The financial impact of inaccurate address data for health insurance providers
When it comes to physical health, sometimes the smallest things can have a big impact. A microscopic virus or a small injury can develop into a life-threatening infection before you even know it’s there — and conversely, a tiny pill or ointment can save a life.
The little things matter when it comes to health data, too. In particular, address data is a small part of a patient profile that can have far-reaching effects if it is incorrect or incomplete. Address data is a key information point at the center of billing and communication with patients, and even a slight mistake in an address—a missing unit number or a misspelled street name—can make mail undeliverable.
Incorrect or incomplete addresses pose significant financial risks for health insurance providers, including the ability to collect premiums and the operational costs involved in fixing problems. Health insurers are faced with the choice to lose money or pass on costs to patients, resulting in a hit to the plan's reputation and competitiveness.
It doesn't have to be this way. Modern technology is making it possible for health insurance providers to manage financial risk by improving the accuracy of their address data. This article looks closer at three main financial risks caused by incorrect or incomplete address data, highlighting how improving address data can improve your bottom line.
1. Billing issues
When bills are delivered to an incorrect address, patients can get behind on premium payments. While a hospital or other provider might eventually send a patient to collections, most health insurers will simply cancel the policy after 90 days. This results in an immediate loss of revenue for the health insurance provider, as well as a loss of future revenue that would have come from that customer.
Several situations can cause bills to go misdelivered. Customers or sales representatives sometimes mistype home addresses during the sign-up process, and the error follows the patient record through the system. Another problem arises when a patient moves and doesn't update their address with the health insurance provider. Addresses themselves can also change, especially in rural areas—for example, cities may rename streets or change their boundaries when they incorporate. In each of these cases, a tool that can prevent and correct inaccurate addresses can help health insurance providers retain customers by reestablishing contact with them within the 90-day Window.
2. Delays in processing claims
Inaccurate or incomplete address data can also result in delays in processing claims. Up to a third of denied claims result from inaccurate patient identification, including faulty address information, costing the U.S. healthcare system over $6 billion annually. Address data is often used to sync patient information between providers and health insurance providers, and if there is a mismatch, it can cause misidentification and hold up the claims process. See Part 1 for a detailed discussion of address matching.
Revisiting claims that have been rejected and appealed is costly in terms of employee time and makes accounting more difficult. At a time when health insurers are facing extra scrutiny over the number of claims denied, they need to decrease mistaken denials, both for public relations and budgetary reasons.
3. Increased operational budgets
Cleaning and correcting address data creates extra manual work for IT teams, and that work takes time—a lot of time. Organizations that lack automated address verification tools can require four to five times more employees to maintain their data. It's much more cost-efficient to invest in automation, and it makes it much easier to scale a business.
Incorrect or incomplete address data can also have ripple effects on other parts of the business. For example, missing payments and delayed claims aren't reflected in financial reports and budget forecasts, making it difficult to track and project true costs. Health insurance providers need real-time visibility into their revenue in order to understand their financial positioning and plan for the future.
Inaccurate address data can even lead to lawsuits if private health information is sent to the wrong person, another costly hit to health insurance providers.
As health insurance providers look for technological solutions to inaccurate and incomplete address data, they have choices between on-premises and cloud solutions. Choosing to maintain address data on-premises might seem like a cost-saving option, but the costs of hiring more IT staff to manage and update these systems are significant. Relying on a cloud solution maintained by a third party is less expensive and secure, and it allows IT teams to focus on other priorities.
Enhancing healthcare revenue with address data integrity and address verification tools
Address data may seem like a small part of running a health insurance company, but if compromised, it can cause a domino effect that impacts revenue in significant ways.
Fortunately, technological tools make it possible to identify and correct incomplete or inaccurate address data. Solutions like Smarty™ offer address verification tools that normalize, match, and validate your address data so you know patient communications and bills are getting to the right people. Smarty also provides an autocomplete tool that helps prevent bad addresses from getting into the system as they are being entered.
To use a healthcare metaphor, these two tools together offer both prevention and treatment. With the right tech in place, you can reduce the risks caused by inaccurate or incomplete address data and help ensure the financial health of your business.
Read the other articles in this series, The Silent Risks of Inaccurate Address Data for HealthPlans:
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