Written by Rod Moore

While claims denial data specific to Texas is difficult to come by, the growing sentiment among hospital leaders appears to be that claims denials have been rising on an annual basis. Despite their best efforts, many hospitals are still plagued by claims denials.  

According to statistics from the 2016 Change Healthcare Healthy Hospital Revenue Cycle Index, approximately 9 percent of claims were denied, totaling $262 billion. The same study found providers spend approximately $118 per claim on appeals, or as much as $8.6 billion in administrative costs nationwide, according to the report. On average, $4.9 million per hospital was put at risk due to denials. 

"There’s such inconsistency in the denials that you don’t know whether you’re going to get paid or not," said Frank Beaman, CEO, Faith Community Health System in Jacksboro. “We’re seeing an increase in our days in receivables as a result of the delays and denials in insurance payments to the tune of 15 to 25 percent.”

Although there doesn’t seem to be broad consistency among denials in terms of type or payer, a few providers are seeing some patterns emerging. For instance, Matt Haynes, vice president of revenue cycle at Baptist Hospitals of Southeast Texas, said that they have seen the most denials on the rise in medical necessity. “Over the last five years we’ve seen between 25 and 30 percent increase in denials for levels of care, which are what you could classify as ‘was the service medically necessary’,” Haynes said.

As a result, Beaman and others have observed an even grimmer outcome.

“The best payer right now is Medicare,” Beaman said. “I’ve heard physicians tell me that they’re tired of dealing with private insurance companies. They would just as soon take Medicare and Medicaid, because they know they’re going to get paid.”

Cause and Effect

To respond to the rise of claims denials, administrators are strengthening their ranks of employees dedicated to billing and collections, said Sara Gonzalez, vice president, advocacy and public policy at the Texas Hospital Association. 

“Anecdotally, there seems to be a perception that administrative hurdles are on the rise,” Gonzalez said. “Some facilities have been able to point to a need to increase the number of staff that handles administrative billing because plans are requiring a lot more back and forth, such as prior authorizations.”

According to Connance, a revenue cycle company that runs complex systems to analyze claims denials and revise processes, senior revenue cycle executives identified their top three priorities in 2016 as:

Claims denials prevention.

Lowering collection costs.

Resolving denials and underpayments.

The time required to track down claim status and provide additional paperwork is daunting—even before the appeals process begins, which is driving inputs and taxing hospital revenue cycle teams. “By the time the appeals process is filed, they (providers) have already gone through several rounds of back and forth with plans to try to resolve the claim,” Gonzalez said. 

Beaman said because claims denials have risen exponentially, the associated cost to pursue or recover payment has also risen.  “In some cases, it’s kind of like spending a dollar to pick up a dime because it’s so hard to get paid,” Beaman said. “You really don’t know until you get an explanation of payment exactly why were you not paid in full. There’s no consistency in the system at all and that just creates less efficiency for us.”

At CHRISTUS Health, Ryan Thompson, vice president, revenue cycle, has seen an increase in clinical related denials because of additional records requests. “In talking with my peers, I think that the clinical element is definitely a bigger issue where payers are getting a lot more stringent,” said Thompson.

Meanwhile, Beaman believes the lengthy appeals process is designed to make providers throw in the towel sooner. “It costs us more to manage a claim than it ever has before, because there’s no efficiency in the system,” Beaman said.  “When a regular hospital claim has to be taken all the way up to the CEO level to try to get it resolved, that’s a problem.”

A Spectrum of Solutions

Although determining the volume and primary source of denials is productive, the solution to the problem isn’t always one solution, said David Franklin, chief operating officer at Connance. “One of the beliefs among providers is that payers change the rules of the game on them quite frequently,” Franklin said.

Proactive solutions such as establishing internal processes to identify and correct mistakes prior to claim submission often decrease denial rates and produces a healthier cash flow. Additional solutions such as automation have helped hospitals because more sophisticated software and technology can perform repeatable tasks that save time. 

For instance, automated claims status solutions that can continually monitor payer portals to identify which claims will be denied based on proprietary reason codes will allow for early detection of denials and give providers opportunities to submit additional information that could prevent denials altogether. 

“There is a lot of complexity in denials and in the denial follow-up,” Franklin said. “Some of the ways to make improvements might include better-structured tools to drive workflow, the application of analytics to help you make smarter choices about which claims to work on and also trend reporting to understand what the patterns are or what the problems have arisen from.”

Thompson said CHRISTUS has benefitted from simply having access to accurate and timely data to determine the source of their denials. “If you are having particular issues with a payer maybe on coordination of benefits or on member not found or other eligibility related issues, being able to see it (data) by payer, by location, and fixing the biggest items first gives you the biggest bang for the buck.”

Gonzalez said the potential conflict between providers and payers over claims is not for lack of communication. “Certainly, all of the larger systems have regular meetings with the plans to go over denials and try to find whatever the underlying issue is.” Gonzalez said. “I think they’re constantly in communication and yet the trend seems to remain the same: it’s more tense and not quite working.”