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The Major Role Payment Policies and Related Edits Play in Payment Accuracy

A health plan’s payment policies provide the billing and payment requirements for services and procedures (including unit limitations).


By Maria Turner

A health plan’s payment policies provide the billing and payment requirements for services and procedures (including unit limitations). These policies are based upon industry guidelines and standards such as CMS, state regulatory agencies, NCCI, CPT Assistant, HCPCS Manual, ICD Guidelines and various specialty publications, as well as specific health plan policies. Such policies can be superseded by federal/state regulations, as well as the terms of provider contracts. To ensure reimbursement, it is the responsibility of providers to bill claims in accordance with the health plan’s payment policies. In turn, the payers have the responsibility – to their individual members and employer groups (who pay the premiums, deductibles, and co-pays), as well as to the taxpayers for government-funded plans – to pay claims right and in accordance with their published policies and regulatory guidelines. 

Payment policies play a vital role in improving payment accuracy – but only if the plan adheres to those policies. The process around creation, implementation, maintenance, communication, and enforcement are all important to ensure that the policies remain purposeful, relevant, and adhered to by providers, both in and out of network. Maintaining a comprehensive set of administrative, clinical, and reimbursement policies is essential for health plans to process claims efficiently, apply the appropriate benefits, and reduce unnecessary costs. While policy maintenance will always have an important place in healthcare, it is especially relevant in the healthcare system of today that employs a variety of reimbursement models, on the spectrum from fee-for-service to value-based care to full capitation models, which all rely on the complete, accurate and timely transmission of 1) claims data for payment and 2) encounter data to report health care information used to calculate risk. 

But where should health plans look to ensure their policies are effective, comprehensive, and up-to-date and to determine the need for new policy creation or for the implementation of policy changes to ensure compliance with the standards? Managed Medicare and Managed Medicaid plans should look to the guidance published by as a starting point. Commercial and Exchange plans should also pay close attention to the policies implemented by CMS as they are often a precursor of where the industry standards are headed. For example, Medicare’s Three Day/One Day Payment Window rules that dictate when pre-admission charges should be bundled with inpatient claims have been widely adopted as standard billing and reimbursement policies across various lines of business, and even commercial plans can recognize the intent of such policies and implement similar policies to achieve similar results. Other reputable organizations to which health plans can look for guidance on policy creation and maintenance include the National Uniform Billing Committee, The American Medical Association, and coding guidelines developed by national societies to name a few. 

Once your organization has set up a comprehensive database of policies derived from the guidance from reputable industry standards, what can go wrong from here? First, many payers have issues keeping up with the continuously updated billing and coding standards, which cause policies to quickly become outdated without the appropriate maintenance. Furthermore, many health plans have issues operationalizing their policies due to system limitations, workflow issues and manual process requirements, change management concerns, lack of resource requirements, and the potential for provider pushback, to name a few. These issues result in a lack of coordination between the policies and the edits used to deny claims, thus resulting in erroneous claims payments. 

Consistency in application can also be a problem when there is a disconnect between the corporate payment policy and the local-level application of that policy. Varying degrees of adherence and enforcement of corporate policies across markets within the same health plan cause confusion that leads not only to missed opportunities for cost-savings but can also cause provider abrasion, compliance issues, and potential legal exposure if policies are applied inconsistently and/or inappropriately. 

The common errors that impact the enforcement of payment policies and the resulting claims payment accuracy can be grouped into five categories: 


Communication of and provider access to payment policies is critical to assure providers understand the billing requirements that are essential to the payment integrity process. 


Keeping up with continuous updates across various industry sources that result in additions, deletions, and/or minor tweaks to coding requirements and policy guidance is vital to ensuring best practices in payment accuracy are being followed.


Cross-alignment between payment policies and edits is vital to employing best practices in payment accuracy. When a health plan’s claims processing, system has misinformed logic tied to an edit, the integrity of claim payments is impacted. Amongst others, edit logic issues may include incorrect or incomplete lists of CPT/ HCPCS codes, inaccurate edit assignments based on the line of business, improper application between facility vs. professional edits, inaccurate unit limitations, improper configuration of edits based on provider contract exceptions, and programmable edits that are missing, customized off or otherwise not configured. 


Certain payment policies are more complex in nature, creating difficulties in the configuration of the claims adjudication system and resulting in the deployment of manual processes which are susceptible to human error. In addition to clerical errors, inadequate workflows and/or lack of training are the usual culprits when it comes to inaccuracies in this category. 


Inconsistent or incorrect policy application sometimes results from payer concerns about the potential for provider abrasion. Health plans are very careful to manage their provider relationships, especially when certain market dynamics exist that give providers additional leverage. In these instances, it is critical for payers (including those in the provider contracting department) to understand any risks of non-compliance, as well as to be educated on the overall market acceptance of the related edit (i.e., are denials under this edit consistent with denials performed by other payers in the market). 

It’s imperative health plans create and maintain a comprehensive database of policies reflecting the best practices in the industry. That information should be cross walked to company policies, which should then be compared to existing edits, to ensure alignment and consistency. By operationalizing and enforcing both new and existing policies through the implementation of edits using software, manual workarounds, and third-party vendor solutions, payers can reduce those complexities that are likely causing limitations within existing systems and workflow.


By Maria Turner

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