Increased Claim Denials Cost Hospitals $3.5 Million
Hospitals and healthcare systems have done a lot to fortify their revenue cycle components. However, despite all the efforts in the right direction, the increasing claims denial rate looms over healthcare financial wellbeing like a foreboding.
The recent survey conducted by Advisory Board from healthcare executives from 90 companies and data collection from 300 organizations revealed alarming trends. It not only revealed some disturbing patterns for healthcare industry, but also revealed that a whopping 90% more denied claims were written off by hospitals and health systems in the last two years. $3.5 million worth uncollectable claim denials is a serious threat for hospitals. Even though health institutions can recoup their losses by appealing these claim denials, recent trends have revealed that the process of appealing has become increasingly complex for the hospitals.
The success rate of denied claims has been an abysmal 45%, down from 56% in the last two years. Even the rate of appeals for claim denials have dropped by 10% to reach 41%.
Appealing Claim Denial Challenges
The survey added that successful appeal of denied claims has proven to be a challenge for the hospitals. With the industry moving towards value-based service and reimbursement model, the need to prove medical necessity will pose greater challenge than dealing with technical or demographic errors in data entry that lead to denials.
If the hospitals want to successfully get reimbursed, they would be required to prove that the care they gave to the patients was necessary, rather than simply fixing a technical mistake. According to experts, the health systems must change their strategies and address denials more proactively to keep denial volumes in check. There is also a need for hospitals and healthcare systems to come up with stronger appeals strategies that are based on improved authorized processes and tighter clinical documentation.
Inaccurate Performance Indicators
According to the survey, hospitals and health institutes saw significant increase in cash flow the last 10 years. However, at the same time, researchers revealed that these sudden increases in financial gains may have also resulted from write-offs and other such factors that reduced A/R.
It is also important to note that the hospital bad debt may appear to have declined because more patients are covered under Affordable Care Act in some states. This means that even though the health systems saw fewer bad debts, there was much higher unpaid patient financial responsibility that increased under high-deductible health plans.
If the hospitals and healthcare systems want to improve their financial health, the key is collecting at the point-of-service. The patients are expected to cover most health costs on the spot. For now, hospitals are not using this feature adequately, adding to the patient financial responsibility.
To increase the cash inflow, hospitals should look for opportunities to increase their point-of-service revenue. Offering discounts will be one way to do it. Hospitals and health systems with high point-of-service collections used patient financial responsibility concessions to encourage full upfront payments. The survey revealed that the discount alone increased point-of-service patient collection by 90%!
The Advisory Board recommends that reducing the cost to collect can be highly beneficial for hospital revenue cycle. The organizations that use centralized revenue cycle functions are able to keep the costs down and increase their revenues. Even though patient access may not be centralized, it is possible for other functions, such as medical billing, medical coding, denial management and other such operational costs to be easily accessible via central systems.