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Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
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19
Administrative Simplification

INTRODUCTION

Physicians spend a reported 43 minutes per day on average—the equivalent of three hours per week and nearly three weeks per year—on interactions with health plans and not on patient care (Casalino et al., 2009). Information needed for provider credentialing is requested repeatedly by differing institutions, consuming time and resources that would otherwise be spent on patient care (Healthcare Administration Simplification Coalition, 2009b). Unnecessary administrative complexity has compounded the inefficiencies in our healthcare delivery system. The presenters in this session discuss promising policy solutions to facilitate administrative simplification, ranging from leveraging technology to standardizing reporting requirements.

Lewis G. Sandy of UnitedHealth Group begins by stating the problem resulting from administrative complexity in stark terms—approximately $332 billion in administrative costs could be saved over 10 years from simplification efforts (UnitedHealth Center for Health Reform and Modernization, 2009). To realize these opportunities, he discusses the following policy actions: policies that promote the “spread” of existing standards and capabilities; policies that promote electronic connectivity and transaction automation; and polices that support multipayer capability development. He additionally emphasizes the importance of interoperability and progressive maturation of system capability, as opposed to emphasizing standardization alone, and the role of public–private sector coordination and harmonization in accelerating these advancements.

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

Linda L. Kloss of the American Health Informatics Management Association states that past efforts at healthcare administrative simplification have often not only failed to reduce costs, but actually increased complexity and cost. Real improvements and cost reductions require an end-to-end view of the business processes, not only within but across sectors and entities, and a commitment to uniform and standard processes and continuous improvement. Drawing on the work of the Healthcare Administrative Simplification Coalition, she focuses on four processes with the potential to reduce costs for providers and payers and improve service to purchasers and consumers: practitioner credentialing, insurance eligibility, standard insurance identification (ID) cards, and prior authorization. She also identifies governance of policy, uniform standards, process and conformance education, and continuous improvement as four common elements among recommendations relating to claims and payment, quality reporting, terminologies and classifications, and other critical healthcare business processes.

Harry Reynolds of Blue Cross and Blue Shield of North Carolina builds on these suggestions, stating that through the tracking and reporting of actual operational changes, industry-driven efforts to bring lasting change to the administrative aspects of health care are currently demonstrating their ability to reduce costs and increase efficiencies. However, he posits that although many in the industry are working to gain greater industry adoption of these efforts, significant challenges exist with regard to integrating these efforts across the healthcare system so that all-payer administrative simplification, public and private alike, could be achieved. Discussing the specific challenges and potential opportunities demonstrated through two initiatives—the Universal Provider Datasource and the Committee on Operating Rules for Information Exchange—he emphasizes the critical need to ensure that these efforts continue to be aligned with federal health information technology policies, the necessity of multistakeholder support, and the barriers posed by the inevitable changes to current business practices.

ADMINISTRATIVE SIMPLIFICATION AND PAYER HARMONIZATION

Lewis G. Sandy, M.D.

UnitedHealth Group


As policy makers grapple with how to reform the U.S. healthcare system, one area of considerable agreement is the opportunity to streamline and simplify administrative processes. Significant differences exist regarding the overall magnitude of the costs of administration in the U.S. healthcare system. Some of these differences relate to varying definitions of “adminis-

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

tration” and the lack of a standard framework for analysis of administrative costs.1 Nonetheless, most actors in the United States believe that the fragmented, intensely manual, complex, and error-prone administrative processes that exist have ample opportunity for improvement.

UnitedHealth Group, a diversified health and well-being company, has recently created a Center for Health Reform & Modernization that has analyzed administrative processes throughout the U.S. healthcare system and found that $332 billion in savings over 10 years may be possible through the application and greater use of existing capabilities in technology, electronic connectivity, and claims processing (UnitedHealth Center for Health Reform & Modernization, 2009). This paper describes a policy framework that would promote realization of these opportunities and outlines three areas for policy development: first, policies that promote “spread” of existing standards and capabilities; second, policies promoting electronic connectivity and transaction automation; and third, policies promoting multipayer capability development.

Policies that promote the spread of existing capabilities and standards represent the “low-hanging fruit” for short-term realization of administrative simplification. For example, the Workgroup on Electronic Data Interchange (WEDI) Strategic National Implementation Process (SNIP) has already developed standards for health ID cards, and UnitedHealthcare has implemented these standards, producing more than 30 million ID cards that conform to these requirements. Not only do these standards improve and simplify ID cards for consumers, they also have magnetic strip capacity that supports electronic eligibility determination and provides accurate copayment information at the point of care. Nonetheless, when this author receives medical care at a highly regarded group practice in Minneapolis (which also has advanced EMR [electronic medical record] and practice management infrastructure), the front desk staff—rather than taking advantage of this capability—photocopies the card! Thus, policies that promote spread must extend through the full healthcare delivery “supply chain,” from employer or plan sponsor, to health plan or plan administrator, to EMR or practice management systems vendor, to medical practice. In addition, policies promoting such spread should encourage fidelity of adoption in order to maximize harmonization across payers and care providers. There are many instances in which “common standards” suffer “variable implementation,” requiring “companion guides,” which add administrative complexity. The Council for Affordable Quality Healthcare (CAQH) has been a leader in this area, and the current CORE (Committee on Operat-

1

For one such framework, see http://www.randcompare.org/current/dimension/waste.

2

 See International Health Terminology Standards Development Organization at www.ihtsdo.org.

