Free Tools | The Virtual TPA Health Claim Audit

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The Virtual TPA Health Claim Audit

This “how to” claim audit tool is based on an article written by our Alliance Partner, Richard A. Schacht, entitled “Electronic Auditing, The Wave of the Future?” The article appeared in The Self-Insurer, which is published by the Self-Insurance Institute of America.

Case Study: An employee benefit plan covering approximately 15,000 lives. The employees generate $2 million in physician, hospitalization, pharmaceutical and other health benefit charges. The employer wants to hire a health claims expert to review the performance of their third party administrator “TPA.” However, the employer is concerned about the timeliness and cost of a TPA audit – as well as making sure the auditor complied with the confidentiality mandates in the Health Insurance Portability and Accountability Act “HIPPA.”

Engagement Plan: Utilizing HIPAA’s requirement for Electronic Data Interchange “EDI” as a center piece, an engagement plan is formulated to electronically evaluate the performance of their TPA. The purpose is to benchmark the TPA’s performance against industry best practices.

Benefits of the Virtual TPA Audit: The virtual audit is conducted remotely, thus eliminating the incurrence of thousands of dollars in travel, meals and lodging expenses. Provided the employer routinely tests their eligibility records on file with their TPA, on-site field testing may not be necessary. Another facilitator of the virtual audit process can be the employer’s implementation of EDI standards under HIPAA

Claim Audit Steps & Checklist

Use the steps and checklist below to aid your audit

  1. Select a sample of claim file numbers for review.
    Methodology: Select a random number of claim files to achieve a sample size assuring results within a 90% confidence interval.
  2. Copy the selected claim records onto a CD and send to the auditor.
    Methodology: This intermediate step is accomplished via EDI.
  3. Employee benefits manager emails the benefit plan documents and their amendments.
  4. TPA’s IT group establishes communications interface with the auditor’s system.
    Comment: Once interface is established, the auditor’s staff will be able to log into the employers data from a remote location.
  5. Staff auditors perform the following tests utilizing the Attribute Checklist.
    1. Was the employee eligible for coverage?
    2. Were payments made for benefits that are consistent with the plan documents?
    3. Were Preferred Provider Organization “PPO” discounts taken, and if not, were Non-PPO providers paid at the proper rate less deductibles?
    4. Were co-payments applied in accordance with the plan?
    5. Were any excluded treatments paid? [Note: Review ICD9 and CPT codes to make certain that excluded treatments were not paid unless the TPA was so directed by the employer.]
    6. Were any payments for specific treatments, such as chiropractic and podiatrists, made in excess of plan maxima?
    7. Did the TPA miss any opportunities for subrogation? [Note: Use judgment to identify the types of injuries that could involve recovery from third parties. Use the adjusters’ file notes to see if subrogation investigations were undertaken.]
    8. Were any payments made for services related to a preexisting condition?
      Note: Review file notes to determine if a pre-existing condition investigation was undertaken and if gaps existed in employee coverage.
    9. Did the TPA check to see if the employee may have been eligible for coverage under another health insurance plan?
      Note: Observe whether TPA conducted coordination of benefits investigations. If the employee/dependents are potentially eligible for Medicare benefits, find out who the payer was.
    10. Was the claim Turn Around Time “TAT” within acceptable norms?
      Note: The TAT is the number of days between the day the claim was received and the day it was processed.
    11. Is the entity who processed transactions properly identified?
      Note: Numerous litigated prompt payment cases revolve around who received the claim and how long it was held before processing, re-pricing, pending or denial.
    12. Were the pended and denial decisions reasonable or valid?
    13. Were benefits paid in accordance with the plan’s benefits schedule?
    14. Were the deductible accumulations, including annual and lifetime benefits, calculated accurately?
  6. Statistics are compiled concerning each of the attributes on the Attribute Checklist.
  7. The employer’s performance statistics are benchmarked against industry norms.