Nearly four years on from the start of the pandemic, the finances of most hospitals remain in disarray. Approximately half of US hospitals finished 2022 in the red, contributing to the worst financial year for US hospitals since 2019. Analysts point to a number of factors that are to blame, including an ongoing healthcare workforce crisis and the increased costs of labor and rising expenses. But one factor has come under intense scrutiny: the significant uptick in claims denied by insurance companies.
Uptick in claims denials
Denied claims aren’t a new problem. Even before the pandemic, denied claims were noticeably on the rise, causing no end of headaches for hospital administrative staff, not to mention lost revenue. But since 2020, this problem has assumed massive, unignorable proportions, and has contributed heavily to the precarious financial situation in which many hospitals now find themselves.
Few things can drain a hospital's resources like denied claims. Hospitals are already severely under-staffed and under-resourced—forcing employees to take time away from urgent tasks to contest denied claims can stretch these resources to the breaking point. Denied claims can also have a detrimental effect on a patient’s perception of their service: an otherwise flawless hospital experience can be marred, sometimes irreversibly, by a claim denial, hurting the hospital's standing in satisfaction surveys.
The 2022 Experian State of Claims report lists three major reasons for this uptick in denials – lack of automation in the claims/denials process, insufficient data analytics, and a lack of thorough training – and it is worth exploring each of these to understand how healthcare reimbursement professionals can best mitigate these risks and prepare for the future.
1) A lack of automation in the claims/denials process
Hospitals – which are, by necessity, on the cutting-edge of technology – should be leading the way when it comes to paperwork automation. But this is, unfortunately, not the case: according to a recent report, 78% of hospitals are using automation, but the denials management process is not benefiting from it.
The problem is obvious: a lack of automation means that a dedicated staff member with relevant expertise must handle each denial individually. Given the drastic uptick in denials in recent years, and the ongoing staff shortages plaguing many hospitals, this situation is increasingly untenable.
One way hospitals and healthcare systems can overcome these challenges is by investing in solutions that ensure there are no gaps in the revenue cycle process. MediRegs, a SaaS platform that comes equipped with analytical tools that help healthcare revenue professionals “drop” a clean claim the first time, eliminates gaps that can lead to denials.
2) Insufficient data analytics
A lack of automation invariably breeds a second problem: a lack of transparency into the workings of the denials process. Manually tracking trends among the flood of denials most hospitals receive today is a fool's errand; a massive team must handle that mountain of paperwork, and even then, things would inevitably be missed. Put otherwise: reimbursement professionals cannot hope to get a handle on – let alone fix – a system's revenue cycle without crystal-clear insight into its inner-workings.
Data analytics, enabled by automated revenue cycle management, allow hospitals to pinpoint problems and to adjust accordingly. A few targeted procedural tweaks can potentially yield massive financial dividends, but without analytics to identify what those tweaks should be, hospitals will continue to struggle.
3) Insufficient training
While things have gradually returned to a kind of normal over the last year or two, the effects of the COVID-19 pandemic are still very much being felt from a staffing perspective. Increased burnout at the height of the pandemic led many professionals to drop out of the field entirely, and replacing those roles has proved a significant challenge. Meanwhile, several pandemic-era developments – from the rise of telehealth, to new protocols around claims submissions, to the still-robust backlog of non-essential medical procedures delayed by the pandemic – have perilously over-burdened the new staff members that hospitals have been able to hire.
One effect of all this is that training has suffered, with hospitals (understandably) focused on putting out day-to-day fires. This is unfortunate, because proper employee education is one of the most important components of revenue cycle management. When employees aren't clued into the specifics of the claims process, they are liable to make precisely the kinds of mistakes that lead invariably to denials.
What hospitals can do to reduce denied claims
Revenue cycle management is a hugely complex process, and any number of things can go into an eventual denial: an absence of required documentation, an eligibility error, a coding issue. If hospitals hope to clear these obstacles going forward, it is imperative that they thoroughly modernize their revenue cycle management, with a focus on automation and data analytics.
The right technology platform can precisely provide the tools needed by healthcare reimbursement professionals to ensure their program's integrity, synchronize decisions across teams, and speed-up coding processes. Platforms like MediRegs reduce the need for extensive employee training by minimizing complexity: with a sufficiently intuitive interface, a new employee (or an established employee) can navigate an automated claims process with minimal instruction. MediRegs tools and calculators are available via API and batch services. This allows revenue cycle professionals the opportunity to expedite the denial error assessment process and provide time for data analytics.
Some aspects of the current healthcare financial crisis – say, increased costs and staffing shortages – are out of any hospital's control. Claim denials are avoidable. Yes, payers will always decline some percentage of claims, but, with the right technology, it is very much in a hospital's power to reduce overall denials and save significant revenue.
