Health insurers turn to Internet to handle claims: Empire Blue Cross gets ready to process paperwork online

Christopher Mele
The Journal News

May 28, 2001 - Dr. Louis McIntyre remembers talking to a friend who worked for a software maker about developing an Internet-based system that would simplify the burdensome process of getting medical claims paid by health insurers.

"He told me it would take millions of years and hundreds of thousands of lives and dollars," said McIntyre of Westchester Orthopaedic Associates in Harrison.

Five years after that conversation, McIntyre's office is about to see claim submissions to New York's largest insurer, Empire Blue Cross Blue Shield, become as simple, fast and easy as a credit-card transaction.

Empire is rolling out a system that will allow doctors to file a claim via the Internet and have it processed in an average of 12 seconds. Such near-instantaneous approvals promise to spare doctors mounds of paperwork, eliminate delays due to data-entry errors and shave off time for payments to reach them.

Doctors can't continue to sustain themselves with current paper-based systems that are "beyond Rube Goldberg," McIntyre said. His office has four full-time staffers, at a cost of $40,000 each, dedicated to handling the paperwork generated by insurance claims.

"If you don't use these technologies, you're dead," McIntyre said. "This could bring medicine up to speed with the rest of the country. Medicine is the caboose of the industry."

Many health maintenance organizations and insurers rely on electronic claims processing, whether by developing their own custom-made systems or contracting with a third party.

But only a "marginal" number of doctor's claims are currently being processed via the Internet, said Doug Johnston, an analyst with the health care and e-commerce research team at Forrester Research, a technology research and strategy consulting company.

Seven of the country's leading insurers, accounting for about 61 million people or 25 percent of the country's insured, announced last fall that they would contract with MedUnite to process claims over the Internet.

Administration accounts for 25 percent of the costs of the $1.2 trillion health care industry, so any savings from streamlined claims systems could be significant. Of the 1.8 billion physician claims processed in a year in the United States, 1.05 billion are paper-based.

Administrative savings may not necessarily mean reduced premiums, but it will allow insurers to control costs, said Empire spokeswoman Deborah Bohren.

"We saw this as where we needed to go to be competitive, successful and innovative," she said. "Basically, it gets the hassle out of health care."

With paper claims, it can be a week to a month before Empire receives batches by U.S. mail from a doctor's office. If an entry error appears on the paperwork, Empire sends it back by mail, it gets corrected by hand at the doctor's office and mailed back.

Now, claims can be sent via the Internet from the doctor's office on the day of service. The system requires no software and costs doctors nothing, other than the need to have a personal computer and Internet connection. Empire's payment turnaround time will remain the same - about 10 days - but there will be less lag time in getting the claim-review process started.

"Eighty-seven to 90 percent of the claims submitted through the Internet will not be touched by human hands and will be OKed within seconds," Bohren said. "It eliminates any human intervention of claims on our side."

Humans will still need to review claims that the system kicks out when there is a dispute about a diagnosis or treatment. But for garden-variety, uncomplicated claims, it will accelerate the process.

Doctors can also use Empire's system to get their patients pre-approved for medical procedures and tests. Instead of having an office staffer on hold on the telephone waiting for an OK, they can send the request over the Internet and move on to other tasks.

In a separate Web site, patients can access information about their co-payments, medical services, claims status and deductibles. If they get frustrated or confused, a click of a red telephone icon allows them to send an e-mail, get into an instant chat or leave a telephone number for a call back from an Empire representative.

Empire is one of only a handful of insurers to have a claims system on-line. Last week it launched the second phase of the system, involving 300 doctors at 50 sites throughout New York.

The insurer expects to make the system available in a month to all of its 80,000 providers, including about 7,400 in Rockland, Westchester and Putnam counties. By year's end, Empire hopes to have 16,000 doctors actively using the system.

The claims system is part of a broader $60 million computer upgrade Empire has invested in to serve its brokers, employer health benefit managers, patients and doctors over the Internet.

At a minimum, Empire expects the project to pay for itself and perhaps save as much as $100 million in reduced administrative costs.

For the past 18 months, Empire's offices at the World Trade Center have resembled a dot-com start-up, with rows of computer servers lining the floors of a two-story building on Staten Island, as more than 130 technology developers drafted the business rules and codes that filter the claims. Empire handles 23 million claims a year.

The company has relied on 128-bit encryption for security, the highest level available, Bohren said. Empire asked ethical hackers from IBM try to break into the system. They could not. Empire, recognizing competing insurers are employing their own approaches, is even considering marketing its system to accommodate other insurance plans.

But for all the excitement, there are skeptics.

Dr. Andrew Kleinman, secretary to the Westchester County Medical Society, said electronic filings will remove humans from reviewing claims. He also wondered whether Empire will use the new system to discern patterns in doctor's submissions and ultimately use that data against them.

"They are trying to be considered a more physician-friendly company. I really hope that happens. We shall see," he said.

McIntyre is more upbeat. In the last five years, he said, insurance reimbursement rates have dropped by 60 percent while costs have increased 10 percent a year. Any move to save money and streamline reviews are in the best interests of doctors, he said.

"Anything that makes life easier is good," McIntyre said. "It shouldn't be hard to go to the doctor."

Back to Practice News