Study: Large amount of money in wasted claims expense is missed by organizations relying on random-sample methodology

With healthcare expenses increasing by up to double digits annually and self-insured employers providing the majority of healthcare benefits for insured Americans, identifying wasted health plan expense has never been more important. A common tool for doing this is the random-sample, retrospective audit of an employee health plan's past one or two years of paid claims.

A white paper just released by Healthcare Data Management, Inc. (HDM), a leading provider of health plan audits and analytics, conclusively proves that the random-sample methodology is missing most of the wasted expense that it is supposed to find. Corporations, governments, Taft-Hartley health plans - all who use random-sampling as a means of containing health plan expense - may be letting hundreds of millions of dollars a year slip away.

The paper details a study commissioned by HDM to determine the relative effectiveness of random-sample auditing versus a method that relies on a 100-percent-of-claims analysis as a core element. The study was conducted by Ronald K. Klimberg, Ph.D., and George P. Sillup, Ph.D., M.S. from the Haub School of Business at St. Joseph's University in Philadelphia.

Using actual paid medical claim data sets from two unidentified HDM Fortune 100 client companies, professor Klimberg ran 100 simulations each of 300 and 400-claim sample sizes among only the errors ("exceptions") that HDM found. HDM employs a proprietary five-step protocol for analyzing 100 percent of paid claims.

According to professor Klimberg, "regardless of the sample size, the best the random sample simulations could do was catch less than 10 percent of the errors that the 100-percent of claims methodology found." "Translated into dollars," professor Klimberg explained, "from $200,000 to over three quarters of a million dollars in over- and underpayment errors were simply missed by the random-sample simulations."

In underscoring the practical implications of the study, Professor Sillup added, "with the common use of retrospective random-sampling as a health plan auditing tool, it is not far fetched to say that, in aggregate, hundreds of millions of dollars in wasted claims expense is being missed annually by organizations relying on the random-sample methodology for all-important health plan auditing."