The True Cost of Claim Denials in Healthcare

The True Cost of Claim Denials in Healthcare

According to a survey, claim denials are considered the biggest obstacle in revenue cycle management, with over 20% of providers reporting an annual loss of $500K due to these denials.

A recent survey of healthcare leaders conducted by leading medical billing company revealed that claim denials are causing a significant and costly issue for healthcare revenue cycle management (RCM). The survey included several healthcare organizations with annual revenue ranging from $25 million to $5 billion and RCM teams consisting of 50 to 700 people.

The survey found that more than half of the respondents (58 percent) ranked claim denials as their organization’s greatest RCM challenge, second only to “specific payer challenges” (44 percent). Other RCM challenges included staffing (41 percent), cost of collections (26 percent), and policy changes like The No Surprises Act (21 percent).

The survey also showed that nearly 42 percent of respondents reported that denials management is one of the stages in the RCM process that is regularly backlogged. Additionally, claim denials are costly for healthcare organizations.

According to the survey, 22 percent of respondents reported that their healthcare organization loses over half a million dollars in annual revenue due to denied claims, while 10 percent experience losses of over $2 million.

Despite the challenges healthcare organizations face with achieving clean claim rates and reducing denial rates, 43 percent of respondents ranked denials management as a top priority this year. Other RCM priorities include patient eligibility and benefits verification (38 percent), prior authorization (32 percent), claim submission (29 percent), and patient collections (26 percent).

The survey revealed that AI and RPA can help healthcare organizations improve their RCM operations. Almost 30 percent of respondents who used AI and RPA for their overall healthcare operations experienced faster cash flow and collections. Additionally, 20 percent saw more insightful business analytics, and 18 percent experienced faster and more comprehensive supply chain management. Some respondents also noted improved patient flow and scheduling.

Although AI and RPA have proven benefits for RCM operations, about three-quarters of survey respondents reported that their organizations have no plans to implement AI and/or RPA in RCM processes this year. Instead, healthcare organizations are focused on unifying the RCM process to improve revenue integrity. Some organizations plan to invest in educational resources for their internal RCM team (27 percent), while others plan to work with trusted external advisors (21 percent).

Despite this, the authors of the survey believe that technology like AI and RPA can help tackle some of RCM’s greatest challenges if healthcare organizations can overcome their hesitancy.

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