The Growing Challenges of Hospital Denial Management

Several recent trends in the healthcare market have worsened the urgent issue of hospital denial management. Hospitals are grappling with the collection of their rightful payments, and each of these new developments poses an added threat. Let's explore these trends and their impact on revenue cycle management.

1.    Escalating requirement complexity

Insurance companies incorporate increasingly intricate requirements into their contracts with healthcare providers. As a result, organizations are experiencing a rise in initial claim denials—a recent KFF study of ACA plans found that when patients received care from in-network physicians in 2021, 17% of claims, on average, were denied. One insurer even denied 49% of claims in 2021. This causes the need to rework or appeal one out of every five claims, diverting attention from patient care and impeding revenue cycle improvement initiatives.

2.    Increasing patient responsibility

Insurers and employers are placing a greater financial burden on patients through high deductible health plans (HDHPs) and other methods. More than half (55.7%) of American private-sector workers were enrolled in HDHPs in 2021, the highest on record, representing the eighth straight yearly increase in HDHP enrollment. Prompt payment collection presents its own challenges compared to commercial or government payer portions. Consequently, denials prevention and resolution programs are becoming crucial to maximize insurance collections and ensure revenue cycle vitality.

3.    Margin pressures from value-based initiatives

Value-based care offers long-term benefits in terms of efficiency and cost savings, but it also brings potential risks to revenue cycles and overall profitability. In the value-based care model, costs and payments are standardized, meaning that profitable services are often reimbursed at a lower rate. Standardizing costs and payments as part of value-based initiatives can reduce the profitability of certain service lines, potentially destabilizing hospital revenue. Additionally, the complexity of the transition can lead to an increase in claim denials, which also affects revenue. 

To mitigate this, hospitals must streamline their overall overhead, including costs associated with denials management initiatives. Moreover, with a focus on improving care quality and patient outcomes, hospitals can maximize the financial incentives available under value-based payment models.

4.    Outdated denials management software

With ongoing regulatory changes, hospitals that rely on outdated software or a manual claims process struggle to remain compliant. As these issues persist, they negatively impact denials management. A comprehensive denials management solution that combines advanced technology and expert services can address these challenges before they become unmanageable. With the right tools, it’s possible to achieve financial goals while maintaining compliance and providing high-quality patient care.

By recognizing and addressing these trends, hospitals and health systems can navigate the evolving landscape and optimize their denials management practices for improved financial outcomes and patient care.

Learn how FinThrive can help your hospital speed up claim payments and prevent denials.