Payers’ increasing claims denials, delays ‘wreaking havoc’ on provider revenue cycles

A jump in claim delays and denials is “wreaking havoc on providers’ revenue cycle performance” and contributing to health systems’ “volatile” accounts receivable and diminishing cash reserves, according to a recent pair of analyses.

The first, published this week by Kodiak RCA (formerly Crowe healthcare consulting), pulls average revenue cycle performance benchmarks from platform incorporating more than 1,800 hospitals’ and 200,000 physicians’ data.

The analysis found, among other trends, an increase in overall initial denial rates from 10.15% in 2020 to 11.2% in 2022, and then up again to 11.99% in the first three quarters of 2023.

Additionally, it pointed to 2020-2023 increases in of 90 day-plus accounts receivable’s percentage of payer claim value, both for patients with Medicare Advantage (19% to 36%) and commercial (27% to 36%) coverage.

“Clearly, the leading driver of aged [accounts receivable] more than 90 days is related to increases in initially denied claims, which require additional time and resources from hospitals, health systems and medical practices to resolve,” the group wrote.

The other report, released late last month by Syntellis and the American Hospital Association (AHA), reviewed the financial data of more than 1,300 hospitals and health systems.

Its highlights included 55.7% and 20.2% increases in denials from Medicare Advantage and commercial payers, respectively, from the top of 2022 to the midway point of 2023.

It also outlined “significant volatility” among nationwide hospitals’ accounts receivable. As measured by every $1 million in net patient service revenue, the metric ranged from a low of $18,896 in May 2023 to a high of $33,598 in February 2023. Month-to-month fluctuations reached highs of $14,287 for commercial payers and $8,872 for Medicare Advantage payers.

“These issues compound reimbursement challenges from Medicare fee-for-service and Medicaid, which chronically underpay hospitals relative to the total cost of care,” Syntellis and AHA wrote in their report. “Taken together, a lack of proper and prompt reimbursement has both upstream impacts on hospitals’ cash flow as well as downstream impacts on patient care.”

Kodiak RCA’s analysis noted that the payer denials are a driving factor in other revenue cycle challenges for providers. Hospitals and other providers can’t bill patients for their share of the payment until the question of their insurance is settled, meaning that longer adjudication of an initial claim increases the time until providers will eventually receive that portion of their revenue from patients, the professional services group wrote.