Missed Opportunity
Recently Healthcare Horizons personnel identified a large overpayment of a medical claim by a client’s third-party administrator (TPA) that was quite surprising. If you have followed our Lost Benjamin Awards, you know that our finding large overpayments is quite common because we audit 100% of our clients’ medical claims on most engagements. What was so unusual in this situation was that the finding occurred in a random sample audit. One rarely finds large overpayments when doing random sample audits, even when stratifying the medical claims population by dollar amount to audit a higher percentage of large-dollar claims.
Overpayment Found
The finding was due to an overpayment on a COVID claim. The payment was processed without a patient cost share. The previous cost share waiver for COVID had ended, but the claims payment system was not updated to account for this. Therefore, all COVID claims paid during an 8 ½ month period were overpaid. Yet, the significant overpayment was not recognized by the TPA’s proprietary audit procedures as part of a larger problem. Healthcare Horizons personnel immediately began wondering how many similar overpayments had occurred but remained undetected. Significant overpayments like this one often point to an underlying systemic issue that leads to even larger recoveries.
Opportunity Lost
However, the employer’s contract with the TPA limited its audit rights to only random sample selection, so we were unable to apply our 100% audit capabilities to identify other overpayments. These events reminded us of a quote from Professor Ronald Klimberg of Saint Joseph’s University Haub School of Business:
“Random sampling misses over 90% of the errors caught by the methodology based on the 100-perecent-of-claims analysis.”
As we approach St Patrick’s day celebrations, we must encourage self-insured employers to not rely on the luck of the Irish to find and recover overpayments of medical claims by using random sample audits. Instead, rely on Healthcare Horizons’ 100% difference and audit all medical claims to ensure you are not missing out on possible “pots of gold” in recovering undetected medical overpayments.