Because the healthcare industry has been involved in various “self-insurance” programs for decades, one would expect that claims management practices would live up to universally high standards. Unfortunately, that is not always (or even commonly) the case. Sometimes the basics have not been properly established, while at other times they have not been properly maintained.
Healthcare organizations typically execute claim management in one of two ways: (1) by self-administration or (2) via an independent third-party administrator (TPA). While neither alternative presents a clear advantage over the other across all instances, the underlying claims management mind set does. When things are going well in this regard, it is because of a culture that focuses on detail, coupled with open dialogue and integration among staff, physicians, insurers and counter parties. When performance is less than ideal, there is often fragmented, silo-style thinking born from a paradigm of isolation, i.e., “our programs, our money, our decision”. As can be said about almost any endeavor, excellence comes from interaction and seeking new knowledge—from challenging and being challenged.
Claims Management Foundational Tenets: Check Your Claims Programs and Processes Against These Basics:
Claims Committee Involvement: Solid claim management programs are centered around a Claims Committee that shares information on current issues and trends, evaluates and remediates current cases, and reviews loss reserves. Typically comprised of a financial officer, risk and quality manager(s), and medical directors and nurses, this committee generally meets at least quarterly and has a written policy defining the triggers for mandated additional sessions, e.g., severe claims as determined by injury/value, sudden adverse trend development, a new regulatory requirement, etc.
Timely Reporting: Effective integration between claim administration and risk/quality management depends upon timely reporting of poor clinical outcomes or injury. Investigations need to be started quickly and should include medical record reviews and staff interviews.
Reserve Adequacy: A documented process governing both the adequacy and timeliness of reserves is critical to ensuring the program’s financial security. An initial reserve should be posted within 30 to 60 days of incident notice. After sufficient fact-finding, an initial estimate based on the full estimated value should be established. The ultimate loss reserve should be determined within 12 to 18 months.
Ongoing Coverage Analysis: Risk and claim management evolve through discovery, investigation, and resolution. Therefore, an ongoing analysis of claims-made dates against policy effective dates and in-force coverage is paramount. An allegation of an intentional act may be excluded while a demand for punitive damages may require a reservation of rights, depending on the insurance policy wording and the subject jurisdiction. It is important to recognize these coverage issues on a timely basis, while separately fulfilling the duty to defend obligation.
Memorialized Litigation Guidelines: Effective litigation management starts with written guidelines describing:
- duties, responsibilities, and time lines for both the claims administrator and defense counsel;
- controls of the use of legal associates, retaining experts, settlement authority and pursuit of summary judgment motions, hourly rates, and related billing charges; and
- frequency and timing of updates and presentation.
Medicare Secondary Payer Act and Section 111: Are You an RRE and, If So, Are You Certain of Your Accuracy?
With enforcement of MMSEA Section 111 well under way by the Centers for Medicare and Medicaid Services (CMS), self-insured healthcare organizations need to be extra diligent in assessing how they are exposed, what their reporting protocols are, how to internally check for adherence, and who is auditing, or “checking the checkers.”
CMS deems a self-insured healthcare organization to be the Responsible Reporting Entity (RRE) if it: (1) issues an insurance policy directly, (2) is a Risk Retention Group (RRG) or (3) funds payments in a fronting relationship.Although RREs almost universally select a Reporting Agent (RA) to send required reports to CMS, the RRE remains the party CMS holds accountable for timely and accurate reporting.
The RRE has two broad exposure categories under MMSEA Section 111: (1) Civil fines for untimely and/or an incorrect reporting format and (2) reporting errors resulting in bodily injury claims. Accuracy of reporting is “mission critical” for any RRE. The RRE needs to understand fully the reports being filed to CMS on its behalf both in terms of the information contained in the report and the filing process. Let’s look at some scenarios.
Insurer as RRE: Assume a Medicare eligible beneficiary with an undiagnosed brain tumor was treated for a slip and fall at a retail store that has (risk transfer) insurance coverage. The RRE would be the insurer that covered this incident as a claim, paying for bodily injury treatment. In its report of the settlement to CMS, the RRE includes co-morbidities such as headaches. Later, the individual seeks treatment for on-going headaches but is denied by CMS (for payment under Medicare) because of records of the slip and fall. The individual must clear up the misreporting to be eligible for treatment under Medicare, which can delay treating the tumor and may result in a lawsuit.
Hospital as RRE: But what if the RRE were a self-insured hospital, physician’s office or long-term care center? Who assesses and makes the incident report on the RRE’s behalf? What is that reporting agent’s (RA) knowledge of ICD-9 codes1 (soon to be ICD-10) and how adroit are they at assessing how information contained in the report compares to the actual specifics of the incident? Is there a quality control process in place that checks the accuracy of the RRE’s records prior to sending them to the contracted RA? Keep in mind that, if the incident is misreported and bodily injury ensues, the loss likely is not covered by the RRE’s standard insurance contracts.
Risks of Overcoding and Undercoding: Overcoding, such as in the first scenario described above, can lead to CMS denial of treatment and the potential for bodily injury claims against the RRE. On the flip side, undercoding can lead to CMS paying an inappropriate claim. While these mistakes can be “fixed” if and when discovered, they also expose the RRE to the Federal False Claims Act (FCA). In an era of increasing scrutiny to protect the Medicare Trust Fund, FCA is a significant tool for federal government enforcement. Despite the implication of its name, actions under FCA need not be intentional and fraudulent; honest mistakes that lead to improper reimbursement requests also violate FCA.
The trend clearly is for more government oversight. The Affordable Healthcare Act requires significant electronic record-keeping and reporting. Moreover, privacy laws, such as HIPAA, and new cloud-based record-keeping and required data fields are almost at odds with each other. With over 30 years in the industry, we know the best practices for achieving excellence in claims management. It is a process that begins with errorless execution of the basics and continues to improve with regular review and maintenance, including:
- being vigilant in identifying new challenges/threats;
- partnering with internal and external resources to build for new regulatory paradigms;
- RREs substantively examining their MMSEA Section 111 reporting processes and data;
- conducting a claims management audit at least every two years; and
- working with experienced partners who can supplement your knowledge with their expertise.
Continue to focus on managing your “self-insurance” program as something organic and dynamic. It is always evolving. If you haven’t changed anything in the past three years and assume all is well, you haven’t been looking closely enough. Don’t wait for the dashboard red lamp to come on, saying, - “government auditor at the door, are you ready?”