Revolutionizing denials management with artificial intelligence

Jim Bohnsack: ©Aspirion

Few challenges loom as large in health care revenue cycle management (RCM) as the dramatic increase of denied claims by payers. For physicians and hospitals, denied claims represent more than just technical glitches—they signify increased administrative burdens, severely delayed or lost revenue, and the potential for delayed patient care.

In recent years, providers have expressed growing concern over an unprecedented surge in claims denials. The primary catalyst for this trend appears to be the implementation of AI-powered algorithms by insurance payers. These automated systems are generating denials at an unprecedented rate, creating significant challenges for health care providers to manage and respond effectively. This technological advancement has sparked debate within the health care industry regarding its true impact: does it represent progress in claims processing, or merely an expedited method of claim rejection?

The denials dilemma: A $19.7 billion challenge

The American Medical Association (AMA) has reported alarming statistics regarding claims denials. In 2023, 11% of all claims were denied by payers, a notable increase from 8% in 2021. For an average health system, this translates to approximately 110,000 unpaid claims, presenting a substantial financial burden for health care administrators across the nation.

Moreover, recent studies show nearly 15% of claims submitted to private payers are rejected upon initial submission, even when prior authorization has been obtained. In 2023, health care providers expended $19.7 billion contesting these denials. Each denial presents a significant challenge, often resulting in financial strain for providers and frustration for patients.

Operationally, denials create a cascade of complications. Staff members must dedicate significant time and effort to investigating, correcting, and resubmitting denied claims. This process not only increases administrative costs but also delays reimbursement, potentially affecting cash flow and financial stability.

Perhaps most critically, denials can directly impact patient care. When claims are denied, patients may face delays in receiving necessary treatments or procedures. In some cases, patients might even forgo care altogether due to concerns about financial responsibility. A 2019 study published in the Journal of General Internal Medicine found that insurance claims denials were associated with decreased health care utilization and poorer health outcomes among chronically ill patients. This situation not only compromises patient health outcomes but also undermines the fundamental mission of physicians to deliver timely and effective care.

The power of AI in denials management

Given the magnitude of these challenges, it's clear that traditional approaches to denials management are no longer sufficient. This is where AI enters the picture, offering a powerful set of tools that promises to revolutionize denials management and usher in a new era of precision and effectiveness in healthcare RCM, helping physicians catch up to advanced payer practices.

AI's potential in denials management is multifaceted:

1. Automation of repetitive tasks: AI can handle many of the time-consuming, repetitive tasks associated with denials management. From data entry to claim status checks, AI-powered systems can process these tasks with greater speed and accuracy than human staff, freeing up valuable time for more complex, high-value activities.

2. Predictive analytics: One of AI's most potent capabilities is its ability to analyze vast amounts of data to identify patterns and make predictions. In the context of denials management, this means AI can predict which claims are likely to be denied before they're even submitted. This proactive approach allows providers to address potential issues upfront, significantly reducing the likelihood of denials.

3. Intelligent appeals generation: When denials do occur, AI can assist in generating accurate, compelling appeals. By analyzing successful appeals and understanding payer-specific requirements, AI systems can craft tailored appeals that have a higher likelihood of success.

4. Continuous learning and improvement: Unlike static systems, AI solutions can learn and improve over time. As they process more data and encounter new scenarios, these systems become increasingly adept at managing denials, offering health care providers a continuously evolving solution.

The four pillars of AI-driven denials management

While the potential of AI in denials management is clear, successful implementation requires a structured approach. Consider these four essential pillars for effective AI-powered denials management:

1. Well-defined use cases: The first step in leveraging AI is to clearly define the specific problems you're trying to solve. Are you primarily focused on reducing initial denials? Improving the success rate of appeals? Identifying trends in denials to inform process improvements? A well-defined use case ensures that your AI implementation is targeted and effective.

2. High-quality data: AI systems are only as good as the data they're trained on. Ensuring you have access to comprehensive, accurate, and up-to-date data is crucial. This includes not just claims data, but also information on payer policies, clinical documentation, and historical denial patterns. The quality and breadth of this data will directly impact the effectiveness of your AI solution.

3. Advanced platform: The right technological infrastructure is essential for successful AI implementation. This includes not just the AI algorithms themselves, but also the systems for data ingestion, processing, and output. An effective platform should be scalable, secure, and capable of integrating with your existing healthcare IT systems.

4. Skilled talent: While AI can automate many tasks, it doesn't eliminate the need for human expertise. In fact, successful AI implementation requires a team with a unique blend of skills, including data science, health care domain knowledge, and change-management capabilities. Investing in training and recruitment to build this skilled team is vital for long-term success.

For these four key pillars, think of the platform as a powerful engine. The data is the fuel, the race is the use case, and the driver is the talent. It’s more than just having an advanced platform. Yes, organizations can build an engine, but it doesn't do any good if it doesn't get them anywhere. The true value lies in driving tangible outcomes and meaningful progress.

The future of denials management

As we envision the future of health care RCM, a paradigm shift is evident in addressing critical challenges, particularly in effective denials management. By harnessing AI's potential—founded on the four pillars of well-defined use cases, high-quality data, effective platforms, and skilled talent—health care providers can transform their approach to managing denials.

This evolution promises not only financial improvements but also operational efficiencies and, crucially, enhanced patient care. As denials are minimized, prevented, and handled more effectively, health care professionals can redirect more resources and focus on their primary mission: delivering exceptional patient care.

Jim Bohnsack is the Chief Strategy Officer at Aspirion