Pamela M. Waymack
Gwendolyn Lohse

Incomplete eligibility verification can create problematic ripples throughout the revenue cycle. But some healthcare organizations have found a way to keep the ripples from turning into a tsunami.

At a Glance 

Electronic eligibility verification is already being performed by some healthcare organizations and is in the near future for all hospitals. Several steps will help your organization make this vision a reality: 

  • Gain internal management commitment to improving eligibility automation. 
  • Approach potential business partners. 
  • Talk with your software vendors about their plans to obtain CORE certification. 
  • Consider requiring CORE certification as part of your managed care contracting expectations. 

It is a simple fact of the healthcare revenue cycle: Insurance eligibility drives payment. And the first step in that cycle-eligibility verification-is the most critical. Unfortunately, eligibility verification is one of the most neglected elements in the revenue cycle.

The need for seamless, integrated eligibility and benefit verification is becoming more urgent. Every provider organization should be taking steps to prepare for standard, automated eligibility verification.

Eligibility Verification: A Potential Tsunami

In the absence of proper eligibility determination, countless downstream problems are created: delayed payment, rework, decreased patient satisfaction, increased errors, and, potentially, nonpayment. Incomplete eligibility verification creates problematic ripples in three key areas:

  • Plan identification
    • Erroneous plan billing
    • Failure to identify out-of-network patients
    • Failure to meet correct plan's timely filing requirements
  • Benefit coverage
    • Inability to identify excluded benefits
    • Inability to determine benefits requiring precertification
    • Failure to preauthorize with correct plan
  • Patient satisfaction
    • Incorrect filing of claims
    • Inability to verify insurance benefits with initial registration information
    • Incorrect identification of patients' financial responsibilities

When eligibility is not properly verified, those ripples become waves that are felt throughout the organization. Getting eligibility right has always been imperative for efficient and effective reimbursement. But what forces have raised eligibility verification to the critical business process that it is today?

The Forces at Work

Multiple forces are driving the need for more thorough eligibility verification. The declining number of Americans with employer-sponsored health insurance since 2000 has been documented by the Kaiser Family Foundation in its study Health Insurance Coverage in America: 2004 Data Update (November 2005). In addition, those Americans who do have employer-sponsored plans are changing employers more frequently; as a result, their benefit plans are also changing.

See Exhibit 1 


Multiple forces are driving the need for more thorough eligibility verification. When eligibility is not properly verified, the impact is felt throughout the organization. 

Insured patients are facing higher deductibles, copayments, and coinsurance levels, and those amounts are often changing annually at open enrollment. In response to cost concerns, many plans are offering reduced benefit coverage. Also, restricted networks are now tiered, making coverage determination more complex.

Although the Health Insurance Portability and Accountability Act requires health plans to support a standard electronic eligibility inquiry, the regulation has failed to meet provider needs. For example, HIPAA requires health plans to answer only "yes" or "no" in response to a provider's eligibility inquiry, falling far short of all the information needed by providers.

For those plans that provide additional data, the lack of standardization makes communication with multiple plans difficult. Health plans' differing patient identification requirements also add to the difficulty of confirming eligibility. Finally, standard business requirements for electronic commerce, such as acknowledgment of inquiries or timeliness of expected response, are not addressed by the HIPAA requirements.

The ripples affecting providers attempting to verify eligibility are widening. Software vendors cannot offer seamless eligibility verification solutions without health plan cooperation. Providers have few cost-effective options. And semi-automated solutions such as web site lookup or interactive voice response continue to consume staff time.

Third-party data management companies offering eligibility verification interfaces offer an alternative, but at a price. Eligibility verification services would do well to take a cue from electronic banking, in which users can conduct a variety of transactions anywhere, at any time of day, and at virtually no cost. Unfortunately, today's patchworked solutions are inadequate given the changing health insurance market.

