Claim Lifecycle

·           Define a claim

·           Describe the claim lifecycle

·           Describe claim administration

·           Describe the claim adjudication process

Definition: A claim can be defined as the documentation of the services that have occurred during the course of a visit to a healthcare provider. 

Claim Lifecycle

n   Claim lifecycle consists of a series of four steps. The steps in a claim lifecycle are:

1.     Generating a claim: This is the first step in the claim lifecycle. It begins with a member’s visit to a provider. The provider provides the adequate treatment and captures the healthcare information in the standard format.

2.     Filing a claim: A generated claim, which is captured in the standard format, is sent to the insurer.

3.     Claim administration: A filed claim is received, reviewed, and adjudicated by the insurer.

4.     Claim reporting: After the claim administration process, the claim is archived for referral, financial reporting, and regulatory purposes.

Step 1: Generating a Claim

n   A claim is generated when a member visits a provider. The provider provides adequate treatment and captures the healthcare information.

n   The healthcare information includes member’s name and identification number, provider information number, national provider identifier (NPI), dates of service, process codes of services performed, diagnosis code, and payer identification number.

n   Claims can be generated by the following service providers:

          ·           Facility: This includes healthcare facilities, such as hospitals, skilled nursing facilities (SNF), and                       long term care providers.

          ·           Physician: This includes primary care physicians (PCP), ancillary, and specialists.

Ancillary services are supplemental services, including laboratory, radiology, physical therapy, and inhalation therapy that are provided in conjunction with medical or hospital care. 

Step 2: Filing a Claim

n   Once a claim is generated, it can be filed by the member or the service provider. The claim can be filed either in paper format or electronic data interchange (EDI) format.

n   The claim are filed using standard forms, such as:

      ·           Universal Billing (UB) 92

      ·           UB 04

      ·           Health Care Financing Administration (HCFA)1500

      ·           Centers for Medicare and Medicaid Services (CMS) 1500

Step 3: Claim Administration

n   Insurers manage the claim administration process through the claim administration department within their organization. Claim administration involves receiving, reviewing, and adjudicating claims.

n   The claim administration department is structured depending on:

·           Type of billing forms being processed

·           Line of Business (LOB) for which the forms are being processed, such as dental, medical, and hospital 

n   The most critical step of the claim administration process is claim adjudication. After a claim is received and reviewed, it is sent for claim adjudication. 

Claim Adjudication

·           Involves determining eligibility, applying benefits, and identifying the payment terms for a claim

·           Can be done manually or automatically (auto-adjudication)

The claim adjudication process, involves:

·           Determining member’s eligibility for coverage for billed dates of service

·           Verification of billed procedures or services

·           Calculating the payment to be made

Result of Claim Adjudication

·           Claims Approved: If a claim is approved, the insurer reimburses the expenses to the provider for the medical services and facilities provided.  Providers are reimbursed for services rendered to a member in two ways: 

·           Fee for service (FFS): Provider is reimbursed specifically for the services rendered to the member and paid based upon contractual arrangements.

·           Capitated encounter: No payment is made to the provider but a statistical claim is used to identify services rendered. The providers are paid a fixed sum for fixed duration.

·               Claims Pended: Claims that require extra information are given the pend status. Once the required information is received, claims are reopened.  

·               The reopened claim is either auto-adjudicated or processed manually. A reopened claim is processed manually if only the required information is sent. If the reopened claim is filed as a fresh claim, it can be auto-adjudicated. 

n    Claims Denied: Some claims are denied after adjudication.

Common factors for denial of claims are given below.

·               Diagnosis is inconsistent with patient’s age

·               Member has already exhausted benefit maximum limit

·               Primary care physician (PCP) did not approve services

·               Claim has previously been paid, duplicate claim checking is performed to determine this

Step 4: Claim Reporting

n   Claim data is submitted to a data warehouse for reporting and archival purposes. Some of the important aspects of claim reporting are:

·           Due to government regulations, claims are stored for a minimum of seven years.

·           Claims statistics are gathered on a monthly basis to determine expenses paid out by claim administration department.

·           Claims are vital to financial reporting process.

·           Incurred But Not Reported (IBNR) mechanism tracks claims that are in a “pend” state but will be paid soon.

Pend claims are often routed to specific work queues for adjudication