How the Healthcare Claims Reconciliation Process Can Lower Healthcare Costs
It’s not just you: everything is getting more expensive. And that includes healthcare.
When you consider the astronomical amounts of money the United States spends for healthcare, you’d expect to see more accessibility to top-of-the-line facilities and cutting-edge services. And yet, despite the trillions of dollars spent annually on U.S. healthcare and healthcare-related services, the prices continue to increase.
According to the Centers for Medicare & Medicaid Services (CMS), total healthcare spending in the U.S.—called national health expenditures (NHE)—grew by 9.7% to $4.1 trillion in 2020 and reached $4.5 trillion in 2022. With an estimated annual increase of 5.4% over the next six years, the CMS projects NHE will reach $6.2 trillion by 2028.
In an economic climate clouded with labor shortages and pressurized by record-breaking inflation—currently 8.5% year over year—the increase in healthcare costs puts many employers in precarious situations. Many organizations are seeking more ways to save money and combat rising healthcare prices.
One faction that has enjoyed benefits from increased spending is healthcare providers themselves. Hospitals may have their hands full when administering care to patients, but they can’t complain too loudly about their consistently large profits. Despite this historic advantage, providers still rely on the healthcare claims reconciliation process—which can also give patients an edge if they apply some strategic insight.
This article details the healthcare claims reconciliation process and how employers, third-party administrators (TPAs), and brokers can use it to their advantage for significant savings.
The Healthcare Claims Reconciliation Process
In healthcare, the claims reconciliation process works much like any other reconciliation process. The goal is to identify the funding status of patient payments and ensure that the provider receives the payment. In short, it’s how hospitals and providers ensure that they get paid.
The problem providers face is a Byzantine payment process—a complex and unwieldy method of managing healthcare payments created by decades of varying market forces. From archaic systems adopted via mergers and acquisitions to the ever-increasing reliance on multiple software solutions, many healthcare providers struggle to modernize their reimbursement processes against obstacles other businesses have not had to face.
This complexity often turns the reimbursement process into quite a time-consuming ordeal for everyone. The typical claims process is easily bogged down by an array of elaborate systems and regulations.
On paper, the claims process looks deceptively simple.
- After a patient visits a provider, the provider bills their insurance company for any charges the patient left unpaid, or the patient submits a claim on their behalf.
- Once received, a claims processor checks the claim for accuracy and verifies whether certain services are covered under the patient’s insurance plan.
- If covered, the insurance company pays the remainder of the claim. The amount could equal the entire claim or just a part, depending on what the insurance company covers.
- The claims processor verifies amounts for the patient’s copay, a portion of their annual deductible, and out-of-pocket maximum.
- The patient receives an explanation of benefits (EOB), detailing how their medical care is being paid. Note: EOBs are not bills.
- The provider sends a final bill to the patient for whatever amount the insurance does not cover and awaits payment.
This process is even more complicated than it appears because all parties involved will look for ways to best manage their own costs.The providers want to make as much money as they can and insurance companies want to spend the least amount possible. These conflicting forces often leave the patient to pay larger amounts than necessary, as they typically have the least amount of leverage in the process.
When claims processors verify insurance claims, they must potentially go through hundreds of line items and medical codes. The length and complexity of this process make it susceptible to human error that eventually gets passed on to the patient.
Due to its extensive nature, the medical reimbursement process occurs after services have been rendered, as opposed to pre-payment. This leaves patients unaware of their financial responsibility for medical services before they are performed.
Such uncertainty can work in the patient’s favor, however, given the extended timeframe of the claims process. Providers use this time to ensure that they are not under-collecting for services.
This affords patients the time to verify the accuracy of their own claims and may allow brokers or TPAs to negotiate rates lower than what’s listed on the bill. Using an approach like reference-based pricing or clean claim reviews often yields successful results.
Making Healthcare Claims Work for You
Just because a patient receives a bill for a certain amount does not mean the amount is correct—or even reasonable. In fact, medical billing mistakes are extremely common: up to 80% of all hospital bills contain errors, likely due to an overtly complex reimbursement ritual.
This surprising fact means patients could end up spending thousands of dollars in erroneous charges for complicated medical procedures. In addition, the lack of transparent coverage costs and an opaque billing process enables hospitals to charge exorbitant fees for procedures that cost far less.
This is where the glacial pace and unnecessary complexity of healthcare claims reconciliation can work in a patient’s favor. Methods like reference-based pricing and claims reviews can use providers’ own lengthy processes to help patients save money.
Reference-based pricing (RBP), is a healthcare reimbursement method for self-funded plans. In contrast to typical insurance policies that place patients at the mercy of providers and insurance companies to decide their out-of-pocket spending, reference-based pricing gives patients more flexibility in choosing how and what to pay for medical services.
A leading cost-containment method, it uses aggregate prices for services to negotiate more reasonable payments. Because this is a pre-payment approach, reference-based pricing uses the convoluted claims readjustment process to the patient’s advantage.
Clean Claim Reviews
A clean claim review involves scrutinizing medical bills to ensure their accuracy prior to payment to help patients avoid becoming another billing error statistic. An effective clean claim review notes all line items billed and removes any mistaken amounts that patients would have paid, thereby saving them thousands of dollars—or more.
Both RBP and clean claim reviews offer powerful tools to help ensure the healthcare claims reconciliation process favors employers and patients over providers and insurance companies.
6 Degrees Health Helps Lower Healthcare Costs
While RBP and clean claim reviews are potent solutions for mitigating healthcare costs, partnering with experts can maximize healthcare savings by exponentially increasing their effectiveness.
6 Degrees Health was founded by industry experts with the shared mission of shifting the balance of favor in healthcare away from profit-driven companies to benefit patients and their employers. We are not an insurance company. Instead, we work diligently with third-party administrators and brokers to bring effective cost containment solutions to you.
In addition to providing increased transparency and payment integrity, our reference-based pricing solutions and clean claim reviews can help you save up to 40% on your healthcare spend and reveal the true value of quality healthcare.
Want to know more about the healthcare claims reconciliation process? Speak to a representative today to find out how our reference-based pricing model can help you realize the true benefits of healthcare.
Looking To Lower Your Company Healthcare Coverage Cost?
As a service-first cost containment company, 6 Degrees Health is here to help employers and employees navigate a historically opaque healthcare system to pay only what is fair.