The Future Vision: Seamless Eligibility Verification

A registrar is scheduling a patient by telephone while, in the background, the scheduling system verifies eligibility and determines benefit coverage for the requested appointment. Before the patient hangs up, the scheduling system identifies an incorrect health plan, and the registrar is able to ask the patient immediately for changes to plan participation. The scheduling system confirms eligibility with this plan and also establishes the patient's financial responsibility; thus the registrar is able to inform the patient of payment up front. Additional calls to the patient and the insurance company are reduced, and staffing costs are virtually eliminated.

On the day of the appointment, as the patient checks in, the provider's registration system reconfirms the patient's eligibility with the identified plan. Any changes based on new employment, open enrollment plan changes, or modifications to benefit levels are addressed at the point of registration.

In the days that pass after the patient receives healthcare services and before the bill is dropped, eligibility is once more verified electronically, this time by the billing system. Any changes to eligibility are added to a work list for the collectors in the morning. Charges therefore are not submitted to an erroneous plan, eliminating the chance that they would be denied. The cycle time for submitting charges to the correct plan is significantly reduced, and patient satisfaction is improved.

A mirage? Not necessarily. Several healthcare organizations already have piloted this vision with their health plan partners, establishing models in automating eligibility processes on a regional basis. The results speak for themselves.

Minneapolis-based Allina Hospitals and Clinics is an early innovator of fully automated eligibility verification. It moved from a process dependent on manual entry of eligibility information into each individual payer's web site to a fully automated query of all patients that occurs during the scheduling process. Allina's goal was to verify 100 percent of all patients' insurance on the front end.

The organization's experience with its first and largest payer in 2003 produced the following results:

  • Staff time at the front end went from 44 seconds per transaction to 8 seconds.
  • Monthly claim denials related to eligibility were reduced from 500 to 100.
  • After the initial pilot, 97 percent of all patients had their eligibility verified before service.

Southcoast Health System, which consists of three community hospitals in Massachusetts, is another forward-thinking organization that realized its chance of getting paid correctly and on time depended on improved eligibility data. For the past five years-before the basic HIPAA eligibility standard was required-Southcoast has been obtaining eligibility data electronically in real time for all scheduled patients (surgery and radiology services) and utilizing a nightly batch mode for its more than 160,000 emergency visits.

The system was able to accomplish this through the New England Healthcare EDI Network, a regional collaboration of large plans and providers. Although Southcoast experiences a 96 percent member match rate through NEHEN, it still finds that 4 percent of eligibility inquiries require follow-up. With more than 500,000 automated eligibility queries per year, that leaves approximately 25,000 encounters that must be resolved within a four-day window prior to dropping bills.

With one of the features of NEHEN, Southcoast is able to query the participating plans for membership information on all self-pay accounts. As a result, Southcoast has found active insurance for approximately 15 percent of its more than 8,000 self-pay patients annually.

Southcoast was also able to reduce its write-offs for denied charges over the past six years. From 2 percent of net revenue written off to denials in FY00, Southcoast expects to end FY06 having written off only 0.20 percent of net revenue to denials. In addition, Southcoast's gross days in accounts receivable have consistently declined over the past seven years, from 83.0 days in FY00 to 39.7 days in FY06. Its revenue cycle executive notes these results could not have been achieved without automated eligibility.

Moving the Vision Forward: The First Step

Those organizations were successful because they realized that fully automated eligibility verification is imperative in reducing the chaos we have created at the back end of our revenue cycle.

Eligibility verification has always mattered. But it matters even more now because of the changes in healthcare insurance, from consumer-directed plans to pricing transparency. With the changes occurring in the health insurance arena, eligibility is becoming a wave that will force its way through healthcare organizations with disastrous results if not prepared for.

How can your organization prepare for this future? There are several steps that will help your organization make this vision a reality:

  • Gain internal management commitment to improving eligibility automation to enhance the organization's financial performance and patient satisfaction.
  • Approach potential business partners. Providers cannot achieve the vision alone; they depend on health plans and software vendors.
  • Ask your partners what they are doing to make seamless eligibility verification a reality. Make ongoing business relationships contingent upon partners supporting standard electronic commerce for eligibility and benefit verification.
  • Ask your health plans when they plan to adopt CORE's rules and become CORE certified. Consider requiring CORE certification as part of your managed care contracting expectation of preferred plans.
  • Talk with your software vendors, including scheduling, registration, and billing companies, to identify their plans to obtain CORE certification. Ask what they are doing to incorporate eligibility verification into their software workflows.
  • Consult with your clearinghouse to determine whether it plans to become CORE certified.
  • Become a CORE endorser to show your organization's commitment to improved performance in this critical business process. Also, consider getting involved in CORE; its work groups will continue their work to build on this initial foundation with further data content and functionality. 

