by Luke Shulman

A World Without Claims

It’s an oft-repeated phrase that the fee-for-service healthcare system rewards volume not value. Thus, it incentivizes providers to simply render more care rather than render better care. The healthcare claim is the physical embodiment of that system. It is literally the bill on which a provider writes out a list a of the services and expected fees. If you have never seen one, I encourage you to look at the raw form for professional services or for institutional services. Credit to Independence Blue Cross for posting helpful guides to the forms.

Why bother to think about this? Because if we really plan on transitioning away from the fee-for-service system what would a health system be like without claims? Furthermore, the current wave of ‘value-based payment’ systems all rely on claims data and the underlying pricing of those claims in order to benchmark and measure whether savings are achieved. This is despite the fact that even the negotiated prices for services seem arbitrary or just crazy compared with the real cost to deliver a clinical service. Here are 21 charts hat explain what I am talking about. Or take a look at the amazing work by Steven Brill inTime and other sources.

So if we know that the claims pricing has these wild inconsistencies why is the raw price still being used as the basis for our value-based reforms? Consider CMS’ effort to rollout a bundled payment for hip replacement? CMS determines a benchmark rate, then applies a 3% discount, and lastly codifies this total price of services as the new bundle price. But consider while the average cost for a hip replacement is $40,364 the highest cost (95th percentile) is $87,987. The same flawed pricing from fee-for-service undermines the success of our value-based options. So let’s return to our thought experiment. What if we started from scratch without any claims (or legacy) pricing? What would that look like? No, this isn’t a single payer system. Given current trends, let’s explore what this system might look like across four domains:

  1. How would the business of health care work?
  2. How would the technology of health care be effected?
  3. Would it be better for patients? or Providers?

The No-Claims Business of HealthCare

This is a relatively easier part to imagine. We can also look to fully integrated systems like Kaiser Permanente or even the Veterans Administration (VA). Simply put, we would still need to economically estimate the required healthcare utilization for a population and distribute scarce economic resources (money) to ensure that population is adequately served. This is essentially the business of health insurance. Even within the VA, up to 90% of the budget for medical care is determined through an actuarial model modeling utilization and costs across 90 different service categories.  source pg 15

The care delivered is further backed by a range of quality measures that attempt to ensure that everyone with the system is getting great timely care by the providers.

But this also requires populations to be fixed and assigned. While health insurers today can get long-term commitments from employers or from the pools into which they sell their products, providers and health systems have no way to get that long-term annual commitment from patients. Meaning at any moment that patient can appear at an out-of-network hospital leaving a large Fee-For-Service bill to impact that ACO. Furthermore, claims are what we use today to determine assignment to health systems by analyzing retrospective visits in claims.

Limiting that choice has been successful for marketplace plans under the ACA. In  one study, 90% of consumers choose a plan that severely limits their access to hospitals and providers if it means lower costs.

To summarize without claims, patients need to be proactively aligned between payers and systems so that resources, money, can be fairly allocated. It’s easy to imagine this being a lot like a gym membership. You have your home gym where you go to most of the time. You can access a network of other gyms but only those gyms. Also, you can never ever get out of your contract. More than a joke, many people treat their gym membership as a badge of honor carrying their affiliation proudly on their key chains. It would be interesting if people got the same level of commitment and service from their health care providers.

The Technology of No-Claims Healthcare

Looks it no secret that the only universal electronic exchange of healthcare information takes the form of a claim whether through the direct submission over the EDI interchanges or the massive data dumps CMS and other payers give to their affiliate ACOs. The backbone of the investment in population health is claims data with some success starting to incorporate clinical transactions - particularly labs or medications.

Why is claims data the near universal standard for data analysis? Because payment relies on it. If we said ok tomorrow there are no claims but we need to know about what care patients are getting and we need to ensure that health systems have accurate histories of patients treatment to ensure they have the capacity and resources to treat that patient. Rest assured if it mattered financially, health care would have a clinical interchange that reliably exchange patient problems, medications, lab results, care plans etc. Health systems that this exchange internally but it never mattered financially but if you could get paid on a CCD every EHR would generate a CCD and ensure that it was properly completed with validated information from the medical record.

This exchange is essential. It helps to ensure that systems are aware of the needs and comorbid conditions of new patients helps to provide accurate modeling for what patients need and how they might be treated.

