Claims under fire: Three reasons why denials are hitting revenue cycle management harder than ever

Jason Considine: ©Experian Health

It’s no secret that claim denials are a major pain point in health care revenue cycle management. Health care providers have dealt with a complicated claims management environment for decades, and claim denials persist. In fact, according to a recent claims survey, 73% of providers say claim denials are increasing, compared to 42% in 2022.

It’s a significant challenge that continues to disrupt providers’ operations. The same report found that 38% of provider respondents say claims are denied 10% of the time or more, and 11% say claims are denied more than 15% of the time.

This area of the revenue cycle leads to consequences across the entire health care ecosystem, impacting the efficiency, affordability and timeliness of health care delivery and, of course, providers’ financial well-being. According to the Journal of AHIMA, on average, hospitals face a yearly loss of $5 million due to health care claim denials, amounting to 5% of their net patient revenue. Providers continue to grow more frustrated with the loss of income due to a complicated and labor-intensive process of claims management.

There are several reasons that claim denials occur, including operational challenges such as insufficient data, lack of automation in claim submissions, staffing shortages and more.

Complex policies and slow adoption of technology

The claims submission and denial management processes are already convoluted. It involves numerous data elements (some of which are incomplete or inaccurate) along with the added challenge of ever-changing complex payer policies.

Providers are seeing payer policy changes occurring more frequently. The inconsistency of these payer rules adds more layers of responsibility for the provider in the claims submission process and creates more room for error, further complicating the situation. Providers are having to allocate more time and resources to resolving and appealing denied claims. They need to implement an efficient solution to keep pace with these rule changes.

To compound an already overwhelmed claims system, providers are also dealing with high patient volumes, which results in more claims to process. With patient volumes expected to continue to rise, the requirement for more data intake and claims submissions is only going to climb. Nearly half of providers agree that the number one reason for claim denials is missing or inaccurate data, and the third-ranked reason for claim denials is inaccurate or incomplete patient information.

The slow adoption of new technology has created operational challenges, which have increased claim denials for years. Automation and AI-enabled solutions are available, however, providers are still heavily relying on manual processing.

Labor shortages and complex manual processes

Providers not automating the claims management process are allocating numerous staff hours toward managing claims. The issue remains that providers simply cannot keep up with the complexities and data-intensive nature of claims processing without automation and technology.

Many providers simply don’t have the workforce to effectively manage their claims and denials management processes manually, and they are recognizing it. 80% of health care leaders acknowledge that chronic staffing shortages present significant risks for their organizations, one of those risks being increased claim denial rates. Additionally, a recent staffing survey, found that 70% of provider respondents facing staff shortages also experienced increasing denial rates.

Providers are at a crossroads with the current claims and denials management strategy. Labor shortages mean fewer hands on deck to ensure claims are processed correctly and to re-work denied claims. To compound the issue, providers are experiencing financial strain increasing the pressure to solve the claim denials crisis. In fact, payers deny hospital systems a staggering $260 billion worth of inpatient claims annually.

Manual claims processing results in health care workers being overloaded with a cumbersome process that has the potential to be automated. Not only is manual processing absorbing the valuable, limited hospital resources and staff, but it also creates the opportunity for inevitable human error, and providers are seeing errors in claims increasing.

The absence of data and analytics technology also hinders providers' ability to get ahead of the hiccups to identify and address potential inaccuracies or issues that lead to claim denials.

Need for modernization and more technology

The benefits of implementing automation and AI for managing claim denials are clear. Unfortunately, we’re seeing a regression in providers using technology. Only a small percentage of providers say they have completely automated their claims processing, including to correct claims and resubmit in case of a denial.

One positive outcome of the pandemic was the health care system’s uncharacterized acceptance of new technology. The providers who have chosen to utilize automation technology in the claims management process have experienced success in unburdening their staff and increasing their bottom line.

There is a significant need to modernize the claims management process from step one. Using automation technology specifically designed considering the needs of the claims management process can intake patient information, flag missing or inaccurate information in a claim to prevent a denial, unburden health care staff and ultimately increase the providers bottom line and provide more time for what matters— excellent patient care.

The claims management process needs to be evaluated to reduce the manual workload of staff, investigate machine learning and AI technology and when current solutions aren’t performing to expectations.

Traditionally, providers have been on the losing end of claims management and the steady increase in claim denials will only make it worse. Technology is the best way to level the playing field for providers, but unfortunately, the healthcare system has seen a retreat from embracing automation technology that spiked during the pandemic. If providers invest in the right technologies, they are well positioned to reduce denials, cost to collect and labor costs, accelerate cash flow, and deliver a better patient experience.

Jason Considine is the Chief Commercial Officer at Experian Health.