A look at the reimbursement life cycle provides a case study for some of the issues facing modern healthcare entities. On the surface, the issues seem simple: Patients are covered by payors, either through individual insurance plans or through their employer-sponsored group plans. Providers render services to the patients, and in turn the providers want to get paid for the services they have rendered.

However, as anyone who has ever had a claim go awry knows, there are literally hundreds of things that can get in the way of a smooth process.
Some common issues:

  • Eligibility: Is the patient covered for the services rendered?

  • Claim Completeness: Is all of the data required by the payor provided in the required format?

  • Coordination of benefits: Should someone else be paying for some or all of the services?

  • Prior Authorization: Does this service require pre-approval?

  • Utilization review: Are the services medically necessary in the opinion of the payor?

From the provider side, this situation creates an administrative nightmare. A reasonably sized physician practice will have to deal with literally dozens of payors;
a large hospital will count scores or even hundreds. With no single point of information, providers spend significant amounts of their administrative budget trying to get paid (estimates suggest that 35%-45% of all administrative efforts is 'wasted' in chasing payor issues).

From the payor side, administrative overhead associated with member/provider services would seem to cry out for change as well. Despite significant advances in IVR systems and self-service Web portals, payors still spend heavily on clerical and administrative support. The complexity of rules created by payors coupled with a
lack of sophistication on the part of many providers and consumers means that a significant percentage of issues are still resolved via costly human interaction.

Given all of the above, so the argument goes, payors should be chomping at the
bit to expose their business rules and processes to providers and consumers via the Web Services-enabled gateways. Providers should be able to go to a single terminal, type in a few key pieces of identifying information about a patient, or better yet, swipe a card, and viola - instant eligibility lookups, pre-authorization, dispute resolutions, and so on.


Experience suggests that widespread adoption of Web-Services in the reimbursement cycle faces significant hurdles. The industry has a long history of false-steps in the direction of open, standard-based initiatives. Consider most recently the case of MEDUNITE. With the significant financial backing of seven of the largest national payors (including Aetna and Cigna), MedUnite was launched in late 2000 with the
aim of providing a single point of entry for providers interacting with the payors. Better still, it was based on an open access policy, encouraging other payors beyond the founders to participate. Yet, by the summer of 2002, three of the original seven payors had publicly stepped back from their commitments, and the rest seem noticeably non-committal on their continued support of MedUnite. It is unclear at
this point what the future holds for MedUnite, and the same is true of many other initiatives that have attempted to solve the problem outside of traditional EDI Channels.

Clearly, the obstacles facing widespread adoption of Web Services have more to do with fiscal and political realities and less to do with technology. Consider for example:

The dire financial straits of many provider organizations, with IT budgets squeezed by ever-lower reimbursements. With little funding that is available is focused on sustaining existing operations.

The broader demands on payors to service their sales channels, either through
better interfaces to brokers or directly to individual and group customers. Add to
this demutialization, mergers and acquisitions, and other top-level issues, and the CIO faces a host of competing big-ticket initiatives.

Uncertainty in the claims clearinghouse area, with WebMD and NDC, for example, needing full cooperation from a significant percentage of the payor population in order to make Web Services a viable backbone (note that NDC was one of the original supporters of MedUnite).

Significant resources in all areas still being deployed to meet the near-term demands of HIPAA compliance.


Despite the hurdles, INAM believes that Web Services have the potential to significantly impact the patient/payor/provider interface. Unlike the frenzy
of the mid and late 90s, adoption of Web Services will likely be led by established industry heavyweights. The potential competitive advantage this will yield in terms
of administrative cost savings is great enough to warrant investments in the near term.

As many articles have predicted, we agree that Web Services deployments will
begin behind the firewall (in some cases work is already in progress). Also, as widely reported, once HIPAA - compliant transactions are universally adopted, the last major technical obstacle will have been eliminated. Therefore, it makes sense for organizations to be 'Web Service-enabled' so that when/if there is critical mass prepared to expose Web Services outside the firewall they will be ready.

Some Specific examples by industry segments include:

Payors: Should begin implementing Web Services as part of a coordinated middleware strategy based on ANSI x12 standard formats specified within HIPAA guidelines. A logical first step is converting selected components of existing portals/self-service websites to utilize Web Services.

Clearinghouses and Consolidators: Ensure that existing EDI interfaces are abstracted and enhanced to build on a backbone of WebServices. Given significant efforts already allocated to HIPAA compliance in these organizations, the foundations are already in place.

Practice Management and Hospital Accounting/Billing Systems Vendors: With the wide variation in quality AND sophistication of architectures in these systems, this is likely an area where a select few vendors will be able to stand out from the pack. Those systems with relatively open architectures need to begin looking at Web Services by building modules that will allow them to activate a 'direct connect' service either via clearinghouses or, more intriguingly, directly with payors.

In terms of an implementation approach, we believe that all major players regardless of the type of organization should begin pilot projects as soon as possible. A typical roadmap would include:

Readiness assessment: Covering existing applications architecture, processes and people, and, perhaps most significantly, quality of business rules (e.g. edits) in existing applications.

Project identification: Identify on or two manageable projects that at minimum meet the following criteria:
Solve a real problem in order to generate internal buy-in
Can be executed in 4-6 months
Span at least two major internal systems

Design: focus on building a middleware strategy that will support multiple interface mechanisms, including traditional EDI and Web Services,

Implementation: Aside from normal best practices, ensure that special focus is placed on performance testing and security.

Even if the conditions do not develop to support the Utopian environment envisioned by some technology prognosticators, the work done today will certainly support many initiatives, whether point-to-point solutions between specific partners or broader, industry-wide initiatives. As is often the case with bleeding-edge technologies, the ultimate product may not be exactly as envisioned today. However, given the potential, smart CIO's will make incremental investments today to ensure the organization is not suddenly left behind if the best-case scenario does in fact evolve.


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