The U.S. healthcare system is fraught with inherent complexities in how providers receive payment for the services they deliver. And those complexities include conflicting methodologies that too often breed contentiousness between payers and providers around how, when and whether services will be reimbursed. Payer scorecards offer an effective solution for mitigating these tendencies.
While they are still being perfected, these tools have evolved to the point where organizations can reap clear benefits today from using them to assess and compare the performance of provider and payer partnerships.
“Providers can use these tools to systematically measure and analyze a broad range of factors,” said Shawn Stack, HFMA’s director of perspectives and analysis. “Factors include payment rates, claims processing efficiency, payment timeliness, denial rates, utilization oversight, patient/member access to care challenges, solvency and overall collaboration among commercial insurers as well as government managed care plans and payers.”
Payer scorecards defined
“Payer scorecards are comprehensive assessment tools used by provider organizations to evaluate the performance and value of various healthcare insurance plans and payers,” Stack, said. “In specific federal and state contexts, scorecards also can serve as a valuable comparative tool, allowing providers to benchmark the performance of a contracted federal or state managed care plan against the performance of its fee-for-service counterpart.”
Stack suggested that a well-crafted payer scorecard should help a provider organization to:
- Streamline patient/member utilization and reimbursement
- Pinpoint avenues for process optimization
- Alleviate administrative overheads and expenses
- Foster the collaborative and negotiation prowess of the organization’s managed care professionals
- Identify and pursue opportunities for advanced alternative payment models, including value-based care and quality care models
Purpose and design of payer scorecards
Providers have used payer scorecards to monitor health insurance and payer performance for years. Over the past decade, however, advancements in data analytics and more comprehensive reporting derived from electronic health records (EHRs) and patient accounting systems have empowered providers to develop more robust payer scorecards.
“These enhanced scorecards facilitate timely and intricate discussions with payers,” Stack said. “As a result, they directly influence performance, care accessibility, administrative efficiency and collaborative efforts.”
OSF Healthcare: A scorecard in action
Among those health system pioneers that have forged ahead in adapting their EHRs to allow for broader comparisons among their payers is Peoria, Illinois-based OSF HealthCare. Laurie Hurwitz, MBA, OSF’s senior vice president, revenue cycle and managed care, and Cathy Beebe, OSF’s director of managed care, together have been instrumental in this effort.
“Our Epic EHR can generate standardized payer scorecards — they select the metrics,” said Hurwitz. “But we initially found it wasn’t very useful because it generated one scorecard for every insurance plan. And we might have something like 30 Blue Cross of Illinois plans. So Cathy worked with IT to create payer roll-ups that would allow us to get to one scorecard for Blue Cross, one scorecard for UnitedHealthcare, and so on — so although they’re separate, we now have scorecards for all commercial payers we contract with, including Medicare Advantage plans and Medicaid managed care organizations.”
A monthly reporting process. OSF initiated this process in 2020 and has since steadily reaped the benefits. OSF now generates a scorecard report for its payers on the sixth of every month, providing insight into the following metrics:
- Percentage of first payments denied
- Average days to denial resolution
- Percentage of accounts receivable (A/R)
greater than 90 days
- Percentage of A/R greater than 35 days with
- Average days to first payment
- Average days to first payment weighted (accounting more for high-dollar claims)
Hurwitz and Beebe were awaiting a report at the time they were being interviewed for this article, and it came in, much to their excitement.
“I love these reports,” Beebe said. “I’ve been working on this one payer really hard, so I’m curious to see if their numbers came down.”
“Cathy routinely pulls the latest report while talking with payers and shows it to them,” Hurwitz said. “And it actually compares how they did in the current month to the previous month. And gives them how many claims are out there and the dollar amounts.”
“We put the percentages that are coming into an Excel spreadsheet — it’s a bit of a manual effort, but it doesn’t take that long,” Beebe said. “For example, we group together the Medicaid payers and then take our key metrics and line them up. And we blind it for them. So we might say to the payer, for example, ‘Here’s where you are and here are payers A, B, C and D: And you can see, your first payment is denied 10% of the time and everybody else’s is at only 5%.”
That leads to a discussion of what’s driving the denials.