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

ing Rules for Information Exchange) standards represent additional opportunities to promote the spread of existing standards using a common approach.

Second, policies that promote transaction automation and electronic connectivity are vital in order to move away from current intensely manual and error-prone processes. America’s Health Insurance Plans (AHIP), the trade association for U.S. health insurers, has advocated for comprehensive overhaul of administrative processes to standardize and automate five key functions: claims submissions, eligibility, claims status, payment, and remittance. Full automation and standardization of these administrative transactions will allow physicians, hospitals, and other healthcare providers to reduce their administrative costs substantially (U.S. House of Representatives, 2009). Similarly, the American Medical Association has noted the significant opportunity from greater deployment of existing Health Insurance Portability and Accountability Act (HIPAA) standards in these domains (American Medical Association Practice Management Center, 2008). The Healthcare Administrative Simplification Coalition (HASC), a multistakeholder coalition (of which UnitedHealth Group was an early member), has also advocated for full deployment of existing capabilities in this area (Healthcare Administration Simplification Coalition, 2009a).

Third, policies that promote multipayer capability development would advance administrative simplification significantly. The claims “clearinghouse” industry itself developed as a response to the complexity of dealing with multiple payer requirements, yet no single clearinghouse provides full “all-payer” connectivity, necessitating connectivity “trading” that creates its own complexity and risks of error. Policies that promote national standards and specifications for regional gateways and practice management information systems (PMIS) are greatly needed. In the interim, AHIP is piloting a multipayer “portal” strategy to advance this agenda in the short term. In addition, developing and adopting system-wide analytics (such as quality or cost performance measures and fraud detection) that can be more efficiently deployed on a national level (or at least using a national framework of standards) would be a major advance that would support medical cost savings initiatives and make the entire system “smarter.”

In developing policy to promote administrative simplification, it is important to distinguish between “utility” functions, such as credential-ing and eligibility verification, and “innovation” functions, such as benefit design, medical management, and consumer engagement. The former are essentially part of the transaction infrastructure in the U.S. healthcare system, and uniqueness offers no particular advantage in a dynamic, competitive marketplace. These utility functions should be standardized and policy should promote rapid and full adoption, with a structured process for revision over time. On the other hand, given the magnitude of the

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

quality and affordability challenges in our system, there is significant need and opportunity to innovate in areas such as “value-based” benefit design, advanced medical management approaches, and consumer engagement and activation. Although some advocate for standardization of benefit structures and medical management processes at this time, it is premature to forestall innovation in these critical areas. Rather, the administrative simplification agenda can be advanced in these domains through emphasis on interoperability. For example, advanced notification requirements for coverage verification and/or medical management may vary across payers as a result of differences in covered populations or other factors, but the notification process itself could be “engineered” into PMIS and health plan clinical management platforms using current and emerging standards for clinical data exchange, rather than the manual processes used by both practices and payers at present.

In implementing policy, careful attention to phasing, sequencing, and prioritizing change initiatives is critical. Incremental efforts that do not fundamentally change workflows will have limited impact, while large-scale change initiatives require significant time and human or financial resources to plan and execute. As one report from the Washington State Office of the Insurance Commissioner (2008) articulated:

In order to review and simplify healthcare administrative functions, a decision-making and implementation framework is needed—an organized structure to promote collaboration and well-informed discussions and decisions, and to bring about broad adoption of the common standards and processes necessary for administrative simplification and cost reduction.


By formalizing a public/private approach between all affected entities, administrative simplification is more likely to occur with greater acceleration if attempted on an ad hoc or piecemeal basis. This framework should include clearly defined roles for both the public and private sectors.

Lastly, since Medicare constitutes such a large proportion of national health expenditures and the patient population of most physician practices, Medicare’s approach to administrative simplification will play a key role in advancing this agenda. Medicare’s approaches to physician and hospital payment are already widely used by private payers, and efforts that would advance public–private harmonization of administrative simplification efforts would likely have synergistic effects in improving the healthcare delivery system. Given that Medicare as currently organized and financed is unsustainable over time, it is likely that Medicare will have to incorporate new approaches on a variety of fronts, including its administrative operations, and public–private harmonization efforts could lead to a more robust “signal” to the delivery system that would accelerate change and facilitate

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

the path toward a modernized U.S. healthcare system (New America Foundation, 2009).

PAYER HARMONIZATION ON THE PROVIDER PERSPECTIVE

Linda L. Kloss, M.A., R.H.I.A.

American Health Informatics Management Association


The processes associated with billing and payment for healthcare services in the United States consumes 15 percent or more of each dollar, compared to 2 percent for billing and payment transactions in the retail sector (LeCuyer and Singhal, 2007). The cost to providers is actually closer to 20 to 22 percent, while the cost to private payers is 8 percent (Kahn et al., 2005). To address the significant duplication and resource uses in our healthcare industry, the American Health Information Management Association (AHIMA)—which is made up of some 54,000 health information management professionals sharing the vision that quality information will create quality health—joined with the American Academy of Family Physicians and the Medical Group Management Association in 2005 to form the Healthcare Administrative Simplification Coalition (HASC) to spotlight and advance opportunities to reduce administrative complexity, including but not limited to the complexity of payment systems.

Targeted Short-Term Solutions

Today HASC has 14 member organizations committed to advancing administrative simplification strategies that reduce unnecessary costs. Over the years, HASC has focused on three payment-related processes for which short-term solutions were available: practitioner credentialing, insurance eligibility, and health identification cards. Through grassroots communication and advocacy, it has advanced uniform practices in these three areas.

