Medicare Advantage plans denying more inpatient claims

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Healthcare systems have found themselves in precarious financial standing due to a dramatic increase in the number of inpatient claims being denied by health insurers based on the lack of medical necessity, according to data collected by accounting and technology firm Crowe. These level-of-care reimbursement disputes are especially rising in frequency among Medicare Advantage plans.

One of the most straightforward payer categories when it comes to assigning the appropriate level of care is traditional Medicare, found Crowe. MA plans, on the other hand, have adopted more restrictive criteria commonly used by commercial health insurance carriers and, according to the report, deny more inpatient hospital claims than all other payer types.

Through November of 2022, the initial inpatient level-of-care claim denial rate for MA plans was 5.8%, compared with 3.7% for all other payer categories. When isolating just the payers within the MA plan population, providers wrote off 8.5% of their inpatient revenue as uncollectible in comparison to 4.7% in 2021.

WHAT'S THE IMPACT

In 2022 alone, clients in Crowe's benchmarking database wrote off $535.4 million on account of Medicare Advantage plan denials based on lack of medical necessity. 

Colleen Hall, managing principal of the healthcare group at Crowe, said that due to the immense popularity of MA plans, providers will have to adjust their clinical operations, "and should ensure their revenue cycle and care management teams are in alignment on which denied claims should be prioritized when managing appeals."

The report also revealed that in 2021, providers wrote off 3.6% of their inpatient revenue as uncollectible. Through November 2022, that number jumped to 5.9% – a 64% increase.

Through November 2022, the dollar value of initial clinical denials by payers represented 4.2% of billed inpatient dollars. That percentage is 18.5% higher than in 2021.

"One step that providers can take to try to prevent these reimbursement issues is to implement a physician adviser program to verify patient status and allow for peer-to-peer reviews to be completed when payers offer them," said Hall. "This could help alleviate the administrative burden placed on them to defend the level of care, so hospitals can allocate more of their resources to caring for their patients."

THE LARGER TREND

On February 1, the Centers for Medicare and Medicaid Services released the 2024 Advance Notice for the Medicare Advantage and Part D Prescription Drug Programs in which CMS said MA plans are expected to receive a 1.03% increase in revenue.

AHIP president and CEO Matt Eyles said by statement that three changes in the Advance Notice would cut average MA rates in 2024 by 2.27%, with varying impacts across the country.

These three changes include: a 3.12% reduction due to the MA risk model that accounts for the health status and demographic characteristics of enrollees; 1.24% lower quality bonus payments under the Medicare Star Ratings program; and increase benchmarks used to set maximum payment rates on average by 2.09%, which is less than half the growth rate in 2023 (4.88%) and well below the projected growth in per enrollee Medicare costs (5%).
 

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com