Hospitals complain about insurance denials
April 4, 2024
Source: Premier National Survey, Oct-Dec 2023 LINK
Insurance company denials have increased, and hospitals are not happy.
Premier, a hospital group purchasing organization, surveyed 516 hospitals across 36 states with over 52,000 beds. They extrapolated this to the entire medical system and projected that hospitals spend almost $20 billion annually on appeals of denied claims. Their respondents said that over half (54.3%) of denials were overturned on appeal. This was a non-scientific survey performed by an advocacy group, so it might have overstated the problem or the cost of appeals. A previous unrelated study showed that insurance company denials had increased from 10.2% to 12% from 2000 to the first nine months of 2023.
Post-hospital providers have also been especially unhappy with Medicare Advantage plans, some of which have used algorithms to issue multiple sequential denials of skilled nursing facility stays for patients who remained exceptionally ill.
Hospitals have also faced cash flow challenges due to the Change Healthcare cyberattack; that system is now up and running and working to resolve a $14 billion backlog of claims. This is about 4% of total monthly health care spending.
Implications for employers:
Although many hospital systems have healthy profit margins and a good number of days of cash on hand, other hospitals, especially rural hospitals and hospitals that serve the poor, are in perilous financial circumstances.
Denials can push endangered hospitals into insolvency, which can mean people in rural or poor areas will have to travel further for care, especially for maternity and oncology care.
As Medicare Advantage plays a larger role in retirement plans, employers should be aware of the high rates of denials in some of these plans.
Carriers should abide by contract terms, and only deny payment if services are not medically necessary.
Value based payments could lessen the issue of denials, although could create a new set of tensions between providers and health plans over reconciliations of alternative payment model contracts.