A HASC-sponsored summit in November 2008 produced a set of action recommendations that have the support of the organizations that participated, including government agencies, health plans, physician and hospital organizations, and associations for providers, health plans, and health information specialists. The report of the summit presents the challenges and describes the action agenda (Healthcare Administration Simplification Coalition, 2009b).

Simplify Practitioner Credentialing

Except for minor differences, health insurance companies, Medicare, Medicaid, and hospitals require the same information from physicians

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

and other healthcare providers to support the credentialing process. For this reason, the Council for Affordable Quality Healthcare developed a uniform credentialing solution, the Universal Provider Datasource (UPD). UPD is available online and currently includes nearly 750,000 physicians and other providers whose credentialing information is accessed by more than 500 health plans, networks, and other organizations. It is a system that is rapidly becoming the industry standard and would benefit from a clear policy directive that it become the standard solution. CAQH estimates that the current level of adoption has already produced savings of more than $92 million per year of more than 3.2 million hours of provider and staff time and estimates an additional $150 million to $200 million savings per year if UPD is the standard application used by all entities, including Medicare and Medicaid (Healthcare Administration Simplification Coalition, 2009b).

Action: Require public and private health plans, payers, providers, and regulatory bodies to adopt the UPD. Its benefit has been demonstrated, and the barriers, such as modifications required to meet the unique needs of Medicare and Medicaid, have been identified. A reasonable but aggressive date should be set for adoption of UPD.

Health Insurance Eligibility Process

The Health Insurance Portability and Accountability Act of 1996 called for adoption and use of standardized electronic transactions associated with payment processes, including those for eligibility verification and notification of processed claims. A decade later, the standards have yet to be widely implemented, and these processes remain highly manual, contentious, and costly.

As with UPD, there is a solution that is gaining acceptance and would benefit from a national policy push. The CAQH Committee on Operating Rules for Information Exchange currently consist of operating rules for eligibility verification, benefits information, and claims status. Additional transactions are under development. CAQH offers certification to confirm conformance to CORE standards.

Phase I and II rules are being adopted by health plans, clearinghouses, and application technology vendors. However, the pace of adoption could be increased by a clear directive that this will be the standard.

Action: Call for adoption of the CAQH CORE Phase I and II operating rules and certification as the industry standard for insurance and payment-related transactions. A roadmap for additional development of these operating standards should be included in the rule so vendors, plans, and providers can anticipate phased enhancements and improvements. The vehicle for adoption should be the Health Information Technology (HIT)

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

Standards Panel and HIT Standards Committee, which are managed by the Department of Health and Human Services (HHS) Office of the National Coordinator. The standard should be reflected in conformance criteria used by HIT certifying bodies.

Health Identification Cards

Insurance identification cards provided by health plans are non-standard so providers generally can leverage technology and instead photocopy and re-enter information. Not only does this increase costs, but it also introduces data errors. The Workgroup for Electronic Data Interchange approved a health Identification Card Implementation Guide in 2007 (WEDI, 2007) that includes specifications for machine-readable ID cards and the required data elements to be included on those cards. While several large health plans have adopted the WEDI guide, most plans continue to offer their own design.

Action: Call for adoption of standard health identification cards conforming to the WEDI specifications. Electronic health record and practice management software vendors should develop machine-readable applications to read and populate patient demographic and insurance information to eliminate manual processing. The vehicle for adoption should be the Health Information Technology Standards Panel and HIT Standards Committee, which are managed by the HHS Office of the National Coordinator. The standard should be reflected in conformance criteria used by HIT certifying bodies.

Other Targets for Simplification Efforts

In addition to the three target areas identified by HASC, standardizing prior authorization processes and data protocols for payers are critical reforms to which some attention has been paid in recent years. However, much work remains to be done.

Prior Authorization Processes

Prior authorization for services is a costly but necessary process for payers and providers. It is also a source of anxiety for patients. HASC urges greater transparency of medical necessity guidelines and standardization of prior authorization processes, but as a practical matter, it recommends initial focus on radiology, advanced imaging, and pharmacy benefits. These are high-volume areas that, if streamlined, could have big payback for providers and payers. The current process requires a patient to contact the physician, who then fills out the forms required by a particular plan. Sometimes the patient must follow up with the physician, and the pharmacy

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

may even need to provide additional information. The National Council for Prescription Drug Plans (NCPDP) has worked with Health Level 7 (HL7), a standards developing organization dedicated to providing a comprehensive framework and related standards for the exchange, integration, sharing, and retrieval of electronic health information, to advance a standard for a simplified prior authorization process using normalized datasets for certain therapeutic data.

Action: Create incentives as part of e-prescribing to urge adoption of HL7 prior authorization attachments as developed by the NCPDP. Projects based on the NCPDP model should be developed for radiology and advanced imaging leading to standards development and incentives for adoption.

Health Data Practices and Policies

Clinical terminologies such as SNOMED-CT and classifications such as the International Classification of Diseases (ICD) are the foundation for standardizing and summarizing the data content in the electronic health record (EHR). Reference terminologies can improve the value of data captured in EHRs and support interoperability. Classifications are the basis upon which services are billed and paid, but coded data are used for many purposes beyond billing. The implementation of ICD-10-CM and ICD-10-PCS on October 1, 2013, will improve the granularity of billing codes, thus improving the descriptive value of coded data to substantiate claims. New technology applications can be expected to automate some of the current manual processes associated with coding and increase the value of data for analysis.

