Claims denials on the rise, complicating revenue collection, survey finds

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Healthcare claims processing is rife with inefficiencies and financial strains marked by operational bottlenecks, rising denial rates, and increasing administrative burdens faced by providers, according to the new State of Claims 2024 report from Experian, a data analytics and consumer credit reporting company.

As healthcare organizations aim to transition towards value-based care models, claims management remains a critical area in which inefficiencies can lead to significant financial losses. The findings underscore the urgency of improving revenue cycle management strategies as the industry moves into 2025.

Among the key trends is the rising rate of claims denials across the healthcare sector. Denial rates have steadily increased, with providers seeing rejection rates as high as 10 to 15%. This not only complicates revenue collection, authors said, but also leads to administrative overhead as healthcare organizations spend more resources on appealing and resubmitting claims.

Experian attributes this increase to several factors, including tighter regulatory scrutiny, complex billing requirements, and payer policies that are continuously evolving. Coding errors, incomplete patient information and authorization issues are among the top reasons for denied claims, according to the report.

WHAT'S THE IMPACT

Outdated technology and inefficient workflows are major contributors to the ongoing claims processing challenges, authors said. Many healthcare organizations are still reliant on legacy systems that fail to integrate effectively with electronic health records and payer platforms. This lack of integration creates data silos and hampers the real-time processing of claims.

On top of that, insufficient automation exacerbates delays in claims submissions and verifications, the analysis said. Despite the promise of artificial intelligence and machine learning in healthcare operations, many providers have been slow to adopt these technologies due to high implementation costs and complex integration processes.

Meanwhile, as the healthcare industry shifts towards value-based care, providers are being incentivized to improve patient outcomes while reducing costs. But the traditional fee-for-service model still underpins most claims processes, creating a disconnect between healthcare delivery and reimbursement methods, authors said. Value-based care relies on accurate data sharing between providers and payers, but Experian's findings suggest that the claims infrastructure is lagging behind.

It said that data analytics will play a crucial role in improving claims accuracy and financial performance. Healthcare organizations that invest in robust data analytics platforms are better equipped to track claims in real-time, identify patterns that lead to denials, and optimize coding practices to ensure proper reimbursement. By leveraging analytics, providers can proactively address issues that could result in claim denials before they escalate, the report found.

To address these growing challenges, the analysis suggests that healthcare providers explore partnerships with third-party vendors who specialize in revenue cycle management. Outsourcing claims processing to experts who possess the necessary technology and expertise can help reduce denial rates and improve financial outcomes.

Authors also recommend that healthcare organizations invest in modernizing their claims infrastructure. By adopting cloud-based solutions, providers can ensure better interoperability with payer systems and other healthcare technologies. The report also stresses the importance of continuous staff training on coding updates and payer policies, which are critical to avoiding claim denials.

THE LARGER TREND

Claim denials are particularly costly for healthcare providers, as they result in delayed payments, increased operational costs, and potential revenue loss. 

According to a 2019 survey, claim denials cost healthcare organizations an estimated $262 billion annually. The administrative burden of reworking denied claims is a significant drain on resources, further contributing to financial instability, especially for smaller providers.

The same survey suggested that AI and machine learning can enhance operational efficiency, and that these technologies, when implemented effectively, have the potential to transform claims processing and reduce the financial strain on healthcare organizations.

For organizations that have begun incorporating AI-driven solutions into their revenue cycle management, there are tangible improvements. Automated claims processing can reduce human error, speed up workflows, and ultimately improve the rate of first-time claim approvals, said Longevity Health Plans Chief Population Officer Heidi Wold.

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.