Any healthcare provider's billing department can tell you how much work it takes to get paid. Insurance claims must be reconciled, invoices get sent, and maybe after 90 or 180 days the hospital sees reimbursement.
Much of that time is spent in adjudication on the payer side. Adjudication is when insurance companies decide whether or not they are on the hook to pay for the services given to patients by providers. The summary of benefits offers some answers to these questions. The rest is a matter of interpretation, and that work can get tedious.
While historically this process has been hyper manual, software has the ability to make these decisions much more efficiently. After all, the terms of coverage agreed upon between a payer and a patient are essentially commands, so a programmer can write code that automates the lengthy, complex adjudication process.
At a basic level, auto-adjudication has been happening for years. The difference today is that blockchain technology and smart contracts open a new universe of opportunities that can make adjudication even more efficient.
The end result? Claims can now be processed in real time, and healthcare providers can save themselves time and money by getting paid much closer to the moment that care is administered.
Here is what you need to know about this unfolding reality.
The Potential for Smart Contracts
Smart contracts are key in our blockchain application, DokChain. Imagine: DokChain will connect payers, providers, and patients on a single ledger visible to all parties. Whenever a patient receives a service -- a routine physical, for example -- it will be recorded on the DokChain, and all parties will become aware that the event has taken place. Smart contracts then immediately go to work to:
- Determine whether the physical falls under the payer's terms of service
- Determine who, between the payer and the patient, owes money to the healthcare provider, and how much
- Process payment to the provider
And this all happens instantly.
As Ron Dunlap at Healthcare Financial Management Association (HFMA) points out, a claim that must be processed manually costs four times as much as one that can be auto-adjudicated. "Considering that approximately 3 billion healthcare claims are filed each year, extending auto-adjudication rates by even a few percentage points could have a significant financial impact," he says.
Adding Complexity to a Claim
The beauty of a smart contract, and software in general, is that it can process much more complexity than manual decision making or even simpler software, and it requires no intermediaries.
Jay Cassano, a contributor to Fast Company, makes the same point, but with sports betting rather than healthcare revenue cycles. "Because smart contracts are computer programs, it would be trivial to add more complex betting elements like odds and score differentials into the mix," he writes. "While there are services out there today that might handle this sort of transaction, they all charge a fee. The key difference with smart contracts is that it is a decentralized system accessible to anyone, that doesn't require any intermediary party."
An Evolution of Current Auto-Adjudication Processes
Auto-adjudication is already happening. As health and retirement benefits administration software provider, basys demonstrates in a case study, the National Automatic Sprinkler Industry Welfare Fund was able to auto-adjudicate two-thirds of the 27,000-plus claims it received.
Although software like this is finding footholds here and there across different industries, it is still in the nascent stages of adoption by healthcare organizations. Smart contracts are the next step toward adjudicating the claims that current software cannot process and toward accelerating wider adoption. We believe that developing this technology is the clear way forward.
What Happens When Blockchains Enable Autonomous Auto-Adjudication
Employing DokChain to adjudicate disputes across the patient-payer-provider relationship will upend many existing business models, but we believe this will be a good thing.
In fact, Magdalena Ramada, Ph.D., a senior economist at Willis Towers Watson, argues that introducing blockchains to existing insurance providers' business models will make healthcare pricing more transparent, and lead to the creation of new insurance products.
Jeff Garzik, the CEO at Bloq, says blockchains are the logical next step in the industry because "blockchain is adjudication as a service," he tells CoinDesk. "It validates rules that are common to the entire playing field. It's very much a hyper-real-time version of the court system."
In their recently published white paper, Raghavendra Voichal Prabhakar, Govind Shukla, and Upanshu Ratan at professional services company, Cognizant propose that new blockchain-based processes hold some exciting applications. They examine all of the processes that would be initiated, for example, when a person dies:
- A hospital or hospice care facility might record the death on the blockchain.
- Protocols would tell insurers, beneficiaries, and even funeral services providers what to do next.
- The insurer verifies and processes a claim, then immediately sends funds to the beneficiary. Meanwhile, the beneficiary selects a funeral home from a list of service providers, and that funeral director pings the state health department's death registry in order to obtain a burial permit.
Again, this is an example of where a formerly Byzantine process is made much more user-friendly. "The automated process would ensure that the onus is no longer on the beneficiary to produce paperwork and to follow up with agents for processing the death claims," the authors write. "Rather, the onus would be on the insurer to process claims. A cumbersome workflow with too many processes is replaced by a simple and efficient workflow."
Still, that future hasn't arrived just yet. Most industry professionals acknowledge the need for more R&D with blockchains as autonomous auto-adjudicators. PokitDok, through the DokChain Alliance, is doing just that.
A Road Map for the Future
In a white paper for EY, Dave Nuernberg and Angus Champion de Crespigny argue that there are three crucial next steps for blockchain developers looking to disrupt the payments side of healthcare:
- There must be internal proofs of concepts and case studies that prove the viability of what, up to now, has been mostly a theoretical discussion.
- Processes must be honed and made user-friendly enough to be customer-facing.
- Blockchain deployments must be integrated with other smart devices and software via APIs so that big data, the internet of things (IoT), and blockchains can all work together to deliver the promised value.
As a healthcare API platform, we're able to accommodate demanding requirements such as these but it is not without its challenges. For one thing, the proof-of-concept phase must address issues like data integrity and security. As the team at Advanced Medical Strategies points out, auto-adjudication only works when the process can assume every cost listed is both necessary and truthful.
Further, any process must take into account the complexity of local and national provider networks. In fact, a team from Deloitte and Amazon Web Services asserts: "Regional and national payers are weighed down by complex, organically grown or custom configured claims processing and adjudication engines that are required to process 4.6 million+ claims each day. Breakdowns in any piece of the claims system can significantly delay processing times causing prompt payment penalties for the payer and inconsistent revenue cycles for the provider."
As blockchain technology is being tested and refined, insurance companies and other healthcare payers should be preparing for industry-wide change according to Richard Kastelein at Insurance Thought Leadership. "Insurance companies that don't start lowering their walls might very well find themselves unable to innovate as quickly as emerging companies that embrace more open models in the future and therefore find themselves moot. Kodak, meet Instagram."
It is now time for the healthcare industry to address the root problems that continue to hinder innovation in favor of new approaches that benefit providers, payers, and patients alike.
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Tags: Blockchain, Security & Compliance