According to a recent survey, eligibility and prior authorization issues were among the most prevalent causes of claim denials. Hospitals and healthcare systems are experiencing an uptick in claim rejections due to errors in front-end revenue cycle processes.
The Healthcare Financial Management Association’s Pulse Survey program, conducted for a healthcare technology company, gathered responses from over 350 CFOs and revenue cycle leaders in hospitals and healthcare systems. Nearly half of these financial leaders (47 percent) reported an increase in claim denial rates compared to the previous year, with 37 percent noting a rise of at least 5 percent. While a majority of hospitals and healthcare systems saw a significant surge in claim denial rates, only 2 percent of respondents stated that their rates had decreased by 5 percent or more. Meanwhile, 27 percent observed no change, and 24 percent reported a decrease of less than 5 percent in claim denial rates.
As claim denial rates rose, revenue cycle leaders unanimously identified front-end revenue cycle errors as the primary cause of claim denials. When ranking the most frequent reasons for initial claim denials, errors in patient access and registration topped the list. This indicates that eligibility mistakes and missing prior authorizations were the leading causes of hospital claim denials this year. Additionally, healthcare CFOs and revenue cycle leaders identified a lack of supporting documentation for medical necessity, along with missing or inaccurate patient information, as common factors contributing to initial claim denials alongside errors in patient access and registration. Other causes for initial claim denials included issues with physician documentation, utilization management, coding errors, duplicate claims, and untimely filing.
Claim denials pose a significant financial challenge for healthcare providers. A recent survey conducted by a medical billing company revealed that claim denials represent the most substantial hurdle in revenue cycle management for healthcare organizations, often leading to backlogs in the process. Over one-fifth of respondents (22 percent) stated that organizations with annual revenues ranging from $25 million to $5 billion lose over half a million dollars in revenue annually due to denied claims.
Recognizing the financial impact, healthcare organizations are prioritizing claims denial management to mitigate losses. Trends in initial claim denials highlight the need for improvements in front-end revenue cycle processes to prevent denials at the outset. The Senior Vice President of revenue cycle operations and deployments at the healthcare technology company emphasized, ‘This new data confirms what we all know: Issues at the front end trickle down into the entire reimbursement process. When your patient access operations run smoothly, you’re setting your downstream workflows and teams up for success.’
Hospitals and health systems face challenges in claims denial management that can’t be resolved by hiring alone. The healthcare industry, as a whole, is grappling with a shortage of qualified revenue cycle management staff, among other professionals and clinicians. Without sufficient human resources to address and rectify claims, healthcare organizations must seek alternative solutions.
The founder and CEO of the medical billing company noted in a previous survey that despite proven successes associated with AI and robotic process automation (RPA), providers remain hesitant to integrate these new technologies into their revenue cycle management process. Almost 20 percent of respondents in that survey, who utilized AI and RPA, reported experiencing faster cash flow and collections. Another 20 percent of these technology users also found that the solutions yielded more insightful and readily accessible business analytics.
The opportunity exists to harness AI, including generative AI, in claims denial management to proactively prevent costly initial denials, particularly those stemming from front-end errors. Healthcare organizations must now seize these opportunities to implement automation and maximize revenue.