plans better understand how to leverage payment integrity solutions for maximum ROI. “Carelon was born from one of our country’s biggest health plans,” Hajzak said. “So we not only have access to deep data sets and world-class tech tools, but also a really unique bird’s-eye perspective on the industry. That allows us to offer solutions that can improve efficiencies across a system, not just in one discrete area.”

Similarly, as plans bring in new technology, the lines between their various point solutions will blur, enabling them to engage in big-picture, end-to-end thinking. “First it was the coverage quilt — flat, two-dimensional, piecemeal,” said Hajzak. “Now it’s more comprehensive and three-dimensional, with a focus on delivering transparency, cost efficiency, and value. Mature plans are using sophisticated analytical tools to work on all three of these areas in tandem, which gives their payment integrity a much more sustainable structure and allows them to maximize on efficiencies.”

Plans can then start to ask questions that drive greater transparency and better decision-making, Hajzak said. “For example, how do you determine which type of payment integrity strategy should be implemented for maximum recovery of an improperly paid claim? What’s the best approach for your program: Is it better to work with different service providers or move to an enterprise platform approach, where you're looking for solutions that integrate lead generation, workflow, automation, and programmatic management?” Answering these types of strategic questions can create a cycle of continuous improvement as new insights and possible uses for analytics tools arise.

2. Take a proactive, data-driven approach

Health plans hoping to improve their payment integrity efforts should not only move to more comprehensive, end-to-end solutions, they should also embrace a more proactive, data-driven approach, said Carelon subrogation expert Aaron Browder. “A lot of smaller to midsize health plans, especially if they're managing their subrogation internally, typically don’t have the financial backing or IT expertise to do more than the bare minimum,” he said. “As a result, they’re often very reliant on others — providers, members, or people representing those members — to provide them information so that they can recover money.” Plans that take a more passive approach to payment integrity not only limit their program’s potential value but also risk alienating providers and members.

Data analytics tools like Carelon’s coordination of benefits consensus solution allow plans to go on the offensive when it comes to payment integrity. “Our solution uses a primacy-rules engine and select eligibility details to identify payer responsibilities consistently, accurately, and automatically,” Hajzak said.

“Any payment integrity program that is mature and that's really meeting a health plan’s needs is going to be more proactive about finding opportunities and continuously reassessing and prioritizing those opportunities,” Browder said. “Our clients routinely praise us for being highly proactive. That's one of the areas we've focused on for several years now: proactive outreach around sharing information and successes, and even sharing when there are issues, too.”

3. Aim for optimization and efficiency

Today, payment integrity programs at the highest level of maturity are looking beyond the advances already made to full optimization. “They’re focused on three key elements: capturing as much value as possible, delivering high return on investment, and managing member and provider relationships,” Hajzak said.

Optimization isn’t just valuable for health plans. “We spent several years intentionally investing in our people, our technology, and our processes,” Browder said. “We didn't grow during that time, but in the years since we've almost doubled in size, and we’ve retained most of our people, which is remarkable for an industry that can experience a fair amount of turnover. By looking closely at how we do things, we were able to optimize our efforts so that we can be even more effective for our clients.”

From a plan perspective, this kind of optimization can produce big payoffs. “Expertise grows with experience. And you really want that expertise when it comes to payment integrity,” Browder said. “Take the negotiation stage of subrogation. Negotiation isn't an ability most people are born with, it’s truly a learned skill. At Carelon, we focus a lot of our training on negotiation techniques and strategies, ensuring that our associates are good stewards of our clients’ money. The longer we retain those associates, the more valuable their experience and training become.”

4. Improve member and provider experiences

Payment integrity isn’t just about stopping financial loss. It’s also increasingly about improving experiences for both members and providers. In the past, particularly during the subrogation process, members had to be far more involved than many would have liked. This sometimes took the form of time-consuming phone calls or lengthy written questionnaires. But, as Browder explains, “over the past four to five years, the trend has been to get away from reliance on members,” a trend he believes will continue to be a focus in the future. “Health plans are realizing that their members are very busy, and they already receive a lot of communication, from direct mail to phone calls to texts. The last thing they want is to receive another piece of correspondence from their plan about a claim. What this means is that payment integrity as an industry is going to move away from letters and calls to solutions like database mining and direct subrogation that completely remove the member from the process.”

