A Wake-Up Call About Claim Audits

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Company Medical and Benefit Claims Auditing | TFG Partners

Payment integrity is paramount to employer-funded medical and pharmacy benefit plans, and auditing claims is the best way to confirm it. Outside third-party processors nearly always handle claim processing for self-funded plans, and auditors help keep them on track. Without oversight, sponsors are left to rely on administrators to self-police and report irregularities. Many make an effort to do so, but if their people and systems missed something in the first round, it's not overly likely they will pick it up no a second round with the same people and methods. Audits can doublecheck.

The coronavirus pandemic and its unprecedented spike in expenses was a wake-up call about the value of frequent auditing. Plan sponsors that waited too long to audit were left trying to clean up messes in arrears. Those continuously monitoring claim payments or audited soon after the pandemic's beginning generally fared much better. The astronomical overcharges and irregularities that made headlines were not isolated incidents. Nearly all large employer-sponsored plans felt some impact. It varied by region and the number of employee members and their families who were hard hit.

The overall good news about claims audits is that they are in a period of unmatched accuracy. The advances in technology that have transformed periodic reviews have been game changers. Things that would have been unimaginable during the days of random sample auditing are now standard for auditors. Each year, the systems improve, and there's less human effort involved. It puts claim administrators on notice that higher standards are necessary to keep their clients. Error rates of between one and three percent are typical, and auditors seek to drive those even lower.

Traditional audit firms primarily focus on financial and tax matters, while medical claim auditing benefits from those skill sets and added knowledge. Many former health plan executives now head the claim audit firms and have brought expertise and insight. There are few things as complex as medical billing and coding, which makes the audits necessarily complex. It's more efficient to have people managing the project who have the vocabulary and understanding of the factors they're checking. Approaching it with purely numbers knowledge can be a significant drawback in the long run.

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