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Along with retrospective claims auditing (as discussed in “Understanding the 100-Percent-of-Claims Health Plan Audit”, continuous claims monitoring is a tool for achieving health plan cost containment.
Continuous monitoring and retrospective auditing are best compared in terms of the efficacy and health plan data they provide. A retrospective audit that includes a true 100-percent-of-claims analysis can identify erroneous expense equal to 5-8 percent of the total value of claims paid during the period audited. With adroit analysis, the audit should help bring about changes in plan administrator procedures. However, since the discovered erroneous expenses can date back a year or two, recovery can be limited because of restrictions in contracts between administrators and health care providers as well as other factors.
Continuous monitoring is based on a data feed of paid claims, so erroneous expenses are caught practically as claims are paid, preventing invalid expenses from accumulating and becoming unrecoverable. Sources of errors can be fixed by the administrator, making recovery less of an issue. Additionally, administrator corrective actions can be monitored going forward, and it becomes evident if the administrator has made the promised changes to prevent specific errors from re-occurring.
Another limitation of the retrospective audit is that, although it can be used to review paid medical and prescription drug claims, it cannot link the two. With continuous monitoring, two types of claims can be linked to pick up erroneous expenses—for example, if a plan member is receiving an expensive prescription drug that cannot be linked to a diagnosis.
Plan Management Data
The retrospective audit's purpose is to assure that a plan’s third-party administrator is in compliance with the administrative-services-only (ASO) agreement and the summary plan description (SPD).
Continuous monitoring, on the other hand, provides data that can help manage plan budgets, including the establishment of a reserve for expenses incurred but not yet paid, and data on provider and plan member utilization. In addition, it can isolate particularly error-proneproviders, identify employees who are candidates for a wellness program and help with wellness program management.
The sample budget report below shows how continuous monitoring can be used to project the health care spending budget for the following year based on an analysis of claims that have been incurred but remain to be paid.
Continuous monitoring should include analysis and periodic reports. Quarterly reports seem to work the best. The utilization report below identifies the top 10 highest-paid diagnoses.
Despite the limitations of the retrospective audit, by no means is it going the way of the dinosaur. In fact, for more comprehensive control over health plan budgeting and spending, a retrospective audit can be used to establish a base line for continuous monitoring.
David McSweeney, chief operating officer of Healthcare Data Management Inc., has over 30 years of experience as a financial and operations executive for a variety of health care organizations. He previously served as vice president for Blue Shield of New Jersey and New Jersey Delta Dental, regional vice president for United Healthcare, and president and COO for Alternative Dental Care Inc., president and CEO for Vienna Corp., and co-founder and president of American Health Fund. He served as president and COO of Claims Administration Corp., a wholly owned subsidiary of CNA, where he led a $2.2 billion group health care and benefits enterprise.
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