In a self-funded health plan, employers cover claim costs as they’re incurred, so keeping those charges in check is a top priority. Tom Doney of Cypress Benefit Administrators shares how this careful claim review is paying off in the form of significant plan savings. He explains how his TPA firm was able to uncover $6.4 million in claim savings in one year on behalf of its employers and shares some examples of big-dollar negotiations. Read more about Doney’s thoughts on self-funding success in the article below.

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$6.4 Million in Savings Realized Through Careful Claim Review

In a traditional health plan, it’s common for a claim to be processed and paid without a detailed run through the charges. This is just the opposite of how things work with self-funding. As third party administrators (TPAs), we encourage – and provide – thorough claim review services. That’s because there are so many errors and inconsistencies with claim charges, and this proves to be one of the biggest savings areas for employers time and time again.

What does the review process look like? At Cypress Benefit Administrators and many other TPA firms across the U.S., it’s much more than receiving a claim, processing it and simply stamping “PAID” on the bill. TPAs have specially trained teams who go through claims on a line-by-line basis looking for things like miscoded items, duplicate entries and the medical necessity of a test or procedure. Anything that seems questionable isn’t just passed through the system, but rather, flagged and further investigated.

What does that mean to the employer? Major savings! Our own Argus Claim Review division at Cypress could provide an endless supply of examples. The team finds an average of $1,391 in savings per claim file, which comes out to a staggering 61.5% average savings for billed claim charges. For all of our employer-clients collectively, the total savings added up to $6.4 million in just one year.

Consider these numbers when contemplating the process-and-pay approach with most traditional health plans versus the careful scrutiny self-funding has long been known for:

  • $36,172.64 in savings – When a non-PPO ambulatory surgical center billed a client $66,000+, the claim was immediately flagged due to its size. Charges were compared to what the Centers for Medicare & Medicaid Services (CMS) would allow and adjusted based on the county’s Core Based Statistical Area (CBSA). The claim amount was negotiated to just over $30,000.
  • $62,434.38 in savings – An out-of-network hospital bill came to more than $130,000, and when contacted, the facility said it typically only negotiates a 10% discount. Research showed that the hospital was charging more than 400% of the Medicare-allowed amount so further negotiations were made to result in over $60,000 worth of savings.
  • $78,664.86 in savings – A Veterans Administration Hospital charged over $101,000 for a four-day inpatient stay. These facilities typically don’t negotiate rates and they also don’t accept Medicare reimbursements. After considering the Diagnosis Related Group (DRG) rate instead and then providing comparable rates for two local hospitals, the bill was negotiated to $22,913.42