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  • Anders Knox

Evolution of Claims Auditing


The relationship between the Claims Auditing industry and Payers has not changed much over the last 20 years. Data Saints Auditing thinks that is a bad thing and is making changes that are shaking up the industry.


When Dr. Michael Seavers ran the Claims Department at Capital BlueCross for nearly a decade, handing off claim auditing to vendors was an easy decision early on. “Building up the expertise internally was difficult and getting 75-80% of the over-billing charges back for very little work was pretty compelling,” stated Dr. Seavers. “But as we gained more experience, we saw that we were losing more than we were gaining from the situation.”


Insurance companies that do their own auditing have three important advantages over insurance companies that outsource. These advantages are:


1) Cost of auditing is significantly less – For example; If you run your own DRG/APC auditing internally, you can expect your costs to stabilize at 13-14% of recoveries. Vendors charge 40-100% more.

2) Quality of auditors can be controlled – Great auditors find more recoveries with a lot less provider abrasion. Paying for quality auditors makes sense for the Payer who both keeps the larger portion of the findings and suffers the consequences of provider abrasion.

3) Data control – By having full view of your auditing data, savings can be found both inside your auditing efforts and beyond.


Dr. Seavers continued, “What we saw at Capital BlueCross is that we were able to move significantly more dollars from post-pay auditing to automated pre-pay auditing than vendors with 10x our experience. It was great because it gave us near free savings. On the other hand, it really showed a massive disconnect between the incentives of the Auditing industry and Payers. The vendors could have moved those savings to prepayment too, but their incentives were to not.”


Incentives between claim auditing firms and Payers have been hard to connect. Auditing firms make their money from finding recoveries and naturally prefer to see as many recovery opportunities as possible. This has resulted in an industry that views transparency and data access as a revenue risk.


Anders Knox, President of Data Saints Auditing, thinks it is a cost problem on the auditing side which is the source of the problem. “In our industry management and IT costs are greater than the payroll costs of the auditors doing the actually auditing. That is the reason Payers have been able to outperform vendors when building internal teams. When we started Data Saints Auditing, we first focused on automating away those unnecessary management and IT costs that have built up in the industry. We (vendors) should be more efficient than any internal Payer effort and we should charge accordingly. When I created the #2 app for salesforce.com, we optimized data entry work for thousands of enterprise sales reps working at over 700 companies. There were three of us managing the entire system. Each of those companies had my cell phone number and it almost never rang because we focused our efforts on delivering exactly what we were promising. The workflow of claims auditing is very similar enterprise sales rep data entry and the management aspects were just as easy to automate.”


Data Saints Auditing found out that reducing management costs created other opportunities to improve the Auditing Vendor/Payer relationship.


Mr. Knox explained, “When we eliminated those management/IT costs the math changed on which auditors should be hired. Payers are far better off having highly skilled Senior Auditors auditing their claims since the Payers lose out on missed recoveries.” With less overhead to support, it was clear that a 100% U.S based Senior Auditor workforce was both possible and much better for the Payer.


Data Saints Auditing, targeting a cost of 12% of recoveries for DRG/APC audits with an all US based Senior Auditor workforce, felt that being transparent with Payers on all aspects of the auditing work was the next logical step.


“With our costs being lower than a Payer doing it themselves, and our position that we only hire U.S. based Senior Auditors whose work we would be proud to show off, we then realized we could do something special from the standpoint of data transparency; and that was the genesis of our relationship with Dr. Seavers.”


Based on feedback from Dr. Seavers, Data Saints Auditing quickly moved to a 100% data transparency model. Clients of Data Saints Auditing know exactly what they are paying for, know the quality of the auditors auditing their claims and have full ownership of the claim data. To aid in transparency, Data Saints Auditing reports:


· Auditors’ salary and bonus

· Access to the individual claims the auditor processes

· Auditors’ recovery rate

· Auditors’ claim processing speed

· Auditors’ abrasion rate

· Costs of record retrieval

· Access to all claims individually, in clustered reporting and via API’s

· And much more… (displayable data is driven by the customer)


Overall, you have more data than you would if the auditor was your own employee.


Mr. Knox stated “Dr. Seavers really helped us create a solution that is better than what even the largest Payers can build internally. Simple improvements, such as the ability to have the auditors answer questions about each claim before they close the claim, have been created with his feedback. We didn’t fully recognize how claim metadata can help a Payer beyond the Auditing group. But because we hire only Senior Auditors, they can create relatively clean metadata for every claim they process. With the new AI efforts in healthcare relying on clean data to function well, Data Saints Auditing is doing its part to push the industry forward.”


“The burdens of running internal teams takes away a lot of flexibility,” explained Dr. Seavers, “Just replacing an ineffective auditor with a more effective auditor would be a yearlong process at Capital BC. Data Saints Auditing provides all the control that I would have if I was employing the individual auditors myself; but by eliminating the crushing minutia of running a large team, Data Saints Auditing lets me engage with the data and look towards the future. If I could have brought in a vendor that would lower my costs, let me have insight into the quality of each individual auditor and provide me full transparency into each audit being done, it would have been one of the most strategic decisions our Claims group ever made. We would not have had to spend years trying to create a payment integrity auditing workforce. It would have accelerated our payment integrity efforts by five years and allowed us to focus on the next generation of claim management.”


Anders Knox summed it up saying, “If the Claims Auditing industry moves towards a 100% data transparent model that is cost competitive with Payers’ internal efforts, we will have a measurable impact on lowering the cost of healthcare in the United States. Please take the time to contact Data Saints Auditing regarding your DRG/APC claim auditing, we can put you into a situation where outsourcing claim auditing gives you a competitive advantage.”


Contact Anders Knox, the President of Data Saints Auditing at 650-392-5958 or aknox@datasaints.com.


#costefficiency #returns

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