Executive Overview

For large companies, workers’ compensation is typically a significant expense. A detailed industry study suggests that in California, insurance companies and self-insured organizations might be overpaying as much as 20% of their medical expenditures related to workers’ compensation. One of our clients partnered with us to develop an innovative software solution called Bill Zee™ that is recovering much of the leakage amounting to millions of dollars.

The Client

Our client is a Fortune 500 company that is self-insured and self-administered for workers’ compensation. The client uses a reputable bill review firm to review and process its medical bills, consistent with industry practice.

The Medical Overpayment Issue

California, like other states, allows a utilization review process that enables self-insured organizations and insurers to engage trained physicians to review treatment plans and then authorize or deny treatments based on certain guidelines. Unfortunately, there was no systematic way to check the medical bill against the authorizations, allowing denied treatments to be paid. According to well-respected industry observer Joe Paduda, “The link between UR and Bill Review has been a major issue in workers’ compensation for many years”. See http://www.joepaduda.com/archives/001804.html for Paduda’s full comment.

A study conducted by Navigant Consulting for the State of California examined several samples of closed cases, and documented overpayment levels of over 20%. Many in the industry reacted with disbelief or unconcern. Our client took the study’s findings seriously and conducted their own internal audit of 300 cases. They confirmed overpayment that could have a significant impact to their bottom line. The “missing link” between UR and bill review was a key source of the leakage.

The Results

DataCare then worked with the client to use advanced computer logic to verify the bills against the treatment authorizations. Significant levels of savings were identified. After a six-month limited pilot, a review in December 2009 showed savings between 14% and 20%. The client found that Bill Zee significantly reduces medical over billing without reducing legitimate treatments. In 2010, the client began the expansion of the Bill Zee system to all of its California operations.

The Solution

In looking for a solution, client executives shared their concerns with the principals at DataCare, Eunhee Kim and Paulo Franca. Kim, founder of EK Health, an URAC accredited managed care company, co-founded DataCare; Franca is a PhD software engineer who had developed innovative applications for EK Health and for the client. Using their knowledge of the workers compensation industry and managed care, Kim and Franca began exploring ways to use technology to address the medical overpayment issue.

Franca’s group developed the Bill Zee software solution that took the information about authorized treatments from the utilization review, and used advanced computer algorithms to compare the authorizations with the final bills. EDI transfers were built between bill review and utilization review systems; workflows were analyzed and re-engineered; tests were conducted; notification and escalation processes were debugged and deployed. Bill Zee software does not decide whether a bill is paid; it escalates questionable bills, along with the reasons for a review, to company personnel. DataCare's solution augments traditional bill review services, automates the process and flags the questionable bills for higher level of scrutiny.

A six-month limited pilot showed savings between 14% and 20%. The client found that Bill Zee significantly reduces medical over billing without reducing legitimate treatments. In 2010, the client began the expansion of the Bill Zee system to all of its California operations. According to Catherine Sreckovich, the Managing Director at Navigant who oversaw the State of California study, "Bill Zee represents the type of creative use of computer technology which we discussed in our study. We are encouraged by the development of this type of tool which we believe industry participants will want to evaluate."

Note – savings potential is based on many factors including geography, workforce demographics and other factors. Nothing in this article is meant to suggest a guarantee of specific savings.

Download BillZee_CaseStudy.pdf