After a three year program to successfully implement straight-through processing for medical and hospital claims and member communications, Australia's largest not-for-profit health insurer is looking to share the solution as a hosted offering for Australia's not-for-profit health funds.

Patrick Shearman, Group General Manager Information Management at HCF Australia (pictured), believes the fund's paperless workflow and a sophisticated rules-based claims automation engine can be utilised by other non-profit funds presently drowning in paper.

HCF has already implemented an independent workflow for Manchester Unity Australia Ltd (MUA), the friendly society it acquired in late 2008.

A small team at HCF is now handling up to 4000 medical and hospital claims a day for HCF and MUA, each processed in separate payment pipelines.

Before the solution was implemented in Oct 2007 HCF claims would be processed by branch office staff during off peak times. They now have more time to deal with value-added customer service matters.

All claim invoices were previously manually entered -and the originals stored by Recall. Whenever an inquiry had to be made, the physical document had to be retrieved from storage.

"Claims had to be retrieved from boxes," said Shearman, "we also had a backlog of claims processing that would build up at our branches each month. It was taking up to three weeks for us to settle a claim with Medicare. It now takes about five days."

The transformation began with the processing of membership applications and renewals using two Fujitsu fi-5650c scanners and ReadSoft's capture software. There are now in excess of 2300 membership documents processed each day.

HCF has since acquired four more Fujitsu fi-5650c and two Kodak i610 document scanners and is now processing hospital and medical claims using ReadSoft software. The automation solution has been expanded to include Microsoft SharePoint and IBM ILog’s business rules management system.

The claims pipeline

Once each claim is scanned it is stored in a database and the capture is verified by a team of operators, aided by colour coded tabs to match captured data with the scanned document.

Operators then process the claims through IBM’s business rules management system, which has been specifically configured to expediently manage and approve all medical, hospital and ancillary claims. Approved claims are then automatically available for completion and the operators are free to focus on providing a high level of service to manage exceptions.

There is a wide variation between the type and quality of documents that arrive in the HCF mailroom each day. These range from standardised forms and invoices from hospitals and large medical facilities to handwritten invoices from individual doctors.

"Medical and hospital claims have grown by 35-40% since 2006 as our membership increased and yet we are managing this with a team that has reduced from 36 to 12 people.

“It has allowed us to deploy staff elsewhere to focus on better serving our customers," said Shearman. "For instance, we can reroute calls from our call centre to the branches so there is improved service for members."

Joseph Elias, Senior IT Projects manager at HCF Australia, said, "We have taken their product to the limit.

“We are not dealing with structured forms like a large government department, our invoices can be anything from an A4 page to a little receipt slip and we will scan it. Our new Kodak scanners handle variance in forms shape and size very well and we consistently capture over 80% of data on our documents automatically."

HCF takes pride in its status as a non-profit organisation, and the fact that its management expense ratio is the lowest in the industry. In its last annual report it cited savings of $A1.2 million achieved after the three year business process transformation.

This reflects well on a total investment of less than $A2 million for hardware, software and professional services to implement the solution.

Digital end game

Since 2004 when all processing was 100% paper-based and required manual data entry, HCF has come a long way. The ultimate aim of 100% document automation is not far off as it moves to incorporate claims for ancillary services such as physiotherapy, dental, naturopathy and podiatrist. This will be integrated into the solution by February 2010.

Frank Volckmar, Managing Director of ReadSoft Oceania, said "The passion for innovation and continuous improvement within HCF has been quite unique for any organization. They have repeatedly established new benchmarks for the industry and have been recognized globally for their innovation by ReadSoft’s founder and CEO, Jan Andersson."

HCF is also embracing the EDI alternative, via Medicare Australia's Eclipse service which allows many of its providers to claim at the point of service. HCF was the first health insurer to implement all the Eclipse functionality.

Despite the steady growth of Eclipse, which now accounts for around 30% of medical claims and 28% of Hospital Claims, Shearman does not expect to see paper eliminated any time soon. "Eclipse will take over eventually, but it will take a while," said Shearman.

An important part of the solution has been provided by the ILOG Business Rule Management System (BRMS).

ILOG Rules for .NET is a key component of HCF's automated claims adjudication and payment system, credited with reducing the costs associated with handling, processing and settling claims. It has also rules and pattern analysis that helps to detect fraud or incorrect claims.

Acquired last year by IBM, the ILOG BRMS allows non-technical users to define business rules in plain english that can be applied to processes taking place in enterprise applications running on a mainframe.

With ILOG's BRMS, claims-related business rules are extracted from the legacy systems and maintained in a centralised rule repository making them easier to manage.

"The combination of ReadSoft and IBM technologies has dramatically increased automation. It gave the business people confidence on the accuracy of information scanned and therefore the decisions made by the BRMS.

“It helps them to focus on true exceptions raised rather than false positives therefore a better customer service and lower cost of maintenance," says Stephane Marouani, Sales & Operations Manager for IBM ILOG.

Processing over 1 million invoices a year is no small feat by any means. Many of Australia's largest commercial organisations would deal with a fraction of that.

It compares to the 2.2 million invoices handled a year by NSW Health and is several times that processed by many of ReadSoft’s other Australian customers including Orica, RTA, ABB Grain, Leighton Boral, ETSA, Siemens and Caltex.

HCF has led the way along with ReadSoft and IBM and is now creating opportunity for many other health insurance organisations to improve their customer service while reducing back office operating costs.

While this would be wonderful for customers and the industry, the question remains whether or not competitors share the same vision.

"The success of our ReadSoft solution is measured by the high number of claims that go straight through our data capture process without any manual correction, up to 65% which is a very high level." - Patrick Shearman, Group General Manager Information Management at HCF Australia