Progress is being made in modernizing classifications and testing terminologies in electronic records. However, policy, governance, standards, technology, and education resources related to terminologies and classifications in the United States remain inadequate to support an interoperable health information system.

In 2007, the American Health Information Management Association and the American Medical Informatics Association (AMIA) formed a joint task force to develop recommendations for improving the development, maintenance, and deployment of healthcare terminologies and classification systems in the United States. The task force outlined a vision and guiding principles for how the United States should manage this essential component of the information infrastructure and evaluated the current processes against the vision and principles. The task force also described the terminology and classification practices of other countries (American Health Information Management Association, 2006).

Action: Fund research to design a governance mechanism for the de-

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

velopment, maintenance, and deployment of terminologies and classifications in the United States. This project should be funded and supported by the Office of the National Coordinator in conjunction with the National Library of Medicine, the National Center for Health Statistics, and the Centers for Medicare & Medicaid Services (CMS) because these agencies play a part in the current process. The research, design, and planning should be accomplished by 2011 so that a new or revised organizational entity as well as development, maintenance, and deployment strategies can be implemented in 2012 in advance of the transition to ICD-10.

Conclusion

Real improvements and cost reductions require a more robust strategy for ensuring that there are good data. They require an end-to-end view of the business processes, not only within but across sectors and entities, and a commitment to uniform and standard processes and continuous improvement. Even as EHRs have become a panacea, administrative simplification has been insufficiently addressed. We have not necessarily been addressing how to standardize processes around e-discovery or fraud management, for instance—a costly oversight.

Payer administrative processes are highly manual and fragmented and, as suggested here, a major opportunity for improvements and savings. To support this work, processes for adopting and revising data guidelines need to be updated and streamlined. More research in the best practices around administrative simplification is needed, since there is still much we do not know about this area. Also, even where there are requirements for healthcare data and administration, they have not been enforced and vary greatly from state to state. So, beyond standardization, there must be consequences for noncompliance. If we are to reduce costs, we need to simplify our processes. Just as significant, if we are to glean meaningful information across regions and states or nationally, our data and processes cannot continue to be uncoordinated and fragmented.

POLICIES TARGETING PAYER HARMONIZATION

Harry Reynolds

Blue Cross and Blue Shield of North Carolina


Total current U.S. healthcare spending is estimated to be $2.3 trillion per year (Center for Health Transformation, 2009) with about 25 percent attributed to administrative functions (Healthcare Administration Simplification Coalition, 2009b). There is opportunity to reduce these costs by integrating existing solutions into and across the entire healthcare system.

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

Specifically, some of these solutions are industry-driven efforts that are currently bringing enduring change to the administrative aspects of health care by successfully guiding administrative change. If fully adopted and integrated, these solutions can make achieving all-payer administrative simplification—public and private—a near-term national goal. CAQH, a nonprofit healthcare industry alliance that is helping drive payer collaboration through national, multistakeholder efforts, has spearheaded two initiatives that are producing real results in the marketplace today: CORE and UPD. These initiatives have been widely adopted regionally and nationally, but have yet to realize their full potential for savings and interoperability in the healthcare industry. Increasing the focus that policy makers place on such initiatives will be critical to fully integrating these industry-driven efforts into the national healthcare system and tracking their benefit.

This paper reviews the challenges in integrating industry-driven administrative simplification efforts into the healthcare system, outlines the policy-related approaches to help address these challenges, describes the potential impact of taking such actions using the CAQH initiatives as examples, and concludes with suggestions for how these policy approaches could be applied today.

Challenges to Integration and Approaches to Resolution

Healthcare industry-driven initiatives centered on administrative interoperability are faced with many challenges in integrating their efforts into the ecosystem. The industry is confronted with conflicting objectives, priorities, and approaches. As a result, many of the challenges being targeted for change by the government, private sector, and consumers are fraught with a range of barriers: fragmented markets, lack of coordination, insufficient leadership, undefined milestones, and unproven concepts.

Overcoming these barriers can be accomplished through concerted efforts and by focusing on a handful of key areas that address administrative interoperability. These areas of focus should not affect or influence competitive advantage in the marketplace, but rather should target noncompetitive processes that can have meaningful and measurable impact on a wide group of stakeholders. By employing an inclusive approach that requires public–private coordination as well as multistakeholder support, including states and government groups, challenges can be confronted, managed, and eventually overcome.

Industry-Driven Efforts

CAQH currently has two industry-driven initiatives that are addressing specific challenges identified by a broad range of industry stakeholders.

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×
CORE: Overview, Adoption, and Impact

CORE, a collaboration of more than 100 industry stakeholders, is developing operating rules to enable providers’ access to healthcare administrative information before or at the time of service using the electronic system of their choice for any patient or health plan. The CORE rules are being developed in multiple phases and address data and infrastructure critical to the healthcare revenue cycle. CORE has gained national recognition as an important HIT solution that can help enable electronic health records and transparency. A recent study concluded that industry-wide implementation of CORE Phase I could save the industry an estimated $3 billion over 3 years (see Table 12-9). With industry-wide adoption of CORE Phase I, Phase II, and Phase III rules, the potential savings in the industry increases to $14 billion in 3 years (IBM Global Business Services, 2009).

