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1
Six Sigma Project Summary
Reduce Anesthesia Claim Payment ErrorsDue to Incorrect Unit/Minute Billing
Executive Sponsor: Kathy Merry
Project Champion: Beth Noakes
Black Belt: Paul Wenzler
April 22, 2003
2
Problem & Impact
If these errors are not caught, we will overpay $895,000 per year
Despite being billed incorrectly, both of these claims passed right through our PAR/PPO systems and were overpaid.
This happens 16,000 times per year.
Our billing guidelines require Providers to equate 15 minutes to 1 unite.g., 60 minutes = 4 units
3
Measure Phase
Data Collection & Sampling
The sample of anesthesia claims ≥16 units revealed:
32% billed incorrectly
$283 average overpayment
$629,000 annual overpayments
Baseline Sigma: 1.96
Correct
Incorrect
Hypothesizing that claims with a high number of units were more likely to be incorrect,
the team decided to look only at claims with 16 units or more (9% of the claims).
If billed correctly, 16 units equates to 4 hours of anesthesia – nearly double the average
4
Analyze Phase – Critical Xs
In Six Sigma, we focus on factors we can control
Why do we pay anesthesia claims incorrectly?
- Lack of a national standard for time/unit reporting
- Claim forms do not have a field to indicate which time/unit system a provider is using
- Providers are not following our billing guidelines:• Not using 15 minute units• Adding base units
- CHIPS assumes 15 minute units for every claim – no way for it to automatically double-check
- The 15 minute unit is prone to overpayments
5
Proposed Solutions
1. Pend all claims ≥16 units for manual review
2. Begin retracting overpaid claims from last 12 months
3. Continue to educate and assist our providers
Near term recommendation #1 was not accepted by the Sponsor and we were asked to explore other options
Recommend that PNM investigate the possibility of changing contracts/fee structures to one minute billing to address root cause.
(Current contracts won’t be up for renewal until mid 2005)
Our Recommendation for Addressing the Critical Xs
Nea
r Ter
mLo
ng T
erm
6
Claim Data Breakdown
≥16 units9% of anesthesia claims (7000)
32% error rate
All overpayments
Ave overpayment of $234
Total overpayments of $629,000
<16 units91% of anesthesia claims (68000)
20% error rate
Over and Underpayments
Net Ave overpayment of $20
Net overpayments of $266,000
All Anesthesia Claims
75000 claims with an error rate of 21% = 16000 incorrect claims
Over and Underpayments: Absolute dollar error of $1,650,000
Net Ave overpayment of $57 = Net overpayments of $895,000
7
Proposed Solutions - Revised
Pend claims ≥16 units Pend all claims
7000 pends2240 adjustments2600 calls to providersUse existing resources
75000 pends13400 adjustments46000 calls to providersHire 4-5 new resources
Pend by provider
Configure MARS to pend only those claims from targeted providers
Configure CHIPS to pend claims with 16 units or more
$629,000
Description
Impact
Savings
Pros
$895,000 To be determinedRange: $0 - $895,000
- Cross-functional team’s solution- Efficient use of resources- Significant savings
- The entire problem is addressed- Significant savings- Avoids business practice concerns
Configure CHIPS to pend all claims regardless of units
To be determined
- Low-hassle, targeted approach- Avoids business practice concerns
Cons- Customer feels it is a bad business practice and is counter to Operational Excellence
- Significant provider hassle- Inefficient use of company resources
- Moving target, requires admin effort- Unknown ROI- Will not detect many errors
Customer has decided to adopt the “Pend by provider” strategy.
8
Benefits of the Project
• Better informed about a long-standing issueThis has been occurring since at least 1995 (8 years @ $500,000 = $4 million). We are now better equipped to do something about it.
• Proved the value of the methodologyFacts and rigor won out over strongly held assumptions: “HIPAA will fix that”, “CHIPS can’t do that”, “Its not that big of a problem”
• Generated new project ideasPotential Green Belt projects related to CRNA billing and improper use of modifiers on anesthesia claims
• Leadership DevelopmentWorked with Service Operations, Provider Network Management, Legal, Audit, ISD, and Corporate Training
9
Many thanks to…
Beth Noakes, Kent Pillow, Colin Drozdowski, John Syer, Debbie Lahocki
A Great Project Team
PNMDan WiseTim MillerBob BrownDarryl DaySandy Self
Strong Cross-functional Involvement
Service OpsPatty TaylorNancy ElliottToni Franey
John EdwardsLillian Shell
Jerry GreeneClaims Process Team
AITCatherine Gaylor
AuditConway AllenMelissa Clark
LegalCarter Tucker
Owen Hunt
TrainingCordelia Starkes