How health plans can meet the growing need to manage complex claims

Health plans are facing another challenging year when it comes to forecasting, accruing, settling and managing their financial exposures. The world of payment for healthcare services is rapidly changing as the number of complex non-claims financial arrangements (NCFAs) increases, and that means plan executives should rethink many aspects of their financial operations. The payment ecosystem is suffering from inefficiencies, increased opportunities for errors and financial loss that erodes the bottom line.

NCFAs are claims outside the traditional claims payment system and include any financial compensation provided by a payer to a provider or health services vendor that is not submitted through the traditional claims adjudication processes. NCFAs are not new, but they are growing as the market adopts more alternative payment models (APMs) and value-based care (VBC) agreements. Examples of NCFAs include “upside and downside” shared risk arrangements in which payers and providers collaborate on financial and performance goals and share in potential financial gains or losses; performance-based incentives, and fixed fee-based payments between payers and providers or vendors.

The proliferation of payment arrangements and lack of standardized systems are leaving payers ill-equipped to handle NCFAs amid disparate systems, manual processes and heightened risk of financial loss and duplication. At the same time, there is an influx of specialty payment models and vendors contracting with payers to help reduce medical expenses, administrative costs and operational burdens, as well as take on risk. Many payers are seeing 50% to 70% of their medical expense payments flowing through NCFAs, with fee-for-service claims now representing the minority of payments.

Within this environment, there are many interrelated dynamics for payers to consider when it comes to NCFAs.

• Off-claims payments are becoming more complex due to the wide variety of terms in provider-based contracts. This variety brings diverse financial arrangements, vendor relationships and internal programs within the payer’s operational structure.
• Inadequate, outdated claims payment infrastructures designed primarily for fee-for-service claims lack the flexibility and creativity required to meet today’s evolving care delivery approaches. A strained payment system, redundant operational inefficiencies and material forecast-to-actual misses are often the result.
• The growing volume of complex NCFAs represents a growing financial risk for payers. Effective management of NCFAs means preventing duplication of payments for quality incentives, identifying service overlaps and mitigating the risk of mismanagement of funds.
• The lack of data integration across the payer enterprise resulting from decentralized and fragmented data systems challenges payers to track interactions and transactions, assess the success of NCFA approaches and perform necessary financial and operational analysis.
• Treated by many payers as one-offs, NCFA strategies are often operationalized in siloes, hindering alignment with organizational strategic goals including value-based care contracts, buy-up solutions and other vended services that may overlap across members and groups.
• The heightened focus on regulatory compliance is requiring payers to manage NCFAs with greater transparency, precision and accountability.
• Expanding rules, regulations and stakeholder expectations are creating new accountability metrics. Payers should quickly and effectively manage NCFAs as they analyze data, listen to heightened concerns from providers and insured members, and assess the financial stability of their organizations. Examples of these challenges include managing group charges for programs such as fitness or diabetes management from vendors with risk-sharing providers and accruing and settling with partial risk groups or administrative services only (ASO) customers on a performance basis. Payers that charge on a per engaged member per month (PEPM) basis within provider contracts often face added complexity.

A wide range of opportunities in people, process and technology are available to payers to help manage NCFAs. Many payers are either considering or implementing workflow enhancements, transitioning to a scalable, automated and centralized approach to manage NCFAs effectively.

Several common solutions have emerged.

• Centralized management framework: Implement a centralized repository for NCFA arrangements and a cross-functional governance structure to confirm standardized processes. This framework can streamline the management of existing, proposed and renewing NCFAs, mitigating duplication and enhancing operational consistency across the organization.
• Unified data architecture: Develop a scalable architecture that unifies data, calculations and transformations across NCFA processes. This can help facilitate seamless tracking of financial flows, reduce redundancies and enable precise reporting, imperative for meeting regulatory and strategic requirements.
• Process automation: Transition from manual workflows to automated processes that can decrease reliance on spreadsheets and human intervention. By automating reconciliation, reporting and settlement, payers can improve efficiency, reduce errors and focus resources on high-value activities.
• Enhanced transparency and reporting: Implement tools to help improve transparency in financial arrangements, enabling real-time tracking and reporting of interactions. This approach can promote compliance, provide actionable insights and foster trust with internal and external stakeholders.
• Cross-functional collaboration: Establish a governance model that includes many of the relevant stakeholders — such as procurement, care management and finance — to help drive alignment and consistency in NCFA processes. Collaboration can confirm that NCFA strategies support organizational objectives and address operational pain points.
• Stakeholder training and support: Provide holistic training to stakeholders involved in NCFA management to help confirm smooth adoption of new processes and technologies. Equip teams with the skills and knowledge needed to handle complex arrangements effectively.

We can provide you with strategic approaches that can help you overcome the challenges associated with NCFAs.