UPD: Overview, Adoption, and Impact

UPD is the industry standard for collecting provider data used in credentialing, claims processing, quality assurance, emergency response, member services such as directories and referrals, and more. CAQH launched the UPD service in 2002 to enable providers and other health professionals in all 50 states and the District of Columbia to submit required information for credentialing and other purposes. Providers enter their information once through a secure, centralized, online database to meet the data collection needs of participating organizations. Once authorized by the physician, these organizations have instant access to information in the UPD system. More than 760,000 providers and 500 participating organizations are utilizing UPD.

Policy-Related Approaches

While industry-driven initiatives are delivering results and driving change, to fully recognize the vision of these efforts support is needed in the policy arena. Policy can play an essential role once consensus is reached by the general marketplace that (1) change is needed, and (2) an avenue with prioritized, shared public–private goals is available to address such change. Recent efforts have shown that policy-related approaches focused on these goals have assisted and should further assist in integrating wellvetted, broadly supported, return on investment (ROI)-based, industry-driven efforts into the national healthcare system. These approaches can serve as models, applicable to a range of healthcare initiatives, to create long-standing benefits. For example, CAQH has utilized several successful policy-related approaches, including the following:

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×
  • Phase in efforts with existing priorities,

  • Align efforts with federal health information technology policies,

  • Gain multistakeholder support through state, federal, and industry leaders and policy makers, and

  • Surmount the barrier posed by the inevitable changes to current business practices (Table 19-1).

Phase In Efforts with Existing Priorities

One example of phasing in efforts with existing priorities is demonstrated by CAQH through its CORE initiative. CORE rules are developed based on existing national standards, while keeping in mind expected changes in regulations. For instance, the CORE Phase I and Phase II rules were built based on HIPAA version 4010, but also complement HIPAA version 5010, the latest version. There was no deadline set for compliance with 5010 when the CORE Phase I and Phase II rules were being developed; however, the CORE rule writing included participation from ASC (Accredited Standards Committee) X12, which was driving the draft 5010 requirements. Upon finalization in April 2006, the CORE Phase I rules required health plans responding to an eligibility request from a provider to include patient financial responsibility. This requirement was made well ahead of the HIPAA 5010 recommendation (see Table 19-1) and its corresponding deadline. Moreover, CORE is going beyond what 5010 requires for patient financials. This approach ensures that entities operating in accordance with the CORE rules will be assisted in meeting existing and upcoming priorities established by HIPAA, enabling industry coordination.

Given its efforts to use the nonmandated aspects of 5010 and provide online testing, CMS approached CAQH to implement a 5010 testing

TABLE 19-1 CORE-5010 Crossover: Eligibility Inquiry—Patient Financials

Patient Financial

Required by CORE Phase I Since 4/06 or CORE Phase II Since 7/08 (either 6 or 4 years prior to 5010)

Recommended by 5010 (not mandated)

Copay

X

X

Coinsurance

X

X

Deductible (static)

X

X

YTD deductible (remaining)

X (Phase II)

No

In-out of network variances

X

No

NOTE: YTD = year to date.

SOURCE: Reprinted with permission from CAQH, 2009a.

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

project that would highlight real-time testing of the new ASC X12 HIPAA 5010 eligibility transaction. CMS looked to CORE for this demonstration because CORE is delivering a forum for encouraging uniform implementation of existing standards, ensuring industry efforts are complementary (not duplicative), and directing stakeholders toward standards-based real-world implementations. To conduct the testing demonstration, CAQH collaborated with the Healthcare Information and Management Systems Society (HIMSS), the Integrating the Healthcare Enterprise (IHE) Initiative, and the Blue Cross and Blue Shield Association (BCBSA). In early 2009, the groups demonstrated ways to implement the 5010 HIPAA eligibility transaction standard through existing testing tools, best practices, and public–private collaborations that are already broadly recognized within the healthcare industry, including CORE Phase I and II rules certification testing scripts. This effort embraces existing priorities and, because of the multiphase approach of CORE, enables updates to the CORE rules as new priorities are established.

Align Efforts with Federal Health Information Technology Policies

One of CORE’s guiding principles is to complement federal efforts that contribute to a national solution. By aligning its efforts with federal HIT policies, CORE is supporting interoperability through a single set of standards. For example, even before the recent stimulus incentives created focused direction for health information technology, CORE worked closely with the Healthcare Information Technology Standards Panel (HITSP). HITSP, a public–private cooperative partnership created in October 2005 by the Office of the National Coordinator for Health Information Technology (ONC), promotes interoperable technology in health care. CAQH CORE representatives actively participate in various HITSP committees, including those concerning security, privacy, and infrastructure; administration and finance; technical; provider perspective; consumer perspective; and care management and health records. This active involvement has contributed to the recognition that administrative efforts are essential to healthcare improvements and must align with clinical efforts before interoperability can be achieved. Since the CORE rules closely complement the data exchange efforts of HITSP, numerous CORE rules are incorporated into HITSP specifications. For example, the CORE Phase I rules on eligibility data content are a final component of HITSP’s first set of interoperability standards. Those standards were formally recognized by Health and Human Services Secretary Michael Leavitt in late January 2008. The full set of CORE Phase I rules is required by the medications management specification of HITSP’s second set of interoperability specifications. The entire set of CORE Phase I rules, plus three Phase II rules specific to eligibility, is

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

incorporated into the HITSP Patient Generic Health Plan Eligibility Verification Transaction. Finally, the CORE Phase II connectivity rule is built into the HITSP Administrative Transport to Health Plan Transaction.

