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How the CMS-1500 form became the industry standard for medical claims

Julianna Rice
July 18, 2022

How the CMS-1500 Form Became the Industry Standard for Medical Claims

 

The CMS-1500 form is now an integral part of the medical claims process for non-institutional providers and suppliers. Even though we live in an age where information is transmitted electronically, many CMS-1500 forms are handwritten in a medical office before the information is submitted to insurance companies. This prompts the question, how did CMS-1500 forms become the industry standard for medical claims?

 

Understanding the medical claims process

 

Before we look at how the CMS-1500 form created an industry-wide standard for medical insurance claims, it is important to understand the claims process in the US. There are 10 stages of a medical claim life cycle:

 

Patient registration

 

The patient registration process is straightforward. Demographic and personal details of the patient are collected together with insurance information. Using the patient’s insurance policy number, the service provider will contact the insurance company to verify the policy.

 

Clarify financial exposure

 

It will depend upon the type of insurance policy as to what level of coverage is available, and which procedures are covered. Some policies include a cost split– or co-payment – between the patient and the insurance company. This process will clarify the financial responsibility of individual parties.

 

Bill creation

 

Whether checking in, or undertaking a return visit, the patient will be asked to complete forms for their file. Identification will be required along with a valid insurance card. If there is a cost split between the patient/insurance company, payment may be collected at this point. On checking out, a “superbill” report is produced, including all of the patient’s information, procedures carried out, and diagnosis together with procedure codes.

 

Claims generation

 

It is at this point that non-institutional providers/suppliers use the CMS-1500 form to prepare a medical insurance claim. The form has a very rigid format with procedure codes required for the smooth processing of any claim. Upon completion, the (usually handwritten) CMS-1500 form is submitted to the patient’s insurance company.

 

Claims submission

 

Prior to submission of the claim, the CMS-1500 form is checked for accuracy and to ensure that all relevant information is included. Assuming that the form has been completed correctly, the information will be entered into the insurance company system for appraisal.

 

Claim adjudication

 

At this point, the medical claim will be reviewed to determine validity and compliance with the process. If accepted, funds will be paid to the relevant third party and records updated. Where a claim has been rejected, or further information is required, the insurer will communicate with the party that submitted the claim.

 

Patient statement

 

When a claim has been successfully processed, the patient will receive a statement showing funds claimed, funds paid and – where applicable – any funds due from the patient.

 

Non-payment of bills

 

Medical insurance companies have an obligation to chase non-payment of funds due from patients. It is advisable to contact your insurance company at this point, otherwise the claim may be placed in the hands of a collection agency.

See also: Why Digital Coworkers are the Best Data Extraction Tools for UB-04 Forms

 

Standardization is crucial

 

Due to the way in which the US healthcare system operates, it is important to implement a strong element of standardization across the medical claims process. This is where the CMS-1500 form comes into play, collecting data which is applicable to a variety of different insurance organizations. This one-form-fits-all approach saves time, is efficient, and is accepted across the board.

 

While the above process is well-defined, there are a number of potential bottlenecks. The most obvious challenge is the accurate transfer of information from a CMS-1500 form onto an insurance company claims system. The transfer process would need to:

 

·      Recognize and interpret different styles of handwriting

·      Accurately transfer data from the form to a computerized system

 

These two issues must be done in a speedy yet accurate manner as the cost of checking and validating data can be expensive. The issue of cost is a very important because manual data transfer will take employees away from customer facing services and business creation opportunities.

 

Insurance outsourcing

 

Prior to the arrival of artificial intelligence (AI), many medical insurance companies made the decision to utilize healthcare BPO services. This meant that claims processing was carried out by third parties, with specialists in India and the Philippines popular amongst US insurers. Data entry outsourcing companies were able to improve on in-house accuracy rates and speed. This had a positive impact on profit margins, allowing insurance companies to reallocate resources to client services and business building activities.

 

The adoption of structured data collection procedures, such as the CMS-1500 form, is vital to the industry and has made the claims handling process much simpler. However, there are still difficulties interpreting different handwriting styles. Even though this was far from perfect, many medical insurance companies saw the financial benefits and sought to appoint a data entry outsourcing company to work with.

 

Digital Coworkers are the way forward

 

While CMS-1500 claim form instructions are relatively straightforward and created in a structured fashion, the manual transfer of data is inefficient. The challenge was to increase speed, improve accuracy and reduce cost. So how will Digital Coworkers assist?

 

Digital Coworkers are the result of the combined effect of Cognitive Process Automation (CPA), often described as a combination of Robotic Process Automation (RPA) and artificial intelligence (AI). They are effectively automated bots which are pre-trained to carry out specific procedures, constantly learning via cutting-edge AI. In this scenario, our Digital Coworkers can scan CMS-1500 forms in an instant, extract all relevant data, and automatically transfer this to a claims processing system. This seamless action can accommodate both structured and unstructured data, with the automated bot able to effectively “think for itself”.

 

Here at Roots Automation, we build Digital Coworkers to complement your company’s individual claims processing workflow.

 

Improved efficiency of Digital Coworkers

 

On average, our Digital Coworkers are between 400% and 800% quicker than humans, offer a 250% return on investment, and breakeven in just a matter of months – not years. Research shows that while data entry accuracy for manual input stands at 95%with humans, using our automated bots achieves a 99% straight-through processing rate. In summary, the benefits of using Digital Coworkers are as follows:

 

·      Improved speed

·      Improved accuracy

·      Optical character recognition to interpret handwriting

·      Ability to interpret structured and unstructured data

·      Pre-start training and on-the-job learning via AI

·      Fully trained and deployed after only 6 weeks

 

At Roots Automation, we recognize that, much like human employees, each Digital Coworker will require specific skillsets. We have the “pieces of the jigsaw” to put together the perfect automated employee and train them. This process will take around 4 to 6 weeks from start to finish, at which point your Digital Coworker will be ready to begin work.

 

The result is best described as a plug-and-play situation. We create the automated bot and we train them, before passing them on to their new place of work. There are no additional IT costs for customers, no surprise third-party integrations, and no complicated implementation processes.

 

Automated claims processing is the way ahead

 

Healthcare outsourcing was, for many insurance companies, a Eureka moment, offering the ability to outsource inefficient manual tasks and concentrate on client services/business opportunities. This led to a significant increase in profit margins, more effective use of resources, and the ability to upscale.

 

The emergence of AI and Digital Coworkers has led to even greater efficiencies, cost savings and huge additional capacity. Aside from the initial efficiency and cost savings, Digital Coworkers are now able to “learn on the job” using cutting-edge AI – adding even more value going forwards.

 

Once the major healthcare insurance companies switched to data entry outsourcing companies, this prompted a huge shift across the industry. It is safe to say that the introduction of Digital Coworkers is having a more telling impact. Ongoing efficiencies, utilizing the latest technology, and the ever-increasing speed of processing has changed the mechanics of claims processing forever. Historic challenges regarding the interpretation of data on CMS-1500 forms are no more.

 

Amongst this huge upheaval, the simple yet effective CMS-1500 form still remains the industry standard when collecting data for medical insurance claims.

See also: The Future of Work will Always Need Humans

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