“It allows us to put pressure on them,” she says. “One of our payers is a large local employer, and they really like it because they can share it with their two TPAs [third-party administrators] to measure how the different TPAs are processing their claims.”
Tough discussions. The scorecard reports also make it possible for OSF to have frank discussions with payers.
“When I look at the reports, I am always asking Cathy things like, ‘What’s going on with such-and-such a payer? Why have their denials spiked?’ And when she meets with the payer, she can say, ‘We have a problem here. We see that the administrative cost of participating with your plan and getting our claims paid is too high. And unless you get this cleaned up, we will not extend your contract with us.’ And then they get pretty motivated to attempt to resolve things.”
Hurwitz and Beebe both noted that these conversations have resulted in some big improvements on the metrics.
“For us, it’s really more about volume than dollars, because it takes us just as much time to work a $1,000 claim as it takes us to work a $10,000 claim,” Hurwitz said. “And the volumes for an organization of our size are pretty mind-boggling.”
A focus on partnerships. Hurwitz stressed that the responsibility for a director of managed care like Beebe is about more than negotiating contracts.
“It’s about managing the relationship with the payer,” she said. “You have to hold them accountable to the contract terms to ensure the organization is paid every penny to which it is entitled for services it has provided. The payer scorecard is an effective tool for doing that.”
But Hurwitz and Beebe also emphasized that it’s not just about calling out the payer for problems, because both sides can benefit in this process.
“I think it’s eye-opening to the payers,” Beebe said. “They want to help us improve our A/R and resolve problems by getting to the root cause. Sometimes the errors might be on our side, and we can benefit from identifying opportunities to improve. For example, we might need to ask, ‘Is somebody on our side not working those denials? Is that why this payer’s A/R is going up?’”
“Whenever I’m talking to a payer, I emphasize that we want to have a partnership, not a transactional relationship,” Hurwitz added. “So we ask them to provide us with feedback and have open dialogue. We want them to tell us how we can do better in submitting our claims so we can get paid. And the scorecard helps us see the overarching trends and themes so we can determine if something has gone wrong. Maybe a revenue code changed, and we didn’t catch it.”
“I think the tool has improved collaboration both with payers and internally,” Beebe said. “It’s because we have common goals. The reality is that the fewer denials we have, the fewer headaches they have in cleaning stuff up and dealing with our questions and claim issues.”
A work in progress. Hurwitz and Beebe also acknowledge that the scorecards still have limitations, and they look forward to seeing these tools become increasingly refined and improved.
“The payer scorecards allow us to benchmark payers in Epic’s cohort group to each other with our data, Hurwitz said. “So we can tell Blue Cross what we are seeing in their metrics, which includes, for example, how long it takes them to pay the first claim. But what we can’t do is understand how our interaction with Blue Cross of Illinois compares with the experience of other health systems that are contracted with them. So being able to understand how well we do with them compared with other health systems is still a work in progress.”
Hurwitz added, “I think that many of us have a proclivity to want perfect data. But you can’t let perfect get in the way of the good enough. So even though our payer scorecards are not perfect, they provide a lot of clues we wouldn’t have without them. It’s a place to start. You have to use your data in the best way you can to effectively drive your improvement activities.”
Process improvements underway
“The next step for us is to be able to see these reports in real time, instead of having to wait for a report to be generated every month,” said Beebe. “If you have a real-time view, you could see if all of a sudden your denial rate were to skyrocket.”
“We should all be trying to improve constantly,” Hurwitz concluded. “There’s no such thing as getting there and deciding, ‘OK, good enough.’”
The challenge providers encounter in handling payer issues lies in striking a delicate equilibrium, HFMA’s Stack said.
“This balance involves effectively addressing disruptive trends affecting provider reimbursement and patient care, all while avoiding the creation of animosity and tensions between providers and payers,” he said.
He suggests sustaining harmonious collaborations between payers and providers is paramount for delivering effective patient care.
“Healthcare professionals engaging in these discussions must exhibit unwavering focus, impartiality and determination to steer the conversations to harmonious resolutions that address concerns affecting care quality, rightful reimbursement and undue administrative strain,” Stack said.
