Insurance claim denials continue to be a vexing problem for healthcare providers, forcing them to expend more resources to reverse payers' decisions in an already-inflated cost environment.
One common approach among insurers is denying payment until the provider submits additional information. Payers say it's a way to ensure their dollars are being spent appropriately, but many providers argue it's a stalling tactic.
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Requests for more information are a growing burden on providers, but some payer programs are worse than others, according to a report published Thursday by consulting company Kodiak Solutions.
Kodiak’s quarterly benchmarking report examines data from the company's revenue cycle analytics platform, which is used by more than 1,900 hospitals and 250,000 physicians. The report categorizes any initial claim rejected pending more information as a denial.
Here are five takeaways from the report:
1. Payers are increasingly asking for more information.
Payers initially denied 3.8% of billed charges in the first five months of 2024 requesting more information. Monthly data showed an uptick to 4% in May, from 3.9% in January.
Payers often ask for medical records confirming the level of care was appropriate, including itemized statements of the charges and details on coordination of benefits, said Matt Szaflarski, revenue cycle intelligence leader at Kodiak.
"Providers have tried to figure out ways to be proactive about sending medical records with the first claim ... but oftentimes payer systems aren't set up to accept those records until the claim is denied," Szaflarski said.
2. Providers burdened with higher administrative costs.
Providers face rising administrative costs for staffing and other resources needed to handle requests for more information and to follow up with patients when a claim or parts or it are denied.
Providers spent $1.9 billion in the first five months of 2024 responding to requests for more information, the report found, compared with $1.7 billion for the same period in 2023 and $1.5 billion in 2022.
Kodiak projects providers will spend nearly $4.6 billion for the full year. Comparative numbers for 2023 were not included in the report.
3. Provider claims aren’t necessarily getting sloppy.
Most claims initially denied pending additional information end up being approved.
Kodiak assessed more than 39,000 initial claim denials at five unnamed health systems in 2023 and found that insurers eventually paid 88.4% of those claims once more information was provided.
Szaflarski noted that even if claims are ultimately paid, many of those payments have been delayed for months.
4. Providers see more denials on inpatient claims.
From January through May, payers initially denied 4.5% of inpatient billed charges, compared with 3% of outpatient charges. Full-year data for 2023 show a similar pattern, with payers denying 4.3% of inpatient billed charges and 2.9% of outpatient charges.
"The inpatient cases are the ones that have the highest levels of reimbursement, and so that's where there's a lot more due diligence," Szaflarski said.
He said many denials are related to sepsis cases because payers and providers often dispute the criteria and coding for a sepsis diagnosis.
5. Medicaid and commercial payers issue the most denials.
Traditional Medicaid programs initially denied 9.2% of billed charges in the first five months of 2024. Szaflarski said the trend could be related to constantly changing Medicaid rules and multistate providers dealing with different rules in different states. Medicaid patients also tend to move in and out of those programs more frequently, he said.
Commercial payers initially denied 8.1% of billed charges from January through May.
"It's the commercial bucket that has just become more and more challenging and especially as Medicare beneficiaries have moved over to the commercial space," Szaflarski said.
Medicaid managed care programs initially denied 5.5% of billed charges, and Medicare Advantage programs denied 2.7%, according to the report. Traditional Medicare programs initially denied 0.5% of billed charges.
