$262 billion.  That’s how much one continual battle hospital RCM teams face is costing US-based healthcare systems. Claims denials are the challenge.  Sometimes denials may be cost-based as we detail below. Sometimes it has to do with a hospital’s own coding system and staff training for same. Our hospital clients all struggle with this in different ways, so we continue our review of the latest trends and recommendations.

Insurance Denials Continuing Challenge for Hospital RCM Teams

Even as the reasons change, insurance denials continue to plague hospital RCM teams

Jason Williams, vice president of analytics for Change Healthcare, which collected data that showed the total US hospital loss standing at $262 billion is quoted in Modern Healthcare observing that “payers initially deny about 9% of hospital claims, putting about $5 million in payments per hospital at risk”.  Williams also observed that “although hospitals ultimately will secure payment for 63% of initially denied claims, it costs $118 per claim on average to recoup the money.”

Sometimes the claim denial reason goes to cost of treatments.  Modern Healthcare is also reporting that, “Despite the availability of hepatitis C drugs capable of curing most patients, public and private health insurers denied treatment for more than a third of patients whose doctors prescribed the drugs between 2016 and April 2017”, according to a recent study published in the Open Forum Infectious Diseases Journal.  Why? The course with the drugs cost between $35,000 to $100,000. Hepatitis C affects about 3.5 million people and kills 19,000 a year. We reviewed the study and learned that:

  • Among 9025 patients from 45 states prescribed a DAA regimen (4702 covered by Medicaid, 1821 Medicare, 2502 commercial insurance), 3200 (35.5%) were absolutely denied treatment.
  • Absolute denial was more common among patients covered by commercial insurance (52.4%)
  • Despite the availability of new DAA regimens and changes in restrictions of these therapies, absolute denials of DAA regimens by insurers have remained high and increased over time, regardless of insurance type.

And the denials are not always about drug treatments.  Becker’s reports that New York City-based NYC Health + Hospitals claims UnitedHealthcare wrongfully denied $11.5 million in bills.  The health system is seeking to recover the money through arbitration. Mitchell Katz, MD, president and CEO of the system said that he believes they have been “subsidizing private insurance companies by letting denials slide.”  At their website, the health system stated in its most recent report to the board that, “We are reviewing all of our managed care contracts and denials, and may pursue arbitration against others to collect revenues we are due.” The system also announced a new training program — “NYC Health + Hospitals Coder Academy, a free training program for employees to improve coding accuracy and help ensure reimbursement for services provided.”

This made us wonder what recent tips have been published with advice for reducing claim denials.  Becker’s recently gathered five tips to help revenue cycle teams, from working consultants hospital staff:

  1. Your billing department should be diligently following up on the denials.
  2. Consider using robotic process automation to perform business operations duties.
  3. Leverage blockchain and advanced artificial intelligence algorithms.
  4. Hospitals should focus on the back end as well as the front end of the revenue cycle when looking to reduce claim denials.  We took particular note of this suggestion since our Access Management Solutions are designed to help our hospital clients collect more revenue up front.
  5. Auditors should have a good review CMS’ Targeted Probe and Educate program. This is important because “when performing the medical review as part of Targeted Probe and Educate (TPE), Medicare Administrative Contractors (MACs) focus on specific providers/suppliers that bill a particular item or service rather than all providers/suppliers billing a particular item or service. MACs will focus only on providers/suppliers who have the highest claim denial rates or who have billing practices that vary significantly from their peers.” (from CMS Q&A PDF).

And, Healthcare Finance has published some good nuts and bolts advice for hospital RCM teams starting with the observation that, “While approximately two-thirds of denials are recoverable, 90 percent are preventable.”  This article, by Jacqueline LaPointe, yields several tested solutions including:

  • Hospitals experienced more luck appealing denials from Medicare and Medicare Advantage
  • Offering discounts to patients may help organizations boost point-of-service patient collections
  • Hospitals and health systems can centralize key revenue cycle functions to continue to drive down costs.

We’ll continue to report on smart denial management solutions for hospital RCM teams as the challenge continues.