Skyrocketing Medical Bills from Third Party Injury Claims
Evaluating and resolving hospital and medical bills in third party injury claims is a growing problem for the insurance industry. Rising medical costs make up over 50% of the average personal injury settlement in the United States. This article explains why controlling the medical components of a claim has become an ongoing battle and how, armed with knowledge and data, insurers can reverse the trend of overpayment.
How did we get here?
Multiple factors have contributed to this current state: the basis for hospital fees is a varied and opaque process, expensive state-of-the-art technology is not always medically necessary, and medical providers are falsely seen by adjusters as insulated from negotiation of bills.
Skyrocketing Cost of Hospital Services
When a person is injured in an accident with an insured, hospitals frequently charge exorbitantly inflated costs for services and procedures, such as emergency room visits and accompanying diagnostic tests.
An inflated medical bill submitted to an insurance carrier influences the value of the claim, whether accurate or not, and often incorrectly forms the insurance adjuster’s starting point for determining value. Although casualty insurers typically don’t pay the full amount billed by the medical provider, inflated bills act as leverage for higher compensation. In Casentric’s experience, we find that, on average, adjusters reduce hospital bills by less than 10%.
So, property and casualty insurers have found themselves in a cycle of overpaying for medical bills of injured third parties. With little data on pricing, little to no training on hospital billing practices, and no systematic knowledge of how to adjust medical bills, adjusters have been unable to effectively challenge and reduce medical bills.
Medical Charges Vary Greatly
The amount charged for any given medical procedure can vary widely around the U.S. and even among hospitals in the same region. They can even vary significantly within a hospital among patients that have the same injury. Bills are determined by fees in the hospital’s billing ledger, which is referred to in the industry as the charge master.
Hospitals determine their fees subjectively, commonly without financial rationale or any basis in cost. Compounding this, the rate of error in hospital bills is as high as 90%! While adjusters often view hospital bills as largely unalterable, for the foregoing reasons, they are in fact ripe for challenge.
Required Procedure or Defensive Medicine?
Injured patients and doctors alike are thankful for advances in medical technology, however, medical providers routinely admit in surveys to ordering unnecessary diagnostic tests as protection against future legal action, a practice called “defensive medicine.” Further, doctors and staff are commonly disconnected from billing so that the cost of additional tests is of little consideration when their goal is to treat and heal. As a result, practical clinical assessments don’t drive the use of expensive diagnostic testing, but rather physician malpractice concerns, lack of physician accountability for cost, and patient expectations do. In addition, the documentation to medically justify these procedures is frequently lacking.
The MRI Example
Emergency room care and diagnostic and imaging technology, such as magnetic resonance imaging (MRI), have become the largest chunk of inflated and overused charges. One study showed that the use of MRIs has grown significantly since the late 1990s, without a corresponding change in life-threatening conditions, admissions to hospitals or intensive care units. Professional medical societies have identified MRIs among the “top five” categories of dubious care.
Casentric’s own data from insurance carriers’ claim files show that practical clinical conclusions are not used as a predicate for ordering many diagnostic tests. MRI bills are more often submitted for simple complaints, such as back and leg pain, rather than for necessary cases, such as an indication of a progressive neurological deficit or a clinical finding of a serious spinal problem that could put the person in imminent danger. We commonly find that MRI results are not referenced in determining the course of care, nor do the notes indicate the reason for which it was ordered.
Insurers Can Reduce Medical Charges with Knowledge and Training
As this development has unfolded in the hospital setting, insurance adjusters have not received the necessary training and the corresponding data that’s required to understand, evaluate, negotiate and contest inflated, inappropriate or questionable medical bills. Adjusters make the mistake of believing that it is their burden to dissect and prove the bill. As explained above, hospitals don’t have an effective way of defending their charges. This provides an opportunity for insurance carriers to reverse the problem of runaway hospital bills by shifting the burden to hospitals to justify their bills.
Data, information and training are mandatory to reverse the shift. However, insurance companies don’t have the time, resources or appetite to retrain their staff. But there is a solution. When medical evidence is methodically organized into arguments and used in conjunction with data, insurers can drive more productive negotiations to challenge submitted medical bills.
For example, a customer received a $32,000 bill for a patient transfer to a trauma unit. Casentric reviewed the hospital charges and treatment procedures relative to the injuries diagnosed and determined that the trauma activation fee and other initial charges were not substantiated. As a result, the customer successfully negotiated to reduce the bill to $14,000. By capturing and reviewing data alone, our customers pay $1,474, or 41% less, for emergency room bills for soft tissue cases, compared with the average billed amount of $2,500.
Adjusters don’t have to be at the mercy of inflated medical bills. When property and casualty insurers have more and better information with which to negotiate, including expertise on hospital billing, injury assessment and treatment, and analysis to diagram specific evidence from the medical records with relevant legal arguments, they can significantly reduce injury settlements.
Feedback
We’d welcome your comments or inquiries on this important topic. We can be reached at info@casentric.com or 877.433.4141.
About Casentric
CaseXpert® is Casentric’s cloud-based SAAS enterprise application that captures all information relevant to the value of an injury and its negotiated resolution in real-time. CaseXpert® generates entirely new, highly structured data that provides incisive intelligence on group and individual employee performance in evaluating claims and negotiating their resolution, in addition to specific guidance on steps to take to improve performance. We provide in-house training for adjusters on best practices in negotiating and provide medical reviews of claims to support this most challenging area for claims handlers to manage.
コメント