Most recently, the American Reinvestment and Recovery Act (ARRA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act set a distinct direction for health information technology efforts and policies. While details for this direction are still being shaped, activities are being implemented that move the industry toward this new vision. For example, the ONC is drafting definitions of “meaningful use,” a term employed in the stimulus package in regards to receiving money for the use of EHRs. When the ONC released its draft definition of meaningful use in June 2009, CAQH reviewed and commented on the draft to urge the inclusion of simplified administrative health care in the final meaningful use definition (CAQH, 2009b). In July, a revised draft of meaningful use was issued. This latest version included the use of administrative data in two instances under the policy priority to “improve quality, safety, efficiency, and reduce health disparities”:

  • Check insurance eligibility electronically from public and private payers, where possible, and

  • Submit claims electronically to public and private payers.

The final definition of meaningful use, a description that will shape upcoming healthcare policy, is expected to be released in early 2010 by CMS. CAQH is continuing its efforts to ensure that both administrative and clinical concerns are included in the final definition. Aligning with these meaningful-use efforts included in federal policies is important to ensuring streamlined administrative information flow, a priority that is critical to improving administrative and clinical interoperability and achieving sustainable cost savings. Connecting meaningful use to previous federal HIT efforts has been a focus of ONC, especially regarding detailed specifications. As a result, the underlying specifications to support meaningful use will be created by HITSP. The draft specifications that HITSP’s “Tiger Teams” have issued to support meaningful use include previously recognized specifications, including the CORE rules.

Gaining Multistakeholder Support

Generating multistakeholder support, including those that affect policy outcomes, is essential to industry coordination and adoption of the CAQH initiatives. There is regular government participation in both the UPD and the CORE initiatives. For example, a representative from the CMS Office of E-Health Standards and Services and a representative of ASC X12—a

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

group that develops the standards used under HIPAA—both serve on the CORE Steering Committee. Other CORE participants include the U.S. Department of Veterans Affairs, CMS’s Medicare Business Office, and multiple state groups, such as Louisiana Medicaid and the Michigan Department of Community Health. Additionally, a number of states, including Colorado, Ohio, Texas, and Virginia, have recommended the CORE rules for state initiatives. These recommendations are the result of ongoing educational outreach by CAQH and numerous meetings with state groups that were interested in exploring the CORE approach for state activities.

Thirteen states have also designated or required the UPD form as their standard credentialing application. As a result of many CAQH discussions with state policy makers, these states are recognizing the value of offering a uniform provider data collection service through the standard UPD form. Recently, the first state Medicaid agency, Kentucky Medicaid, selected the UPD form to assist with provider data collection for credentialing. This development is encouraging discussions between other state Medicaid agencies and CAQH. Public–private collaboration and the use of shared tools will help make administrative cost savings a reality.

Market interest in the CAQH initiatives has occurred as a result of individuals who have shown strong leadership and commitment as they help to drive real market change. These individuals represent CAQH member plans and state, federal, and industry organizations—and all have prioritized industry change, resulting in their ability to gain organizational support for CAQH activities. The best example of leadership is actual implementation. Early adopters of both CORE and UPD were CAQH member health plans that showed support for administrative simplification and challenged other stakeholders to learn more about the changes being delivered by these streamlined administrative data exchange solutions. As adoption of CORE and UPD has grown, broad multistakeholder support is resulting. Furthermore, participants are working to present CORE and UPD as solutions for state administrative simplification efforts. Others such as Aetna are driving change even further downstream by having all their trading partners become CORE certified.

Surmounting the Barriers

A final example of a policy-related approach being applied by CAQH is exhibited through its UPD initiative. Surmounting the barrier posed by the inevitable changes to current business practices is being demonstrated through consideration of improvements in primary source verification (PSV) by UPD. PSV requires healthcare organizations to confirm the validity of provider information through a direct contact with the sources of credentials (e.g., medical schools). The current PSV process differs among

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

organizations and is costly, inefficient, labor intensive, and redundant. With concerted efforts, seemingly ingrained inefficient business practices are being eliminated in favor of uniform approaches.

CAQH conducted interviews and research with the goal of understanding the strategic drivers and cost structures of current PSV practices in order to identify areas in which improvements can be made. The results have been summarized in a white paper (CAQH, 2009c) that, based on its findings, recommends a centralized PSV process for the industry through a continuous verification process. If widely adopted, a continuous verification process will lower costs by eliminating redundancy and improve quality by providing more timely and consistent information. Continuous verification and monitoring will involve significant changes to existing methods of PSV and will require collaboration by stakeholders who individually may be impacted by a change in current processes. To successfully effect change, all stakeholders will have to support this opportunity (Table 19-2).

Suggestions for Applying Policy Approaches Today

Administrative simplification is a critical and often overlooked factor in the successful transformation of the healthcare industry. To bring true and lasting change to the industry, industry-driven efforts must continue to educate policy makers on administrative simplification; work with federal, state, and industry leaders to identify methods to accelerate adoption; and implement policies that directly support the public–private objectives surrounding administrative simplification as well as the publicly driven tactical approaches.

Although industry-driven efforts are demonstrating improved processes and delivering positive ROI to adopters, many stakeholders have not yet adopted these efforts. A lack of awareness of the importance of administrative simplification and current initiatives requires that policy makers broaden awareness of the changes needed and where industry consensus is moving. To promote such action at the regional and national levels, CAQH will continue working with government and industry leaders to build awareness of the potential of the initiatives. Further, by providing recommendations for policy-directed approaches, the industry can consider setting very specific goals such as deadlines for adoption of existing solutions that have been shown to enhance marketplace operations.