There’s also an increasing recognition among plans that payment integrity can be a tool for building stronger relationships between payers and providers. “Everyone wants to eliminate that waste in the system. The providers want to eliminate that waste, the payers want to eliminate the waste,” Hajzak said. “The way to do that is to work together to increase the transparency around payments.”

The significant ability to recover funds from already-paid claims can cloud payment integrity’s potential to ensure claims are submitted correctly the first time, every time. Hajzak was emphatic on this point. “When we're thinking about payment integrity, the overall intention has to be to pay the claim right from the beginning. The goal should be building a program that has the right controls to prevent rework and to drive the best possible experiences for members through their providers,” she said. “If we can stop improper payments before they happen by helping providers understand how to submit claims properly, that’s where we want to be. In payment integrity, we say post-payment is good, prepayment is better, but prevention is the best. And a lot of that starts with provider education.”

5. Innovate with technology, but don’t forget the human element

Like many industries, healthcare is accelerating its use of cutting-edge tools such as automation, artificial intelligence, and machine learning to increase operational efficiency and effectiveness and to manage costs. These evolving technologies offer a real advantage throughout the payment integrity process. For example, these tools can help plans more quickly realize the value of overpayment leads through automated validation rules and expanded lead generation.

There are also larger workforce changes that are driving plans to adopt new technology. Over the past few years, particularly post-COVID-19, there have been multiple major labor compressions within the payment integrity industry. “It has become very challenging for some health plans to fill frontline operational staff, and it’s the frontline staff who work all the incoming overpayment leads,” Hajzak said. “When that frontline staff is compressed, those leads don’t get worked in a timely fashion, or at all. That means the value of the payment integrity program simply isn’t there.” The second labor compression is in plans’ IT and technical staff. A lack of in-house technical expertise can drive plans to look for low-touch, automated solutions that are easy to implement and don't stress their limited human resources.

Plans can’t rely solely on technology to meet their payment integrity goals, however — human expertise is vital. “In this business, there are lots of things we can do technologically,” Browder said. “But when it comes to recovering money and case management, it's still very much a people business, and it will always be a people business. A really cohesive and effective payment integrity program is going to have all the technology and highly skilled, trained people.”

Hajzak concurred: “If you can fully automate a payment integrity solution, great. But many of the newest tech solutions we’ve been leveraging recently aren’t fully automated; they're enabling tools. There’s a big gray area between fully automated and fully manual solutions, and a lot of great, elevating capabilities exist in that space. These are the tool sets that allow a workforce to do what they need to do faster and more accurately, a productivity lift that can boost your payment integrity program significantly.”

A world of possibility

Both Browder and Hajzak are enthusiastic about the future of payment integrity. “I’ve had opportunities to do other work, but I always seem to find my way back to payment integrity and subrogation,” Browder said. “I love knowing that the decisions we make every day can lead to millions of dollars of recoveries for our clients and improve the healthcare system.”

For Hajzak, payment integrity is a puzzle that’s never fully solved. “Every year I've been involved in it, there's been another move, another way to make it better, another possibility to make improvements. And to me, that world of possibility is very exciting.”

Transformation often takes longer in healthcare than in other sectors. The industry’s many diverse stakeholders, regulatory hurdles, privacy concerns, and myriad other complexities can all stymie change. But there are examples of what is possible. “I believe that in the future, there will be many more elevated ways of exchanging data that will allow payers and providers to partner better on sharing information and managing programs,” Hajzak said. “When you think about banking and all the transactions of data and money that people complete every day, healthcare can get there.”

In fact, the industry is well on its way. “We’re already familiar with the concepts of value-based contracting and value-based incentives in healthcare,” she said. “There's no reason we can't expand those ideas to include how we partner so that it's easier to understand how to pay accurately and correctly. You're not going to achieve perfection every time, but if we simplify our processes and work together, we can make payment integrity easier and more effective for everyone.”