In his view, industrywide integration of payer scorecards can play a pivotal role in reshaping the healthcare landscape by fostering transparency, accountability and collaboration among provider and payers. The result, he said, could be lower costs and higher-quality and effectiveness of healthcare, ultimately contributing to the broader goal of achieving cost effectiveness of health.
Future developments for payer scorecards
HFMA is working to introduce a nationwide payer scorecard, accessible to its member hospitals via the Association’s MAP App database. This initiative, targeted for completion in 2024, aims to equip providers with the ability to compare payer performance with peers not only within their states but also across their regions and the entire nation.
“The potential impact of engaging in national payer scorecard discussions cannot be underestimated,” said Shawn Stack, HFMA’s director of perspectives and analysis. “It holds the potential to significantly influence interactions with payers, enabling providers to address systemic challenges on a national scale. This collaborative approach becomes pivotal when engaging with payers to forge solutions that enhance patient and member access to care, ensure proper reimbursement and facilitate prompt resolution of medical claims.”
Ultimately, the objective of any such effort should be to alleviate administrative burdens and associated costs, fostering a more efficient and effective healthcare ecosystem.
4 steps for launching a payer scorecard
Health systems seeking to develop and implement a payer scorecard should first take steps to lay the groundwork for building upon, enhancing and maintaining the scorecard in the future. Shawn Stack, HFMA’s director of perspectives and analysis, recommends four steps as being crucial for addressing pivotal considerations in implementing a scorecard. He also strongly advises that these steps be periodically revisited to fine-tune the
scorecard once it is operational.
1 Familiarize yourself with and analyze the payer metrics for each major payer at your organization. Identify both areas of commendable performance and hurdles that demand attention and enhancement. Focus particularly on instances where the payer exerts a discernible influence on a given metric. This entails conducting an impartial review of your accounts receivable, differentiating between metrics requiring internal intervention and those in which the payer plays a pivotal role in shaping performance outcomes.
2 Clearly describe each metric and carefully define its components. With such precision, the organization can establish systematic monitoring of expectations on a predetermined schedule, involving all pertinent stakeholders for each metric.
3 Construct and execute a scorecard that tracks and monitors every identified metric crucial to your organization’s objectives. Benchmarks and thresholds should be established for each payer and metric. This approach should be rooted in both volume of claims and dollar amounts, as it is vital to comprehensively monitor both administrative burden and the payment impact.
4 Meet with essential internal stakeholders to collectively review and refine your scorecard. The scorecard should be a product of the collaborative insights from each stakeholder. Subsequently, the refined scorecard should be presented to payers for periodic review to create and maintain a regular cadence of engagement to drive performance improvement.
Key metrics for payer scorecard success
The effectiveness of a payer scorecard in promoting collaboration between a provider and its payer partners hinges on the provider’s choice of metrics for the scorecard. And making the right choice requires first clearly understanding what the scorecard’s primary focus should be.
That goal should be to improve payer yield and reimbursement velocity, according to Sandeep Puri, MBA, leader of AR recovery for FinThrive, based in San Francisco.
In a July 5, 2021, LinkedIn post, Puri wrote that such a focus is “critical for ensuring the financial health and sustainability for healthcare providers.”a He defined the measures as follows:
- Payer yield is a measure of the cash collected relative to the net expected reimbursement.
- Reimbursement velocity is a measure of the time it takes to get reimbursed by a payer.
Puri highlighted five specific metrics that he suggested can help providers understand the root causes of denials, thereby enabling to institute needed improvements:
- First-pass-denial rate, where a denial is the payer’s first response
- Average time-to-payment, a measure of the payer’s overall responsiveness
- Denial overturn rate, which also reflects success in appeals
- Allowed-to-expected ratio, which represents the amount collected as a percentage of the amount the organization expected to collect
- Payment-to-allowed ratio, the ratio of the amount paid by the payer relative to the allowed amount (which, if small, points to a higher percentage of payment that reflects patient responsibility)
When asked about his outlook regarding future adoption of payer scorecards, Puri was optimistic: “I see more providers beginning to track and compare payer performance to enable data-driven discussions with payers focused on collaboration and incentives to align on common goals.”
a. Puri, S., “Revenue cycle management-payer scorecard for creating better payer-provider alignment,” LinkedIn post, July 5, 2021.