Fiscal Fitness: How States Cope

Oklahoma claims system could save millions as CMS picks up another 25% of the costs

Oklahoma officials like the numbers they’ve heard about: The state could save more than $20 million through 2007. The state’s new Medicaid claims processing system, which recently won Centers for Medicare & Medicaid Services (CMS) certification and entitles Oklahoma to enhanced funding, is the savior.

The savings estimate came from CMS when Andrew Fredrickson, associate regional administrator for Medicaid and Children’s Health, said the state "has a right to be proud of this accomplishment. The state’s Medicaid program has created a state-of-the-art Medicaid payment system." Certification by CMS means that the agency will pay 75% of the system’s operational costs instead of the typical 50%.

More than 90% of the state’s 1.8 million monthly Medicaid claims are being processed through the new system created by Electronic Data Systems (EDS), the vendor the Oklahoma Health Care Authority chose when it decided to build a new claims processing system from the ground up.

Since Jan. 1, one of the key features of the system has allowed Medicaid providers to use a secure web site to submit claims over the Internet and also check patient eligibility, covered services, and service pricing.

Charles Brodt, Oklahoma Health Care Authority director of federal-state health policy, tells State Health Watch the state had been using a system that was first built in the early 1970s but found it increasingly difficult to make changes to fit with a move to Medicaid managed care and other efforts to improve health care delivery in the state. When the decision was made to create a new system rather than try to continue to modify the old one, the agency had two goals, Mr. Brodt says. First, it wanted to develop a state-of-the-art system that would process payments in a timely and efficient manner. Second, it wanted a system with querying and report management features that would allow staff to better manage their business.

Two factors that affected the drive to create the new system were the state’s response to the Y2K concerns and the realization that Health Insurance Portability and Accountability Act (HIPAA) requirements included being able to handle uniform transactions by Oct. 16, 2001. Although that compliance date later was pushed back to 2003, Oklahoma moved forward in expectation of meeting the 2001 deadline.

Mr. Brodt said that two vendors bid on the request for proposal the authority issued, and EDS was chosen. The firm brought in a base system that had been in use in Indiana but then modified it considerably to meet the requirements set forth by the Oklahoma Authority.

Making full use of the web

One of the most significant changes, Mr. Brodt says, was the decision to use the Internet and web-based technology for many of the system’s operations. One reason for that decision was the assumption that while large billing companies would be willing to spend the money needed to upgrade their own technological capabilities to interact with the new system, smaller providers who were used to putting their claims on a floppy disk and sending it in wouldn’t be able to afford the technological upgrade and would want to revert to paper. The health care authority was determined to operate in a paperless environment as much as possible. The solution was the secure password-protected web site that providers can access with a PIN number.

Information available on the web site includes eligibility, procedures covered, pricing, and a billing manual. Claims can be submitted through the web site and the provider can watch the claims go into production and determine whether they are accepted, rejected, or suspended. If claims are suspended, the provider is given the reasons through the web site. If they are being paid, information on the check run is available there. Mr. Brodt says he’s not aware of any other state Medicaid system that makes as full use of the web as does Oklahoma’s system.

Mr. Brodt says a major key to the success of the system development and cutover was the presence on his staff of people with a lot of experience in Medicaid and a culture that promotes hands-on involvement in a major project like this one. He says it took approximately two years from the time the contract was awarded to EDS to when the new system was operational, and much of that time was spent in the state staff defining what they expected from the system and how it should be designed and giving that information to the EDS people.

"We’re very hands-on," Mr. Brodt says, "and we monitored EDS very closely. Over time, the result was a mutual respect between the contractor and the state. It was a very successful team approach."

Another key success factor was the amount of time and effort spent in outreach to providers, billing agents, pharmacists, and other stakeholders to be sure they knew what was going on and that they would be prepared to participate.

"We did a lot of testing in the final six months before taking the system live so that everything would come together," Mr. Brodt says. "We phased the new system in during December 2002 because our heaviest times are at the beginning and end of each month. There was a 24-hour period in which no claims were accepted and then we began processing with the new system. Electronic transfers were accepted as of Dec. 26, and the first payment run was Dec. 27. I’ve been through new system implementations before, and this was the smoothest cutover I’ve ever seen."

Gov. Brad Henry also was impressed with the results. "It is difficult for people to understand what the Oklahoma Health Care Authority accomplished in developing this new payment system. To put it in perspective, it is considered a greater undertaking than preparing for the Y2K conversion. I commend the health care authority staff and contractor for their commitment to this onerous project, the result of which streamlines services with the medical community and reduces red tape."

One concern during development had been the state’s nursing homes, which were used to submitting claims in an "old-style paper turnaround document" in which the nursing home sent in information on paper and the agency added its information and returned the paper to the nursing home. "We woke them up to a new day," Mr. Brodt says, by converting the nursing homes to use of the UB-92 form for any paper claims. But the web site also was made available to the nursing homes, and they are finding that 50% of nursing home claims are coming through the Internet.

According to Mr. Brodt, providers expressed some anxiety when CMS extended the deadline for uniform transactions but Oklahoma stuck with its commitment to go live with the new system Jan. 1, 2003, despite the lack of a federal mandate. "There were concerns that we wouldn’t be ready. But everyone got into compliance. Things tested well; and when we got to Jan. 1 of this year, we were receiving successful transactions."

What advice does Mr. Brodt have for other states that want to do a new Medicaid payment system? First, take the time and resources to clearly define what you want to do. Then manage the project yourself. "What made this successful for us is that while we worked diligently with the contractor, we also managed the effort ourselves."

The third important step is to take time to inform people about what’s coming. Oklahoma’s outreach efforts to stakeholders started a year in advance of implementation. "Don’t be in a hurry," Mr. Brodt counsels.

[Contact Charles Brodt at (405) 522-7300.]