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By Jeffrey Rothfeder  |  Posted 11-01-2004 Print Email
: Insurance Dilemma"> The Insurance Dilemma

Network collaboration between payers and providers to handle electronic claims more quickly and with less overhead is in many ways more of a long shot than clinical data systems.

Electronic data interchange and other automated information schemas currently handle upwards of 80 percent of medical insurance claims, but in general they haven't done much to cut the costs of healthcare and enhance productivity, beyond limited scaling back of insurers' administrative expenses. And they have done nothing to improve patients' experiences.

The nature of the networks—point to point, but with very little interaction or information sharing beyond the basic data in the insurance claim—mitigates against true technology gains.

The main problem is the same one faced by the healthcare industry in all its attempts to rein in uncontrolled costs and deficient patient care: A farrago of companies makes standardization virtually impossible.

In fact, when the Health Insurance Portability and Accountability Act of 1996, also known as the HIPAA rules, mandated a set of standards for claims-processing networks, many providers and payers turned to third parties to handle these transactions instead of designing their own systems to meet the legislation's guidelines. In the process, insurers and clinicians are communicating and sharing data even less.

Is a payer-to-provider network that delivers prompt payments, instant coverage approval and, ideally, a wealth of historical information about patients, treatments and medication even possible?

The best chance lies in regions where a few very large providers do business primarily with a few very large insurers. Such systems are still somewhat rare, but one fledgling example is the New England Healthcare EDI Network (NEHEN), a consortium of major Boston-area providers such as Partners Healthcare (which represents big hospital systems such as Massachusetts General and Brigham and Women's Hospital), CareGroup HealthCare System and Lifespan. The payer members of NEHEN—Tufts Health Plan, Harvard Pilgrim HealthCare, Network Health and Neighborhood Health Plan—insure more than 80 percent of the people in Massachusetts who have healthcare coverage.

In business since 1998, NEHEN is essentially a series of networks that link in real time the health plans to the healthcare providers' information systems, which allows the hospitals to determine standard patient insurance coverage in about five seconds, down from what used to take days, and to be reimbursed for treatment in a little more than a month, as opposed to at least three times that in the past.

NEHEN's goal is to slash the claims payment period to within a week. Though NEHEN has yet to include any clinical information applications, it already processes more than 3 million transactions a month, while delivering significant returns to its participants.

Partners Healthcare says it saves $9 million annually in transaction costs by using NEHEN, with the average cost of determining patient coverage eligibility down to about 10 cents from more than $2. On top of that, improved cash flow and quicker reprocessing of patient claims when they are mistakenly denied has brought further savings.

"The Decade of Health Information Technology: Delivering Consumer-centric and Information-rich Health Care"
July 21, 2004
The Department of Health and Human Services' plan to computerize health and create a nationwide health information network

Web Sites
Manages California's Pay for Performance program
Researches the role that IT can play in improving the quality of healthcare
Consortium of Fortune 500 companies aimed at improving healthcare safety, quality and patient value

"We will have to demonstrate actual and consistent returns in some big programs before payer-provider systems start to be embraced by the entire healthcare community," says Lewis Redd, chief of the healthcare practice at Capgemini.

That sentiment—looking forward and hoping for a future of plenty while living in a present where the situation is rife with serious problems—expresses the state of the healthcare industry.

As long as the industry's business model remains an inscrutable mix of rivals grabbing profits from an ever-growing pie, with no financial motivation to cut prices, to treat patients with the deference they get from any other industry, and to view partnerships with anything but suspicion, it's unlikely that healthcare will solve its ills any time soon.

Information technology seems to hold some answers, but it will take time—and billions of dollars in wasted spending—before IT proves to be the antidote the healthcare industry needs.


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