Acting on the Warning Signs

Eligibility verification is not a project to be addressed "one of these days." Banks that did not embrace automated teller machine technology are gone. Grocery stores that have not adopted checkout scanners are dying.

In health care, many of us may hardly remember using a paper calendar for scheduling. Bills are no longer photocopied from handwritten ledger cards. Manual or semi-automated eligibility processes cannot keep pace with the changes occurring in healthcare insurance.

But most centralized verification offices and third-party data management companies do not cost-effectively address the need for consistent, timely, and robust information incorporated into providers' workflows. Only by transforming the entire process into a seamless, standard, electronic interchange can we achieve the reduced costs and improved patient service demanded of us today. Otherwise, the eligibility tsunami will overwhelm us.

Pamela M. Waymack, FHFMA, is managing director, Phoenix Services Managed Care Consulting, Ltd., Evanston, Ill., and a member of HFMA's First Illinois Chapter (

Gwendolyn Lohse is project director, CORE, Council for Affordable Quality Healthcare, Washington, D.C. (

Getting to the CORE of the Solution

Although individual and regional efforts are important, there is a need for a national approach that is standardized across plans. Over the past two years, nearly 100 healthcare industry stakeholders have collaborated to develop a set of enhanced, common operating rules for electronic eligibility and benefit verification. The Council for Affordable Quality Health Care's Committee on Operating Rules for Information Exchange (CORE) has brought together health plans, providers, vendors, the Centers for Medicare and Medicaid Services and other government agencies, associations (including HFMA), standard-setting organizations, and banking industry experts to make this vision a reality. Health plans participating in CORE (Aetna, Inc.; AultCare; Blue Cross Blue Shield of North Carolina; Emdeon; Health Net, Inc.; Health Plan of Michigan; Humana Inc.; Mayo Clinic; McKesson Provider Technologies; Montefiore Medical Center; Siemens; and WellPoint, Inc. and its 14 Blue-licensed subsidiaries) represent nearly 75 percent of the commercially insured U.S. population.

CORE's focus throughout this initiative has been to:

  • Streamline and enhance current HIPAA eligibility transactions
  • Reduce the amount of time and resources providers spend verifying eligibility and benefits
  • Enhance interoperability between providers and health plans

The first phase of rules developed by CORE was approved in April. With phase I rules, providers will be able to:

  • Determine which health plan covers a patient
  • Identify patient benefit coverage
  • Confirm coverage of certain service types

Establish the patient's copayment amounts, coinsurance level, and base deductible level for the service types as defined in the member contract
In addition, the rules establish policies governing the exchange of that data, including:

  • System connectivity
  • Standard inquiry acknowledgements
  • Maximum response times
  • Minimum hours a system must be available
  • Standard 270/271 companion guide flow and format

Health plans, vendors, and providers across the country are preparing to adopt CORE's phase I rules through a national certification process to further the adoption of electronic eligibility. The vision of integrated, real-time eligibility inquiries and responses is one step closer to reality as a result of this collaborative. Similar to banking's use of electronic transactions, providers will be able to submit eligibility inquiries and receive a real-time response from any point of entry using any electronic system of their choice.

By March 31, 2007, these organizations will electronically exchange eligibility and benefits information; the CORE operating rules will allow providers to get this information from any participating health plan in 20 seconds or less.

The CORE initiative will create operating rules to address additional eligibility components and business transactions in later phases that begin this year. CAQH plans to launch the CORE phase II operating rules in late 2007.

Publication Date: Wednesday, November 01, 2006

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