Empathy for your Hospital when it comes to Administrative Costs
Dear Colleagues:
I recently posted on “Trust” in the healthcare delivery system. Enclosed is a short report from Becker’s that you may have missed. It stresses the problematic situation for your hospital system when it comes to insurance companies’ approvals for care.
We should remember that we all are in it together in terms of the frustration with the insurance companies’ efforts to delay/deny care.
Kind Regards,
Jon “JP” Warner MD
Founder, CSS
Hospitals' administrative costs are rapidly increasing as insurers increase prior authorization requirements and denials, according to Rick Pollack, president and CEO of the American Hospital Association.
Mr. Pollack wrote in a post for the AHA website that care denials were up 20.2% for commercial claims and 55.7% for Medicare Advantage claims from 2022 to 2023, which placed a burden on hospital revenue cycles. Strata Decision Technology data shows more than 40% of care delivery costs are now administrative, according to the report.
William Gress, RN, director for revenue cycle operations at Cottage Hospital in Santa Barbara, Calif., has also seen denials increase in the last few years. The change has increased costs to the health system in a variety of ways.
"Beyond simply a rise in volume and personnel costs, there has been a shift to more clinical and coding denials," said Mr. Gress told Becker's. "Unfortunately, the cost of a coder, nurse or physician advisor to dispute these denials is significantly higher than the traditional biller. This tactic increases the cost to collect, and in-turn payers are increasing the cost of care."
Hospital executives feeling the pinch are planning for continued challenges in the future.
"Over the next five years, declining reimbursements, increased denials, and regulatory agencies will most likely be the biggest disruptors to healthcare," Stephen DelRossi, CEO and CFO of Northern Inyo Healthcare District in Bishop, Calif., told Becker's. "As far back as I can remember, payers have put unrealistic pressure on providers to accept lower reimbursements; there was waste, but the bulk of it has been removed from the system."
Hospitals and health systems across the nation are working on increasing access to care and depend on contracted reimbursements to expand. Mr. DelRossi said the dramatic increase in denials has been especially acute for accounts more than $25,000 but has also appeared for claims less than $500.
"Higher denial rates create rework for billing without providing additional benefits. These are unnecessary denials that are overturned at or about 95% of the time," he said.
The extra administrative costs cut into hospitals' ability to reinvest in infrastructure, service lines, talent recruitment and more, according to the report. It's also taking longer for insurance companies to pay claims, according to the Vitality Payer Scorecard. Last year the time insurers took on average to process and pay hospital claims increased 19.7%, and some commercial insurers are using claims audits to reduce reimbursement or clawback payment, according to an AHA report.
The AHA is pushing back against insurance companies' tactics to delay or reduce pay for care.
"We have made commercial insurer accountability a top priority, working with Congress and the federal agencies to increase oversight of Medicare Advantage plans and crack down on abuses that undermine their effectiveness for patients," wrote Mr. Pollack. "And we are making some progress."
The AHA worked with CMS on regulation for Medicare Advantage, Medicaid, CHIP and federal Marketplace plans to streamline prior authorizations. The AHA also launched a marketing campaign this month as well to run on national networks outlining how health insurers delay care.
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