FFS Medicaid Most Challenging for Billing: Study

The lowest billing hurdles are seen in FFS Medicare.

April 4—One of the first direct comparisons of billing complexities between various types of payers found that Medicaid fee-for-service (FFS) programs were the most challenging for providers.

The analysis of 37.2 million 2015 physician practice visits, which generated 44.5 million claims, found that it took almost twice as long for an FFS Medicaid claim to be processed and paid compared with an FFS Medicare claim. Medicaid claims also had more than three times the denial rate of Medicare claims, according to the study published April 2 in Health Affairs.

The share of claims that were challenged across different insurance types ranged from 6 percent by private insurers to 18 percent by FFS Medicaid.

The denial rate for FFS Medicaid was 17.8 percentage points above the rate for FFS Medicare, while Medicaid managed care’s denial rate was 6.1 percentage points above FFS Medicare.

FFS Medicaid took 19 days longer to adjudicate claims than did FFS Medicare, according to Joshua Gottlieb, a faculty research fellow at the National Bureau of Economic Research, and his co-authors.

The findings echo what some industry advisers see.

“It’s 100 percent what we see with both our clients and our prospective clients that we talk to,” said Heather Kawamoto, vice president of product management at Recondo, a revenue cycle vendor for about 900 hospitals. “Medicaid tends be universally the most challenging payer.”

Kellye Sherbet, president of Aprima RCM, agreed that Medicaid FFS is the most difficult payer for the 150 practices with which her company works.

Medicaid FFS is usually the secondary coverage for beneficiaries, but “their fee schedule [generally] won’t cover the secondary claim and we won’t know that until we file the claim,” Sherbet said in an interview.

The biggest challenge Kawamoto has seen for providers trying to bill Medicaid programs involves the unique requirements around billing edits or billing rules. Additionally, it is a “universal struggle” to confirm whether self-identified Medicaid enrollees are in FFS or managed care plans.

Challenges in Medicaid managed care include each plan’s use of a unique set of billing requirements, authorization requirements, and service restrictions. In contrast, FFS Medicare and national commercial insurers have greater standardization.

“Currently, in Ohio, our biggest problem payer category is our Medicaid managed care,” said Kristen Shoup, director of revenue cycle for Wooster Community Hospital. “Ohio Medicaid transitioned to an EAPG [Enhanced Ambulatory Patient Group classification system used to calculate pricing for outpatient hospital claims] system last year, and our managed care payers have really struggled with this.”

Implications for Providers

The findings putting Medicaid at the bottom of various payer-performance categories were cause for concern, the authors said.

“Medicaid pays physicians lower reimbursements than other insurers do,” the authors noted. “In combination with these lower reimbursements, a higher billing complexity—whether arising from stricter documentation requirements or another cause—could make it especially costly for physicians to treat Medicaid patients. If Medicaid billing complexity remained relatively high, it could reduce Medicaid patients’ access to physicians.”

The good news for providers paid by Medicaid programs is that payment speed improved for both FFS and managed care in recent years. Specifically, the time to payment for Medicaid managed care claims declined from 72.7 days in 2013 to 36.6 days in 2015. Similarly, payments from FFS Medicaid improved from 101.2 days to 53.6 days.

The share of claims challenged by Medicaid managed care plans declined from 26.2 percent in 2013 to 20 percent in 2015, and their denial rate fell from 17.1 percent to 8.9 percent. However, the denial rate of those plans remained far above the 3.9 percent of private-insurance claims in 2015.

The worse Medicaid performance in the early years of the study, which coincided with the 2013 start of Medicaid expansions under the Affordable Care Act (ACA), could have stemmed from overwhelmed state Medicaid programs and Medicaid insurer systems, Kawamoto said in an interview. Medicaid and the Children’s Health Insurance Program have added nearly 16.4 million new enrollees since the ACA expansion began, for a 29 percent increase, according to the Centers for Medicare & Services.

The study’s finding that the performance of Medicaid programs and their insurers has improved is not reflected in what she’s seen in a market where providers are constantly chasing new requirements.

“No sooner do they do that [account for changed Medicaid requirements] then a payer might modify their requirements,” Kawamoto said. “It keeps the ball forever moving and [makes it] hard to get it under control.”

A billing challenge that has emerged over just the last year stems from the growing use by insurers of outside companies to review claims, Sherbet said.

“We find on the back end when trying to check claims status that there is constant finger pointing” about which outside company is reviewing the claim or if it is elsewhere in the process, she said.

Claims appeals also are being increasingly driven by a growing number of managed care denials that stem from not meeting “medical necessity” requirements, she said.

Large Challenge

The findings led the authors to project that public and private payers challenge at least $11 billion a year in medical bills and that the figure could be as high as $54 billion.

The authors said practices might be able to recover some of these challenged payments by hiring additional personnel or upgrading billing technology—albeit with questionable net benefits.

“[T]he administrative costs are likely to exceed the potential revenue, and our estimated amount challenged provides a strong indication that the administrative costs are very large,” Gottlieb and his co-authors wrote.

The authors noted that some administrative cost is necessary as insurers seek to detect fraud and inappropriate utilization.

“But our time-series evidence indicated that insurers can and do reduce billing complexity,” they wrote. “The improvement in billing speed over time suggests that the U.S. health care system may yet be able to improve its administrative efficiency.”

Sherbet has found that claims denials by managed care companies may be mitigated by carefully reviewing policies up front to ensure that the services the practice is providing are covered.

“The biggest struggle is you might get the medical policies, and think you understand them and everything is going fine, and then you get a plethora of denials,” Sherbet said. “Then you start looking and see, ‘Oh, they updated their medical policy but nobody told me.’”

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare