- Approximately 9 percent of hospital charges in 2016 were initially claim denials, according to a new Change Healthcare study. As a result, $262 billion out of $3 trillion in claims submitted last year was denied.
The analysis of over 3.3 billion provider transactions from about 724 hospitals in 2016 also revealed that as much as 3.3 percent of net patient revenue at the typical health system was at risk because of claims denials.
The at-risk revenue represented about $4.9 million per hospital in 2016, researchers reported.
The top reason for claim denials according to the analysis was registration and eligibility issues with 23.9 percent of claims being denied by payers for this challenge. Researchers also found the common reasons for claim denials, including:
• Missing or invalid claim data with 14.6 percent of claims
• Authorization and pre-certification issues with 12.4 percent of claims
• Medical documentation requested with 10.8 percent of claims
• Service not covered with 10.1 percent of claims
Other popular claim denial reasons included medical coding and medical necessity problems with 5.8 percent of claims, respectively, and untimely filing and appropriateness of care issues with about 3.5 percent of claims, respectively.
Researchers pointed out that payers denied hospital claims for issues that spanned the hospital revenue cycle. However, the greatest percentage of denials stemmed from front-end processes.
Hospitals and medical groups have reported a significant boost in payer requirements for claims reimbursement. For example, a recent MGMA poll uncovered that 86 percent of medical practice leaders witnesses an increase in prior authorization requirements over the past year.
Only 3 percent said that their organization experienced a decrease in prior authorization requirements.
Payer requirements, such as prior authorizations, put more pressure on front-end staff to ensure accurate claims reimbursement and minimal claim denials.
While claim denials put hospital patient revenue at risk, the Change Healthcare study found that about 63 percent of denied claims were recoverable.
Although recouping claims reimbursement revenue significantly cost hospitals. A claim denial appeal cost providers about $118 per claim, or up to $8.6 billion in administrative costs nationally.
For hospitals relying on Medicare revenue, claim denials management and appeals were especially challenging. A recent American Hospital Association (AHA) report showed that almost three-quarters of claim denials appealed to an administrative law judge took longer than the statutory 90-day limit for a claim determination.
Consequently, about 26 percent of all claim denials appeals were stuck in the Medicare appeals backlog in the third quarter of 2016.
Hospitals may be patiently waiting for their Medicare reimbursement, but they may not see their claim denial appeals moving through the appeals process anytime soon.
A federal judge ordered HHS to eliminate the Medicare appeals backlog by Dec. 31, 2020. However, the federal department stated that the timeframe was inappropriate and would force the department to “make payment on Medicare claims regardless of the merit of those claims.”
To avoid claim denials and a lengthy, expensive appeals process, Change Healthcare leaders suggested that hospitals implement more automated processes and data analytics solutions.
Automated claim denials management is not common among healthcare organizations. Roughly 31 percent of providers still use a manual claim denials management process, a 2016 HIMSS Analytics survey found.
“Eye-opening insights like these are only possible with advanced analytics and revenue cycle tools that let you identify the root causes of denials, and implement and automate practices that prevent them,” stated Marcy Tatsch, Change Healthcare’s Senior Vice President and General Manager of Reimbursement and Analytics Solutions. “You can’t fix what you can’t see.”
“But by reinventing the revenue cycle with analytics, a hospital can improve its success rate in appealing denied claims and increase how much revenue is recovered—not to mention reducing the number of denials in the first place,” she added.