Illinois HFS Re-Invents Claims Management Lifecycle to Support VBC Payments
Payment model leverages X12 standards, transactional data, and analytics to reduce cycle times, increase revenue cycle management transparency
Like most state healthcare organizations with a large Medicaid population that are transitioning to value-based care (VBC), the state of Illinois encountered myriad challenges when processing through its partnering managed care organizations (MCOs). A growing backlog of rejections and denials resulted in slow payments, putting financial pressure on state providers and creating administrative gridlock between the entities to correct, resubmit, and otherwise process claims.
To shrink payment cycle times and increase revenue cycle management transparency, the Illinois Department of Healthcare and Family Services (HFS) sought to understand and evolve its claim management lifecycle to meet the more challenging demands of VBC, specifically the Centers for Medicare & Medicaid Services (CMS) three-part aim:
- Better care for individuals
- Better health for populations
- Lower costs
They started by accessing the state’s repository of health claims data. Optum filled in resource gaps, providing a dedicated transactions specialist, who developed standardized workflows that enabled HFS to overcome staffing challenges and build a cohesive reporting capability.
To derive insights from standards-based X12 data and modify the related workflows, HFS leveraged the power of analytics by engaging Optum to analyze how MCOs processed claims. Causes for rejections and denials were examined, as well as how providers were creating and submitting claims.
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While VBC holds the potential to improve care coordination and quality for patients, it also creates a higher level of complexity that can result in payment errors. Unlike fee-for-service, which essentially relies on a set fee for services and procedures, VBC encompasses all services in an episode of care occurring within a specific time frame for a single clinical condition or procedure. Bundling these services for payment makes care more comprehensive and affordable. According to McKinsey & Company, new sources of complexity and error are:
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Keys to success
Overcoming identified processing challenges presented hurdles involving transaction and communication capabilities between providers and MCOs. Since each party adjudicates claims differently, information was often inconsistent, creating errors and requiring resources to mitigate.
X12 processing challenges:
- Usage of delimiters due to inconsistent usage by MCOs and Clearinghouses
- Tracking of 837 transactions to the 277 claim acknowledgement transaction
- Tracking of 837 and 835 transactions due to appeals and reversal of previous payments
- Operational challenges in implementing WEDI SNIP Type edits
- Plan specific Provider edits tailored to each MCO separately
HFS introduced a concept that optimizes operations with efficiency, consistency, and full transparency. Standardized claims formatting, grounded in proven X12 transaction standards, was essential to the program’s success and sustainability, delivering key benefits such as:
- Accuracy – Less risk of data entry errors and miscommunication
- Cost reduction – Automation to lower costs associated with manual labor
- Efficiency – Seamless transfer of electronic documents without compatibility or security issues
- Interoperability – Different billing, adjudication, and payment systems to communicate with each other, allowing users to send and receive transactions across different platforms
“Organizations that implement X12-based solutions have long recognized the value of using our EDI Standard to effectively engage with each other via electronic data interchange,” said X12 CEO Cathy Sheppard. “Now the state of Illinois is taking the standardized data to the next level, applying the power of analytics to fine-tune claims processing for value-based care. This significant and exciting innovation is facilitated, in large part, by X12 standards that were already in place. Building this kind of ground-breaking solution on a well-established infrastructure maximizes the impact and reduces the costs.”
To integrate data in existing X12 transactions from multiple entities, HFS partnered with Optum and their Advanced Communication Engine (ACE) analytics platform. This collaboration made it possible to interpret and act on the data, improve workflows, overcome staffing challenges, and create a cohesive reporting capability.
Pre-adjudicated claims, claims edits, claim acknowledgements, claim status requests, and remittance advice transactions were integrated into the Illinois HFS enterprise data warehouse (EDW), providing greater visibility, transparency, and analytic opportunities, while also helping to improve care coordination services. These significant outcomes were shared with all stakeholders, helping to gain buy-in on corrective actions and resulting workflow changes.
Analyzing claims, payments, and related transactions to this level of specificity has allowed HFS to gain informative insights. The X12 EDI transactions were used to identify trends in payment cycle times, payments, denials, and rejections with enhanced utilization management, thereby increasing patient quality and reducing administrative costs. Using the ACE dashboard also made it possible to review and reconcile MCO pricing, further improving transparency and accuracy.
Results
Using advanced analytics to evaluate standardized X12 transactions and improve workflows has resulted in real-time tracking and seamless denial management, increasing efficiency and transparency. Better understanding led to process improvements, including identifying data gaps and plan changes. These proactive measures and corrective actions have been validated and support key performance indicators (KPIs).
Thanks to these changes, the state of Illinois is now exceeding expectations, with 90% of claims being paid from the initial billing.
Just as important, the changes have vastly improved provider and payer relationships, leading to greater collaboration. Technological evolution continues to encourage open communications, easing staff frustration and conflicts. Detailed insights are informing on-going education and decision-making.
Conclusion
Ultimately, any state agency can replicate the payment model implemented by the state of Illinois to improve its VBC claims processing approach. Both providers and patients benefit from the changes, with patients receiving the coordinated care they need, and providers getting paid in a timely manner.
Building on this positive outcome, Illinois plans further improvements, including aligning standardized X12 encounter data from MCOs with ACE analytics to provide even more comprehensive insights. This advancement offers the opportunity for robust messaging and enhanced capabilities to identify and resolve more complex provider billing errors.
About the Illinois HFS
The Illinois Department of Healthcare and Family Services (HFS) is responsible for providing healthcare coverage for adults and children who qualify for Medicaid, and for providing Child Support Services to help ensure that Illinois children receive financial support from both parents. The agency is organized into two major divisions, Medical Programs and Child Support Services. In addition, the Office of Inspector General is maintained within the agency, but functions as a separate, independent entity reporting directly to the governor's office.