For example, the multistakeholder committee led by the State of Colorado recently issued recommendations to create policy requirements for the use of CORE rules, as well as deadlines for adopting the rules (State of Colorado Department of Regulatory Agencies, 2009). By legislating policies to move the state to an electronic system that integrates national standards, Colorado will benefit from streamlined processes that are adopted by all

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

TABLE 19-2 Policy-Related Approaches—CAQH Examples

Policy-Related Approach and Example

Approach

Tactics

Benefit

Phase in efforts with existing priorities

Example: CORE and 5010

CORE builds on existing standards (e.g., HIPAA, HTTP) and encourages a uniform and more extensive adoption of the standards based on business priorities

CORE Phase I and II rules related to eligibility data content (YTD deductibles, copays, service-level financials) were developed with the 5010 regulation in mind; although at the time, the deadline for 5010 compliance was not yet established. Moreover, CORE certification required attestations from entities that they were HIPAA compliant, and tested them that they were using aspects of 5010 that were needed by providers but would not be required under HIPAA

Entities becoming CORE Phase I and II certified are assured CORE certification testing aligns well with the now established 5010 compliance date of January 2012, and thus CORE assists these entities in reaching an existing priority. CMS, along with CAQH, BCBSA, and HIMSS, supported a demonstration of this at HIMSS 2009. This demonstration communicated to the industry that the established deadline for 5010 was reachable and certain entities were already deciding to go further than the minimum requirements

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

Policy-Related Approach and Example

Approach

Tactics

Benefit

Align efforts with federal HIT policies

Example: CORE and HITECH

A key CORE guiding principle is alignment with federal HIT policies

CORE was launched a few months after the ONC was established. As the federal HIT clinically focused landscape evolved, CORE alignment evolved

  • Prior to HITECH, CORE rules were recognized by HITSP, and the CMS Medicaid Information Technology Architecture (MITA) effort had a goal to collaborate with CORE

  • As HITECH unfolded, CAQH communicated regarding the need for providers to use HITECH dollars for administrative simplification efforts and clinical or administrative interoperability. CAQH also participated in HITSP Tiger Team efforts; CORE rules—data content and connectivity—are incorporated into draft meaningful-use technical requirements

HITECH sends a message that administrative and clinical interoperability is a goal; furthermore, data show that providers can use administrative simplification savings to further clinical efforts

Gain multistakeholder support through state, federal, and industry leaders and policy makers

Example: Leaders Guide UPD and CORE

Both CORE and UPD were designed and continue to evolve based on the essential involvement of federal, state, and industry leaders

Direct leadership involvement (e.g., UPD scope) was driven based on feedback from national provider associations; director of CMS E-Health Office serves on CORE Steering Committee

Early adopters (e.g., UPD, CORE) were driven by top-down commitments from health plan CEOs

State outreach (e.g., range of CORE and UPD participants are presenting to state-sponsored committees regarding ways to achieve their regional goals using existing national efforts rather than creating state-specific administrative simplification efforts; HIEs are critical to this)

Federal outreach (e.g., CORE chair met with Senate Finance Committee and Congressional Budget Office)

Through collaboration and sharing ideas on what drives change, leaders are actively encouraging a more streamlined and effective U.S. system that does not promote duplication or add unnecessary cost

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×

Policy-Related Approach and Example

Approach

Tactics

Benefit

Surmount barrier posed by inevitable changes to current business practices

Example: UPD and PSV

State government, providers, and health plans have asked CAQH to consider if the next stage for UPD is to offer PSV

CAQH met in-person with key entities that currently conduct PSV. The purpose of these meetings was to understand their strategic drivers and cost structures and gain their opinions on potential industry approaches to remove costs and reduce administrative burden. As a result of these meetings, CAQH developed a white paper outlining the opportunities and challenges in centralizing PSV for the industry. In September 2009, a meeting will be held with key stakeholders to discuss the opportunity as well as the challenges

Stakeholders currently conducting PSV are openly discussing the benefits and challenges of creating a uniform approach, including impact on their internal strategies and financials. Without such openness, a lasting industry change could not be identified as a potential short-term industry goal

NOTE: BCBSA = Blue Cross and Blue Shield Association; CAQH = Council for Affordable Quality Healthcare; CEO = Chief Executive Officer; CMS = Centers for Medicare & Medicaid Services; CORE = Committee on Operative Rules for Information Exchange; HIE = health information exchange; HIMMS = Healthcare Information and Management Systems Society; HIPAA = Health Insurance Portability and Accountability Act; HIT = health information technology; HITECH = Health Information Technology for Economic and Clinical Health; HITSP = Healthcare Information Technology Standards Panel; HTTP = hypertext transfer protocol; PSV = primary source verification; UPD = Universal Provider Datasource; YTD = year-to-date.

relevant stakeholders, including those entities in the state healthcare system that might not otherwise implement such proven approaches. Imposing deadlines on well-vetted initiatives not only ensures that requirements are adopted across all sectors in a timely manner, but also enables future policies to build on the established foundation. Without the ability to impact all healthcare sectors and build in phases, the likelihood of true and lasting industry change cannot be achieved.

