Private payers initially deny nearly 15% of medical claims

March 25, 2024 - It may take some time to get paid for medical services, suggests a new survey of hospitals, health systems and post-acute care providers.

Nearly 15 percent of medical claims submitted to private payers for reimbursement are initially denied, respondents representing over 500 organizations told Premier Inc. in the survey. An average of 3.2 percent of denied claims also included those that were pre-approved through the prior authorization process.

Despite the initial claim denial rate, over half of the claims rejected by private payers at first were paid to providers, Premier Inc. reported. However, healthcare providers said that more initial denials may have been ultimately reimbursed if not for resource constraints that prevented them from pursuing payments through appeals and other means.

Providers conduct an average of three review rounds with payers to ultimately get paid for initial claim denials, the survey showed. With each review cycle taking 45 to 60 days, providers are shelling out money while waiting for reimbursement.

Claim denials cost an average of $43.84 to fight, according to the survey. Payers process about 3 billion medical claims each year, so Premier Inc. found that providers spend about $19.7 billion a year collectively reviewing claim denials. The healthcare company argued that half of that amount — $10.6 billion — is wasted over claims that should have been paid at the time of submission.

Additionally, the $19.7 billion does not incorporate labor costs. The American Medical Association estimates this adds about $13.29 to the adjudication cost per claim for a general inpatient stay and $51.20 for inpatient surgery.

Claim denials tend to be for more prevalent, higher-cost treatments, Premier Inc. found. The average denial was for charges of $14,000 and up.

Delays in ultimate reimbursement led to almost 14 percent of all health system claims being past due for remittance. Providers often cannot recoup costs for up to six months after their providers deliver the services.

The lengthy and costly claim denials management process has downstream effects on patients and providers, Premier Inc. explained. Patients may receive unexpected bills long after they receive services, resulting in delayed follow-up care. Denials have also been linked to lower patient satisfaction scores on the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey, even after the claim was ultimately reimbursed.

Premier Inc. also found that “overall quality measures scores are being artificially depressed by payer actions,” such as the initial claim denial rate. As the industry moves toward value-based reimbursement, lower quality scores have a material impact on provider revenue.

Of significant concern is the Medicare Advantage (MA) market, Premier Inc. said. MA had the second-highest initial claim denial rate at 15.7 percent, trailing Medicaid at 16.7 percent. MA denials also cost providers the most to fight at an average of $47.77 per claim.

Premier Inc. also cited MA’s robust prior authorization programs, in which over a quarter of claims are subject to prior authorization.

The company and 118 member organizations, including some of the top US health systems, recently called on CMS to protect the continuity of care in light of widespread reimbursement delays and denials. Specifically, they called for prior authorization changes in the MA program to streamline the process and required coverage determination reviews to be conducted by physicians of the same specialty for the service.

They also urged the agency to collect data on MA denials and payment delays, weigh patient experience and access measures more heavily in MA Star Ratings and take action against MA plans that fail to abide by coverage rules.