Cottage Industry Emerges To Head Off Claims Denials

Disagreements between insurers and physicians over claims payments have resulted in a "booming industry of intermediaries" known as denial management, the Wall Street Journal reports. Some doctors, clinics and hospitals are investing in software systems that help navigate insurers' payment systems and prevent denials and also have begun hiring firms to "dig through past claims in search of short-changed payments and tussle with insurers over rejected charges," the Journal reports.

According to a 2004 report by the Center for Information Technology Leadership, payment disputes are costing medical providers and insurers about $10 billion each in unnecessary administrative expenses. The Journal reports that the "denial-management industry's rise shows how much of medical spending is consumed by propping up and doing battle over an arcane patchwork of claims systems."

The Journal profiled Texas-based medical group Paluxy Valley Physicians, which four years ago was trying to recover more than $500,000 in denied or unpaid claims from insurers and had taken out a $100,000 loan to maintain the practice. With the help of Boston-based denial-management firm athenahealth, Paluxy Valley was able to reduce its outstanding claims to $179,000 and repay its bank loan.

Shari Reynolds, the administrator at Paluxy Valley, said, "The insurers outcode us, they outsmart us and they have more manpower. Now, at least we have a fighting chance."

Allan Chernov, a medical director at Blue Cross and Blue Shield of Texas, said, "Every time we redo a claim, it costs us a lot of money, too." He noted that doctors can use the insurer's software to make sure they do not miss a coding rule.

Chernov added, "I recognize computer software can't read every permutation or combination of services," but "we're trying to balance being responsible (to our customers) and making sure we're paying appropriately" (Fuhrmans, Wall Street Journal, 2/14).