- Small differences in private payer performance on claims reimbursement and denials can challenge hospital revenue cycles, a new Crowe Horwath analysis of five major commercial managed care payers uncovered.
“Many providers focus their attention on their own revenue cycle processes with the idea that better-performing patient financial services will produce fewer payer issues,” stated Brian Sanderson, Managing Principal of Crowe Healthcare Services. “While that is true to a degree, our data shows that major commercial payers appear to have underlying inconsistencies when compared to one another that can greatly impact a hospital’s ability to collect revenue.”
The analysis showed significant disparities in private payer performance on two key performance indicators (KPIs) for hospital revenue cycle.
First, researchers found that private payer performance differences significantly affected hospital true accounts receivable (A/R) days, defined in the study as gross receivable with contractuals taken at the time of billing added back. The analysis found the following:
• Private payers had a 15-day difference between the highest (67.7 days) and lowest numbers (52.2 days) of true A/R days
• Each of the five private payers also performed well above the 39.2-day best practice value for commercial and managed care payers
• Hospitals experienced a 13.9 percent difference in true A/R greater than 90 days between the highest- and lowest-performing commercial payer, with the lowest-performing payer reporting over one-third of all outstanding claims greater than 90 days from date of service
• All five payers exhibited true A/R days greater than 90 days above the national best practice for hospitals of 12.8 percent
Researchers also reported that inpatient claims represented a significant challenge for private payers. Hospitals had a true A/R day KPI of almost 82 days for the lowest-performing payer. The payer was nearly 23 days higher than one of its national competitors.
The poor performance may stem from the payer’s difficulty with reimbursing hospitals for large dollar claims, researchers pointed out.
Second, claim denials performance for the five commercial payers impacted hospital revenue cycles, especially since the payers did not have standard processes for claims submission and management.
The analysis found the following disparities for commercial payer denial metrics:
• Initial claim denials rates (claims that need additional work for reimbursement) ranged from 7.5 percent to 11.1 percent of net patient service revenue, indicating that one out of every $10 of revenue was at risk for non-reimbursement
• Payers exhibited the greatest performance disparity for claim denials for additional medical information needed (eg, medical record requests), with the highest-performing payer using this reason for claim denials over three times as often as the lowest-performing payer
• Final claim denials rates (claims written off as uncollectible) varied, with rates ranging from 0.8 percent of net patient service revenue written off as uncollectible to 2.4 percent
Private payer performance disparities for claim denials KPIs spelled trouble for hospital revenue cycles. Commercial managed care is typically the payer type generating positive margins for hospitals.
However, differing claims submission and management processes among commercial payers resulted in payer performance differences, as well as hospital revenue risk. Unlike public payers, like Medicare, each commercial payer has unique requirements linked to contract terms, benefit plan designs, and clinical documentation support.
Researchers stated that regular private payer performance reporting will be key for hospitals as revenue cycle practices change in the near future.
“Since commercial payers are key to a provider’s success, the provider should actively look for payer-by-payer trends,” advised Sanderson. “Ongoing, detailed managed care payer performance reporting, integrated with managed care contracting, will become even more important as hospital reimbursement tightens.”