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
×
Final Note

The potential for the industry to significantly reduce administrative healthcare costs is being widely recognized. Industry-driven efforts, federal funding opportunities, and increased awareness of potential industry savings are creating momentum for changing administrative processes. Healthcare reform is a high priority for many, but the means to reach an improved healthcare system must be accomplished with coordinated, targeted efforts that have strong support. Policy has played and will play an important role in making these changes a reality for the industry—it is one of the necessary means to have administrative interoperability help drive reduced costs and improved quality of care.

REFERENCES

American Health Information Management Association. 2006. Healthcare terminologies and classifications: An action agenda for the United States. http://library.ahima.org/xpedio/groups/public/documents/ahima/bok1_034273.pdf (accessed September 5, 2009).

American Medical Association Practice Management Center. 2008. AMA administrative simplification white paper. http://www.ama-assn.org/ama1/pub/upload/mm/368/admin-simp-whitepaper.pdf (accessed 2009).

CAQH (Council for Affordable Quality Healthcare). 2009a. Outcomes and Lessons Learned from 5010 Testing Project Collaboration. Chicago, April 5.

——. 2009b. CAQH comment letter to the ONC. http://www.caqh.org/pdf/CAQH_ONCmeaningfuluse.pdf (accessed August 10, 2009).

——. 2009c. On the Value of Continuous Primary Source Verification. Whitepaper.

Casalino, L., S. Nicholson, D. Gans, T. Hammons, D. Morra, T. Karrison, and W. Levinson. 2009. What does it cost physician practices to interact with health insurance plans? Health Affairs (Millwood) 28(4):w533-w543.

Center for Health Transformation. 2009. Taking the paper out of paperwork: How electronic administration can save the U.S. health system billing. http://www.healthtransformation.net/galleries/wp-HIT/Taking%20Paper%20Out%20of%20Paperwork.pdf (accessed 2009).

Healthcare Administration Simplification Coalition. 2009a. Healthcare Administration Simplification Coalition Press Room. www.simplifyhealthcare.org/page.cfm/ID/4/PressRoom (accessed August 15, 2009).

——. 2009b. Bringing better value: Recommendations to address the costs and causes of administrative complexity in the nation’s health care system. http://www.simplifyhealthcare.org/repository/Documents/HASC-Report-20090717.pdf (accessed October 1, 2009).

IBM Global Business Services. 2009. CAQH CORE Phase 1 measures of success study. http://www.caqh.org/COREIBMstudy.php (accessed 2009).

Kahn, J. G., R. Kronick, M. Kreger, and D. N. Gans. 2005. The cost of health insurance administration in California: Estimates for insurers, physicians, and hospitals. Health Affairs (Millwood) 24(6):1629-1639.

LeCuyer, N., and S. Singhal. 2007. Overhauling the U.S. health care payment system. http://www.mckinseyquarterly.com/Overhauling_the_US_health_care_payment_system_2012 (accessed 2009).

New America Foundation. 2009. Making Medicare sustainable. http://www.newamerica.net/publications/policy/making_medicare_sustainable (accessed March 19, 2009).

Suggested Citation:"19 Administrative Simplification." Institute of Medicine. 2010. The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary. Washington, DC: The National Academies Press. doi: 10.17226/12750.
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State of Colorado Department of Regulatory Agencies. 2009. Final Report and Recommendations of the Senate Bill 08-135 Work Group to Develop a Standard Electronic Identification System for Health Insurance. http://www.dora.state.co.us/Insurance/meet/sb135/2009/S135FinalReportWReg090309.pdf (accessed 2009).

UnitedHealth Center for Health Reform & Modernization. 2009. Health care cost containment—How technology can cut red tape and simplify health care administration. www.unitedhealthgroup.com/reform (accessed November 1, 2009).

U.S. House of Representatives, Subcommittee on Health. 2009. Karen Ignani at the House Energy and Commerce Committee. June 25.

Washington State Office of the Insurance Commissioner. 2008. Report to the governor and the legislature: Top five healthcare administrative simplification priorities and plan to achieve those goals. http://oic.wa.gov/legislative/reports/SimplificationRPT.pdf (accessed September 15, 2009).

WEDI (Workgroup for Electronic Data Interchange) of the Strategic National Implementation Process. 2007. Health Identification Card Implementation Guide. http://www.wedi.org/snip/public/articles/WEDI-Health-ID-Card-Approved.pdf (accessed 2009).

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The United States has the highest per capita spending on health care of any industrialized nation but continually lags behind other nations in health care outcomes including life expectancy and infant mortality. National health expenditures are projected to exceed $2.5 trillion in 2009. Given healthcare's direct impact on the economy, there is a critical need to control health care spending.

According to The Health Imperative: Lowering Costs and Improving Outcomes, the costs of health care have strained the federal budget, and negatively affected state governments, the private sector and individuals. Healthcare expenditures have restricted the ability of state and local governments to fund other priorities and have contributed to slowing growth in wages and jobs in the private sector. Moreover, the number of uninsured has risen from 45.7 million in 2007 to 46.3 million in 2008.

The Health Imperative: Lowering Costs and Improving Outcomes identifies a number of factors driving expenditure growth including scientific uncertainty, perverse economic and practice incentives, system fragmentation, lack of patient involvement, and under-investment in population health. Experts discussed key levers for catalyzing transformation of the delivery system. A few included streamlined health insurance regulation, administrative simplification and clarification and quality and consistency in treatment.

The book is an excellent guide for policymakers at all levels of government, as well as private sector healthcare workers.

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