Would it be better for Patients?

As part of CMS’ Next-Generation Accountable Care Organization Model (Next-Gen ACO), CMS is allowing flexibility to allow ACOs to incentivize participation. These benefit enhancements allow us to theorize how this model might be better for patients:

  • Telehealth: Imagine that if you sign up with an ACO you are able to immediately speak to a provider through an app. Well one CMS benefit enhancement allows for those ACOs to use telehelth services for follow-up from hospital discharges or to support nursing facilities. These are limited to one visit every three days and in support of specific events but it is easy to see how this could grow to be a form a membership benefit.
  • Home Visits: Next-Gen ACOs receive enhanced payments for home visits allowing members the ability to have clinical services from the ACO come to you. Today, this is constrained to certain circumstances with expansion potentially being a major benefit of ACO membership.
  • Money: There is no better reward than cold hard cash. CMS seems to be encouraging that too “This reward is structured as a $25 check payment to all beneficiaries who receive a Medicare Annual Wellness Visit (AWV) from a Next Generation Participant or Preferred Provider.”

So imagine a healthcare system where ACOs bring the providers to you, where you can summon a patient through your app when the need arises or even refunds you a portion of premium for keeping up with coordinated care. Remember, gyms are great as long as you are not trying to cancel.

But, if you have read this far you have realized that these benefits come with drawbacks. Patients won’t be able to seek out any provider for any reason as they can today under a PPO health plan. Patients with rare or complex conditions may have difficulty transferring their care to academic institutions with specialized resources. Patient cost-sharing along with premiums must be structured to support these trends as well. I would argue these trends are already in progress but without claims without the process and architecture that allows patients to fill out their own claims for benefits these trends are likely to drastically increase.

Would it be better for Providers?

I should have lead off this one but the answer is clearly yes. Everyone has favorite stories of  unnecessary care being under the fee-for-service system.

Does eliminating claims and eliminating the back and forth pre-authorization of service eliminate this problem? Yes and No.

Yes, when you model your costs based on what your patients need rather than how much you can get surely that can be improvement over the current state. Without claims, the entire system would be allocating resources to populations based on need.

Still, does this eliminate all burdens such as coding, preauthorizations, utilization review? No, the process of coding (diagnosis and procedures) and the review is important not only for payment but for maintaining the consistency of performance and measurement. But the focus of these activities would absolutely change. Rather than coding to achieve maximum reimbursement facing the risk of audit, coders could focus on simply coding the truth. The data set would be reflective of care occurring unencumbered by a coding trends.

Consider the way quality measures have to be structured today. To identify a diabetic, systems need to find diabetic codes (ICD10 E11) but must verify that the code occurred on qualifying encounter with certain providers. Why the extra criteria? Because lab test claims for A1C routinely have an E11 code even if they patient doesn’t have the disease. How come there are so few instances of Z13.1 Encounter for Screening of Diabetes is rarely seen. Why? its not covered pg 145. This is a common research subject across healthcare with researchers trying to use claims data unsuccessfully to identify complications of hip replacement, readmissions for heart failure, lung cancer, or hospital acquired infections. But as mentioned above in the section on data, there is a tremendous benefit from having a more robust standard interchange of records beyond the healthcare claim.

Without the crutch of claims processing, incentives would shift, some headaches would be eliminated and quality measurement would be a whole lot more meaningful– we would argue all of these are beneficial.


A world without claims provides a useful way to think about how health systems would operate in a completely value-based payment model is something that is not really possible today.

But eliminating claims exposes key things health systems can do now to invest in the future:

  1. Give Patients Something to Join: Revenue in this framework follows patient behavior and engagement over the long-term. Systems need to earn that commitment with patients not just for one episode of care but through a whole family over years.

  2. Get the new Standard for Analysis: Claims is a poor basis for population health. Leading organizations show have a standard chart output that summarizes a patient history, care plan, medications, vitals and labs. That output should be available not only to the patient but to any organization that will have care for that patient whether within the ACO, contracted with the ACO for specific service or the patient is transferred to another ACO.

  3. Code the Truth: Forget all payment related coding rules. Redeploy coders to make the most accurate dataset possible. Allow providers to do the same.

I hope you enjoyed our little thought experiment. Feel free to comment below.