Processing for profitability: Blue Cross Blue Shield of Rhode Island applies automation to remittance processing—and even has outsourcers saying they couldn't do it faster or better. The health plan successfully reduced the required staff count by 50 percent, but still avoided layoffs

Health Management Technology, Feb, 2005

Not all information technology is glitzy. Some is of the more utilitarian, workhorse variety. Technology to support electronic remittance processing isn't loaded with razzle-dazzle, but there is probably no health plan in business that wouldn't support its promised efficiency gains. One Blue Cross Blue Shield organization decided to see if the promise held water.

Blue Cross Blue Shield of Rhode Island (BCBSRI) is one of 41 "Blues" in the U.S. An independent licensee of the Blue Cross and Blue Shield Association, it ranks consistently at or near the top of the list of Blues for its achievement of performance goals set by the Association.

BCBSRI provides healthcare coverage to more than 670,000 members in Rhode Island, making it the State's largest healthcare provider and the choice of more than 60 percent of the State's population. To achieve this status, BCBSRI has carefully updated and widened the services it offers to include dental, prescription drug, Medicare and HMO plans; the organization has controlled premiums and added innovative programs to improve the health of its members, such as their HealthCare Directions television program.

BCBSRI contains its administrative costs, with only about 10 percent of every premium dollar going to administration, by making careful choices to ensure a balanced and productive use of technology and personnel. One example is in the remittance processing department, where monthly and quarterly premiums are the lifeblood of the organization. Without them, claims can't be paid, and organizations can't be profitable.

Achieving Today's Goal, Planning for Tomorrow

The BCBSRI remittance processing department receives a total of about 6,000 paper items per day. This might represent 1,000 corporate payment-related items and 5,000 items related to individual policy payments. About half of these items are payments, and the other half are paper related to remittances.

Corporate payments are made with a full-page remittance advice and a check, whereas individuals send in a standard remittance advice and check. In the past, a staff of 24 handled these payments, some of whom would key in the data from batches of slit envelopes from the mail opener. The system worked, but BCBSRI Controller Brian O'Malley thought there was a better way with the careful deployment of technology.

According to O'Malley, remittance processing has two interdependent objectives: to accurately record the details of the payment and to get the payment deposited as quickly as possible. But the need for a speedy deposit tends to promote errors in the recording of the transaction details, while the need for accuracy in recording of the transaction details can impede the speed at which checks can be deposited. When the system is heavily manual, as it was at BCBSRI, opportunities for error are substantially increased.

Electronic processing offers a remedy. Images of the remittance documents are captured by scanners, and much of the processing is done automatically utilizing OCR (optical character reading), ICR (intelligent character reading), OMR (optical mark reading) and CAR/ LAR (courtesy amount recognition/legal amount recognition)--minimizing the need for human intervention and, hence, the opportunity for human error.

O'Malley was interested in electronic processing because it could reduce errors and eliminate paper storage, and also because it would set the stage for faster processing of checks as banks implement Check 21 and start accepting electronic images for deposits. However, at BCBSRI, it's a mandate that any investment in technology must provide a demonstrated return on investment.

Due Diligence Delivers an Answer

BCBSRI started to look for a solution back in 2002, contacted three companies to see what they could offer--and began to realize that finding an electronic solution might not be so easy. The first area of concern was the corporate remittances. These are full-page documents, and virtually all remittance solutions are fashioned around the standard remittance advice. The second was the lack of a scanline. Remittance advises have a line of characters that are designed to be machine-read. BCBSRI's documents lacked this line, because they were designed to be read by humans for ease of data entry.

O'Malley faced a dilemma: to implement an electronic solution could mean an overhaul of the existing system, with a major redesign of the existing forms, staff retraining, considerable expense and extending the project beyond its original projected time frame.

"Throwing more bodies at the problem wasn't the answer," says O'Malley. Fortunately, in the due diligence process, an automation answer began to emerge. All three companies had proposed solutions that could address the full-page remittances, but only one, Fairfax Imaging of Chantilly, Va., produced reference sites that were operating systems that processed full-page remittances as BCBSRI needed. Fairfax's Quick Modules was designed to handle full-page and remittance advice-sized documents, and did not require a scanline to process the remittance. O'Malley felt that Quick Modules was competitively priced and that no costly system redesign would be required. BCBSRI selected this system and quickly implemented it at the end of 2002.