Software. Efficiency. Scalability.

Medicare, being such a large player on the Health Care market, has the power to dictate how the things are done. One of the major things Medicare established is the electronic standard for health care claims.

Out of all the standards they picked EDI: Electronic Data Interchange, specifically an ASC X12 subset.

If you are unfamiliar with the EDI standard, it’s probably for the best. Imagine XML with no closing tags. You sorta kinda have to guess when a hierarchy level ends by finding a tag that doesn’t belong to it. The next level and the level after that can be optional- so can be some of the starting tags or the level you need to jump to. You get the idea.

Not only the standard is awkward and hard to parse, the implementation guides poorly define what must be sent and what should not. The vast majority of the tags and fields are optional, leaving the standard up for an interpretation by vendors. Needless to say, those interpretations differ quite a bit creating a major compliance headache for the industry.

Medicare accepts claims in EDI format so a lot of insurance companies started to accept is as well. Of course, they all have different rules, bells, and whistles. As a result, a lot of processing is  required to submit claims. This is where scrubbing houses come in.

Hospitals still do a lot of business on paper- a lot of it. Their business offices give whatever they can to a scrubbing house, a company that tries to organize the claims and get them ready to be submitted according to the rules of the specific provider. Once the claims are processed by the insurance company, they accept remittance forms in EDI format and send them back to the hospital.

While sending EDI claims is a bit better than sending paper claims, it creates a lot of problems of its own: vague claim definitions, poor ways for revenue reconciliation, and big processing delays. It normally takes 45 days to get a claim processed and get a denial in return, which usually does not tell much about why the claim was rejected.

One of the first things that Health Care industry needs is a better way to communicate. Hospitals, physicians, business offices, scrub houses, insurance companies, and the government all need to be able to talk to each other in a way that is transparent and understandable that allows better tracking, monitoring, and better service. It makes me wish that it were part of the current Health Care debate debate. Unfortunately, it sounds too technical and too down the earth, unlike “public option” and “death panel”.

This is a tech blog. However, I happen to work in the health care industry at the moment, so let me share a couple interesting facts. I will start with the general ones and then move onto the tech challenges the industry faces.

The great health care debate has raged on the Capitol Hill for some time now. It’s interesting that a lot of people talk about Public Option and “nationalizing health care,” as now it is private.

Take a look at a chart I just pulled for a small hospital and an in-hospital clinic combined, two years to date:

This hospital is by no means an exception, and Medicare is already 25% of their patient base. Add Medicare Advantage plans, state sponsored Medicaid, charity care, add bad debt from ER.  The total number will be just shy of 40%. It will be higher in states like Arizona and Florida due to a higher Medicare-eligible population. It will be higher in California due to a higher ER abuse. For a normal Midwest hospital the number will be around 40%.

40% of the volume doesn’t mean 40% of the business.  If I were to look at the procedure code 99213 (office outpatient, 15 min visit) and check the average amount paid by the insurance plan for this procedure, I would not find Medicare leading the pack. I would see a whole bunch of private insurances leading with an average payment ranging from $85 to $100, while Medicare would be sitting in the middle with a mere $58 per visit. Medicaid would be even lower down the list, averaging $36 a visit.

Why such a difference? The answer is rather obvious: Medicare underpays so hospitals are forced to charge private insurances more. Private insurances raise premiums passing it onto the people that buy group and personal plans, essentially making those people subsidize Medicare patients. Well, not just Medicare- it includes Medicaid, charity care, people who go to the ER and never pay, etc.

It’s worth mentioning that we are looking at a pretty much best case scenario here, or what is called a “critical access” facility. Hospitals in rural areas can get this status and change their Medicare reimbursement model. There are less overall people living in the area, and maintaing radio-therapy and chemo-therapy units can be pricey for a small hospital. The government realizes the problem so critical access hospitals are paid more.

Now, it’s pretty obvious what would happen if Medicare were to be expanded. The number of under-reimbursed patients will go up. So will go the charges to the private insurance companies. As a result, expanding Medicare will cause private insurance premiums to go up.

Unfortunately, there is no “winner” here. A lot of people can’t buy insurance and end up going to ERs. Medicare is plagued by fraud and going bankrupt.  A lot of hospitals are struggling to keep heads above the water and are losing money on most of the clinic visits. Private insurances end up over-paying for some procedures. Consumers get higher premiums every year and blame private insurance companies for increasing them.

It appears to be more of a systematic problem, but none of the options that are being currently debated on the Capitol Hill seem to be addressing it.