White Paper Summary: Why 100 Percent Claims Audits Outperform Random Sample Audits Every Time
TFG Partners – White Paper Summary
This white paper argues that for large, self-insured companies, checking 100% of their healthcare claims for errors is far better than the traditional method of checking just a random sample.
The Problem: Spiraling Healthcare Costs
- Most large U.S. companies are “self-insured,” meaning they pay for their employees’ medical bills directly, rather than paying a premium to an insurance company.
- Because these costs are “spiraling”, any errors or overpayments on claims come directly out of the company’s pocket, hurting its bottom line.
- These overpayments can add up to hundreds of thousands or even millions of dollars.
The Two Audit Methods
Companies use audits to find these expensive errors. This white paper compares two different ways of doing this:
- Random Sample Audit (The Old Way): This is the traditional method. Claim auditors check a small, random batch of claims (e.g., 400 out of 2.2 million). This method is easy and fulfills the basic legal requirements for a company to monitor its plan.
- 100% Claims Audit (The New Way): Using modern technology, auditors check every single claim for errors. This provides a complete picture of all mistakes, not just a statistical guess.
The Study: A Head-to-Head Comparison
TFG Partners ran both types of audits on a large de-identified data set (2.2 million claims) to see which one performed better.
To make the comparison as fair as possible, they ran the random sample 100 times and picked the single best result from those 100 attempts to compare against the 100% audit.
The Results: Why 100% Audits Win
The 100% audit was significantly better in the areas that actually save companies money.
Finding and Recovering Money
This was the most “striking” difference.
- Random Sample: The best-case random audit identified $111,637 in refunds.
- 100% Claim Audit: The 100% audit identified over $1.5 million in refunds.
The 100% audit found so much more because it could identify all related errors, not just the few in the sample.
Identifying the Real Problem
The 100% audit was also much better at finding the root cause of the errors.
- The random sample only identified about 40% of the different types of errors, meaning many problems were completely missed.
- The 100% audit found all the error types. This allowed the company to fix the underlying system issues (the “root causes”) that were causing the errors in the first place.
Creating Long-Term Savings
By finding and fixing the root causes, the 100% audit helped to prevent future errors.
As a result, overpayments dropped by 32% from the first quarter to the fourth quarter of the year. The random sample audit isn’t useful for this kind of process improvement.
Conclusion: What’s the Takeaway?
The random sample audit is good for one thing: basic legal compliance.
However, the 100% claims audit is “demonstrably superior” for any company that actually wants to save money. It finds significantly more overpayments, gets more money back in refunds, and—most importantly—helps companies fix their systems to stop errors from happening again, leading to “permanent savings”.
To learn more about 100% Healthcare Claims Audit Services, contact us today for a consultation.
