Hospital Claim Denials Steadily Rising, Increasing 23% in 2020

February 04, 2021 - Hospitals are receiving more claim denials from payers, with the average rate increasing by 23 percent in 2020 compared to four years ago, according to a recent analysis.

The hospital claim denial rate has been steadily increasing since 2016, Change Healthcare reported in the analysis. But the recent COVID-19 pandemic has accelerated that upward trajectory, pushing the denial rate up from 20 percent in the second quarter.

Claims denied upon initial submission also grew from 9 percent in 2016 and 10 percent at the start of 2020 to a total of 11 percent by the third quarter of 2020, the internal analysis of about 102 million hospital claim remits showed.

In total, the analysis included $407 billion in total charges across more than 1,500 hospitals in the US.

The good news for hospitals though is that most of these claim denials are potentially avoidable, the analysis indicates.

“One in four denials originates in Registration and Eligibility. It’s time to take a hard look at the dollars and time these denials represent and focus on denial prevention in this area,” Nicholas Raup, associate vice president of product management, revenue cycle at Change Healthcare, said in the analysis.

Overall, the analysis suggests that 86 percent of claims denials processed between July 2019 and June 2020 were potentially avoidable, meaning hospital staff could have intervened to prevent the denial.

In contrast, only 14 percent of the claim denials were unavoidable and nearly one in four potentially avoidable denials cannot be recovered.

Prevention is the key to averting hospital revenue loss, researchers at Change Healthcare stated.

Strategies such as staff education and automation of front-end steps can help hospitals prevent common reasons for claim denials, which include coordination of benefits, benefit maximum, and plan coverage, according to the analysis.

Additionally, hospitals saw a large portion of claim denials stemming from shortcomings related to missing or invalid claim data, which included unspecified billing issues, missing or invalid explanation of benefits, and service not covered.

A recent AHA report confirms that 89 percent of hospital leaders have experienced an increase in payment denials over the last three years, with about half of those respondents describing the increase as significant.

Claim denials are impacting revenue performance for hospitals but also quality and accessibility of patient care, AHA asserts.

While some denials cannot be helped by the provider, for example, obtaining prior authorization for emerging health needs, hospital staff can enact best practices to avoid common denials, Change Healthcare states.

Identifying root causes of denials, prioritizing remediation where it is most needed, and leveraging technology are all strategies hospitals should be considering when aiming to reduce claim denial rates.

Predictive analytics have particularly been helpful for organizations like RCCH Healthcare Partners in Tennessee, which bolstered claim denial management by leveraging technology from Connance Inc. to identify the value of a claim denial and prioritizing where staff should rework claims to maximize recoupment.

More advanced technologies like artificial intelligence are also becoming increasingly available to healthcare organizations and have the potential to significantly impact how providers manage claim denials.

“Those manual, redundant tasks that are taking place in patient access, coding, billing, collections, and denials, those tasks themselves that are performed by the revenue cycle departments can actually be automated using AI,” Ross Moore, MBA, general manager of revenue cycle at Olive, recently told RevCycleIntelligence.