Unlocking Value in Payment Integrity: A New Paradigm for Health Insurers

By Mike Spellman, Senior Director of Consulting Solutions, Lyric

The health care industry is undergoing a profound transformation with payment integrity emerging as a pivotal component for health plans. Traditionally focused on cost-cutting and medical savings, payment integrity can move towards a more holistic approach that prioritizes value creation, enhanced care quality, and improved stakeholder relationships. This shift has an opportunity to create greater overall value for payers, providers, and members. For health plan leaders, understanding and embracing this shift is crucial for future success.

The Shift from Savings to Value

Traditionally, health plans have concentrated on cost control, waste reduction, and claim accuracy within payment integrity. While these efforts have yielded some success, they've often resulted in isolated improvements without addressing broader opportunities to enhance business results and care outcomes.

Payment integrity has been evolving over the last several years, with plans starting to take a different approach. Previously, savings were the bottom line. However, this narrow focus on immediate savings capture often overlooks administrative cost and management and opportunities for enhancing member satisfaction, improving provider relationships, and optimizing care quality. Additionally, understanding the differences between pre-claim and post-claim strategies can help health plans prevent unnecessary costs upfront, thus enhancing overall efficiency.

Pre-Claim vs. Post-Claim

Pre-claim and post-claim strategies are 2 approaches health plans use to manage health care expenses. Today, the predominant area for payment integrity is post claim. Pre-claim strategies focus on preventing unnecessary costs before they occur through methods like pre-authorization, member engagement, predictive analytics, preventive care, and provider collaboration. Post-claim involves reviewing and managing costs after care has been provided, using techniques such as claims auditing, retrospective utilization review, and fraud detection.

Pre-claim strategies offer several advantages, including better cost control, improved patient outcomes, reduced fraud and abuse, increased efficiency, and better provider relationships. Pre-claim approaches can lead to a more sustainable and efficient health care system by preventing wasteful spending upfront and emphasizing early intervention. While both strategies have their place, the trend is moving towards pre-claim as a more proactive and effective method for managing health care costs.
The new paradigm calls for a more comprehensive, value-driven approach to payment integrity that leverages advanced analytics and AI to provide deeper insights and more efficient operations. This shift requires rethinking the claims process, fostering greater payer-provider collaboration, and emphasizing patient choices, treatment, and care pathways.

Challenges and Opportunities

Implementing this new approach comes with its own set of challenges. One significant hurdle is the current incentive structure within health plans. Teams are often rewarded based on hitting traditional payment integrity post-claim savings targets, which can conflict with broader organizational goals of improving care outcomes and member satisfaction.

However, the opportunities presented by this shift are substantial. By focusing on value creation, health plans can:

• Reduce unnecessary services and costs
• Strengthen provider engagement to correct billing behaviors
• Improve pre-care coordination to reduce higher downstream costs
• Enhance member satisfaction and health outcomes

Leveraging Data and Technology

Central to this new approach is the effective use of data and advanced analytics. Better use of data is the starting point. By centralizing data from various sources and applying AI and machine learning technologies, health plans can uncover insights that enable more informed decision making.

Predictive analytics can help identify high-risk members who might benefit from early interventions, potentially preventing costly emergency room visits. For example, if the average emergency room visit costs $2,715, and a predictive analytics program is put in place that helps to prevent 15% of related ER visits, those are considerable savings. Applied to a mid-sized health plan that flags 1,250 patients per year, the average savings would be over $500 000. By properly steering patients into a regular cadence and timing of visits to their primary care physician for improved disease management, health plans help avoid these ER visits, which helps the patient manage outcomes, improve quality of life, and reduce out-of-pocket costs.

Similarly, analyzing provider billing patterns can help plans work collaboratively with health care providers to improve coding accuracy and reduce claim denials. These approaches present a more valuable approach to the plan, provider, and member than traditional payment integrity efforts that aim to reduce payments after the service has been completed and the claim submitted. 

Enhancing Provider and Member Engagement

A key aspect of this value-driven approach is improved engagement with both providers and members. For providers, this means moving beyond health plans simply notifying them of policy changes to actively educating and supporting them in improving their billing practices.

One innovative approach could be health plans implementing provider scorecards. If a provider demonstrates they can bill for a service correctly 95% of the time, the plan could trust them to make determinations with members about necessary services without requiring pre-authorization. Or there could be a 1% incentive bonus for reaching such a threshold. This approach of collaborating in the spirit of transparency, accuracy, and cost not only streamlines processes but also builds trust and collaboration. 
For members, health plans can leverage data insights to empower them to make informed care decisions. This could involve providing more comprehensive information about provider quality and outcomes, like how consumers use reviews and ratings in other industries.

Operational Challenges and Solutions

• Implementing this new approach requires significant operational changes. Health plans will need to:
• Realign incentives across the organization to focus on value creation rather than just cost savings
• Invest in robust data platforms and analytics capabilities
• Develop new metrics to measure success beyond traditional savings calculations
• Foster a culture of collaboration with providers and members
• Consolidate their roster of vendors to achieve greater operational efficiency and reduce costs

New platforms are emerging in the market to support this transition towards value-driven payment integrity. These innovative solutions aim to centralize data from multiple sources, streamline vendor integrations, and provide the flexibility health plans need to adapt to changing market conditions. By offering a unified data management and analysis approach, these platforms can help insurers make more informed decisions, improve efficiency and coordination, reduce operational complexity, and quickly adjust their payment integrity strategies as the health care landscape evolves.

The Road Ahead

The shift towards value-driven payment integrity represents a significant opportunity to separate leaders from laggards in a health plan segment that is highly competitive and watched by employers, providers, and consumers. By focusing on improving care outcomes, reducing unnecessary costs, and enhancing stakeholder relationships, health plans can create sustainable value for their organizations, employer customers, and members.

However, this transition will not happen overnight. The key is to start small –– finding a specific area to pilot a program, demonstrating its value to gain buy-in, and then expanding from there. Health plans might consider focusing on a particular patient population or a specific area of claims, such as lab spend or radiology, to begin this transformation.

As health plans interpret, embrace, and navigate this new approach to payment integrity, those that successfully balance traditional cost-saving measures with innovative value-creation strategies will be best positioned for long-term success. The future of payment integrity lies not just in capturing savings, but in unlocking greater value across the entire health care ecosystem.