Commercial health insurers tend to reimburse providers considerably more per service than their governmental counterparts. However, they’re also much more likely to initially deny claims. And even when they agree to pay up, the companies often drag their feet before cutting a check.
The accounting and advisory firm Crowe reports the data behind the observation in a report posted in May.
Looking at the first quarter of the current calendar year, Crowe found commercial payers gave a preliminary thumbs-down to 15.1% of claims submitted by hospitals, health systems and other provider categories.
By comparison, Medicare said no go only 3.9% of the time.
Adding headaches to financial frustrations, the reasons private payers gave for first-try declines were frequently vague and thus not easily fixable.
“Although most initially denied claims become paid claims, the administrative effort to bring an initial denial to positive resolution is very costly for the provider,” the consultancy points out in the report. “It requires some form of action on the part of the provider in order to receive payment for services rendered.”
Crowe arrived at its findings by analyzing de-identified data from more than 1,800 hospitals and 200,000 physicians in the firm’s Crowe Revenue Cycle Analytics (RCA) platform.
Initial denials trigger many a ‘major fight’ over money
Noting around 45% of a typical hospital’s patient population is covered by a commercial payer, Crowe lays out additional numbers turned up by its Q1 2023 analysis. Of note:
- The request-for-information (RFI) denial rate through the first quarter of 2023 for inpatient and outpatient claims submitted by providers to commercial payers was 4.8%. It was 0.4% for traditional Medicare. Crowe remarks:
When you consider that denial delays payment by at least 45 days, such denials by a provider’s best payers can wreak havoc on cash flow and accounts receivable performance.”
- In 2022, the initial prior authorization/precertification denial rate for inpatient claims for commercial payers was 2.8%, up from 2.4% in 2021. Crowe says this year has brought more of the same, with the rate at more than 3% through the first quarter. By comparison, the denial rate for traditional Medicare was 0.2% through the first quarter of 2023. Crowe:
While a single-digit denial rate might seem minor, a prior authorization/precertification denial can trigger a major fight to get paid. … And it often doesn’t end with the payer making the full and appropriate payment to the provider.”
- About a third of inpatient and outpatient claims submitted by providers to commercial payers weren’t paid for more than three months during the first quarter of 2023. The percentage was less than half that for inpatient and outpatient claims submitted to Medicare. Crowe notes:
It’s hard for hospitals to rebound from the pandemic-induced downturn when their best payers are holding onto a third of their claims payments for more than 90 days.”
Hospitals and health systems “should be able to deliver on their missions without the fear of nonpayment, delayed payment, partial payment or payment takebacks,” Crowe concludes. “Providers cannot survive alone. It takes an entire healthcare industry village.”
Dave P. has worked in journalism, marketing and public relations for more than 30 years, frequently concentrating on hospitals, healthcare technology and Catholic communications. He has also specialized in fundraising communications, ghostwriting for CEOs of local, national and global charities, nonprofits and foundations.