Private payers deny 15% of claims, survey finds

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Nearly 15% of all claims submitted to private payers for reimbursement are initially denied, including many that were preapproved to move forward through the prior authorization process, according to a new national survey of hospitals, health systems and post-acute care providers conducted by Premier.

An average of 3.2% of all claims denied included those that were preapproved via the prior authorization process.

Despite the initial denial, more than 54% of claims rejected by private payers were ultimately paid. Many others may have been ultimately paid, but were not fully pursued for payment due to issues such as resource constraints.

Denials tended to be more prevalent for higher-cost treatments, with the average denial pegged to charges of $14,000 and up.

WHAT'S THE IMPACT?

Hospital and health system respondents that fought the denials did so at an average cost of $43.84 per claim, the survey showed. Considering that health insurers process about three billion medical claims each year, this means that providers spend about $19.7 billion a year in these reviews.

According to Premier, of that spend, $10.6 billion was "wasted arguing over claims that should have been paid at the time of submission." That figure doesn't include the costs associated with added clinical labor, which the American Medical Association estimates adds $13.29 to the adjudication cost per claim for a general inpatient stay, and $51.20 to the cost of inpatient surgery.

There are indirect costs to the denials as well. To get from denial to ultimate payment, respondents reported that they needed to conduct an average of three rounds of reviews with insurers, with each review cycle taking between 45 and 60 days. These delays resulted in nearly 14% of all health system claims being past due for remittance, with providers often unable to recoup costs for up to six months after services were delivered.

This burden is impacting hospitals' financial viability. Over the past year, the average days of cash on hand for hospitals and health systems declined by 44 days over the previous year, on average – a 17% drop year over year. Lacking cash on hand, health systems are unable to re-invest in patient care and may also suffer from downgrades in bond ratings, making cash more expensive and harder to obtain.

By contrast, days of cash on hand increased for insurers like UnitedHealth Group (up 25.5% on average from 2019) and Cigna (up 24.4%).

Patients whose bills are unpaid by their insurer may be liable for some or all of the ultimate costs of care. According to the Commonwealth Fund, 46% of Americans say they skip or delay necessary follow-up care because they are worried about the costs, and another 49% say they would be unable to pay for an unexpected $1,000 medical bill within 30 days.

Looking specifically at the Premier survey data, respondents reported that hospital discharges to post-acute care settings such as skilled nursing facilities (SNF) were particularly subject to initial denials, with more than 20% of all claims requesting discharge to a SNF for ongoing care and post-acute therapy denied by private insurers.

THE LARGER TREND

Premier singled out Medicare Advantage, where over a quarter of claims are subject to prior authorization, and nearly 20% of discharges to post-acute care settings are initially denied. Premier urged the Centers for Medicare and Medicaid Services to stringently monitor reporting of expenditures on direct patient care, particularly in the MA program. 

Premier also encouraged CMS to begin collecting data on payment delays and denials between MA plans and contracted providers to determine whether the practice violates CMS' expectations around network adequacy.
 

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