2024 Denials Index Strained and Drained Infographic

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2024 Denials Index Strained and Drained: A Review of National Medical Claim Denial Trends

In a concerning development for the healthcare industry, the latest data on medical claim denials has revealed a significant strain on the revenue cycle of hospitals and health systems across the nation. Denials, which have long been a persistent issue in healthcare, continue to rise, affecting not only the financial stability of providers but also the quality of care patients receive. In this article, we delve into the current state of medical claim denials, exploring their causes, impact, and potential solutions.

The Pervasive Problem of Denials

A Closer Look at the Data

Denials are a pervasive and persistent problem in the healthcare industry. According to recent surveys, one in five claims are delayed or denied, representing a significant financial drain for health systems. The Advisory Board Company reports that 90% of denials are preventable, highlighting the inefficiencies in the revenue cycle that lead to these issues.

Root Causes of Denials

The root causes of denials are varied and multifaceted. They can stem from errors in registration data entry, pre-authorization, eligibility and benefits checking, clinical documentation, coding, claim editing, and other regulatory requirements. A recent survey by the American Hospital Association (AHA) found that 62% of prior authorization denials and 50% of initial claim denials that are appealed ultimately are overturned, indicating that a substantial portion of denials could be avoided if processes were more efficient.

Financial Impact

The financial impact of denials is substantial. They can cost health systems as much as 3.3% of their net patient revenue, with an average of $4.9 million per hospital at risk due to denials. These losses are not just financial; they also delay patients' access to care, reduce their quality of care, and interfere with the transfer of patients to the right care setting.

Stages of the Revenue Cycle

Denials by Stage

Denials can occur at various stages of the revenue cycle. Here’s a breakdown of where errors commonly originate and how they lead to denials:

• Registration Data Entry: Errors in patient information can delay or deny claims.
• Pre-Authorization and Medical Necessity: Lack of proper authorization or medical necessity documentation can lead to denials.
• Eligibility and Benefits Checking: Inaccurate information about patient benefits or coverage status can result in denied claims.
• Clinical Documentation: Incomplete or incorrect clinical documentation can be a significant cause of denials.
• Coding: Incorrect coding can lead to claims being denied due to lack of coverage.
• Claim Editing: Errors during claim editing can cause denials, especially if there are discrepancies in the claim data.
• Other Regulatory Requirements: Failure to meet regulatory requirements can also result in denied claims.

Examples of High-Denial Codes

Certain revenue codes are more prone to denials than others. For instance, laboratory chemistry tests (revenue code 301) are denied 38% of the time, while laboratory general tests (revenue code 300) are denied 28% of the time. Understanding these high-denial codes is crucial for implementing targeted strategies to reduce denials.

The Impact on Hospitals

Financial Stability

The financial stability of hospitals is under threat due to rising denials. Administrative costs, which include billing and insurance expenses, constitute up to 31% of total healthcare spending. Of these, 82% is attributed to billing and insurance, further exacerbating the financial strain. More than half of hospitals ended 2022 operating at a financial loss, and the first quarter of 2023 saw the highest number of bond defaults among hospitals in over a decade.

Operational Challenges

Hospitals face significant operational challenges due to denials. Administrative burden and the time spent on appeals processes divert resources that could be better utilized in patient care. Nurses and physicians report that insurer policies are a barrier to patient care, affecting their ability to practice medicine and deliver quality care.

Preventing Denials: An Analytics-Driven Approach

The Need for Analytics

Preventing denials requires a proactive and analytics-driven approach. By identifying errors and inefficiencies throughout the revenue cycle, healthcare providers can implement targeted strategies to reduce denials. For example, Orlando Health used analytics to identify where errors commonly occur and established workflows to address these issues. This approach led to a significant reduction in authorization-related denials and improved the overall claim acceptance rate.

Data Analysis

Data analysis is key to understanding the root causes of denials. By stratifying denials by their root causes, healthcare providers can pinpoint areas that require the most attention. For instance, a study found that most denials stemmed from authorization requests, requests for additional information, medical necessity, and claims for services not covered. By addressing these specific areas, providers can significantly reduce the number of denials.

Standardizing Denial Mapping

Standardizing denial mapping by payer and analyzing revenue denial and recovery rate data are crucial steps in optimizing workflows. This allows healthcare providers to track their performance and make data-driven decisions to improve their revenue cycle efficiency.

Solutions and Recommendations

Improving Claim Quality

Improving claim quality is essential for reducing denials. This includes ensuring that all necessary documentation is complete and accurate, and that claims are thoroughly reviewed before submission. Implementing quality checks at various stages of the revenue cycle can help catch errors early and prevent denials.

Enhancing Pre-Authorization Processes

Enhancing pre-authorization processes can also help reduce denials. This involves ensuring that all necessary information is provided upfront and that there are clear guidelines for what constitutes medical necessity. Using automated systems to streamline pre-authorization can also help reduce delays and denials.

Increasing Transparency

Increasing transparency in healthcare pricing is another solution. Recent transparency laws require hospitals and payers to post their negotiated commercial prices, making medical costs less opaque. This can help employers compare negotiated pricing across health systems, networks, and regions, enabling them to make more informed decisions about plan design and network strategy.

Conclusion

The 2024 Denials Index highlights a significant strain on the healthcare system due to rising denials. These denials not only affect the financial stability of hospitals but also delay patients' access to care and reduce their quality of care. By implementing an analytics-driven approach, improving claim quality, enhancing pre-authorization processes, and increasing transparency, healthcare providers can significantly reduce the number of denials and improve their revenue cycle efficiency.

References - AMA/Specialty Society RVS Update Committee Minutes - NFP 2024 US Benefits Trend Report - Change Healthcare: Denials Management - Becker's Hospital Review: The State of Claims 2024 - American Hospital Association: Environmental Scan 2024