This transcript has been edited for clarity.
Oh, insurance claim denials. When patient care or treatment is warranted by a specific diagnosis, I wish insurers would just reimburse it without any hassle. That’s not reality. Let’s talk about insurance claim denials, how they’re rising and harming patient care, and what we can do about it. That’s kind of complicated.
Rising Trend in Claim Denials and Financial Impact
First, denials are increasing. Experian Health surveyed provider revenue cycle leaders— that’s a fancy term for people who manage billing and insurance claims — and 75% said that denials are increasing. This is up from 42% a few years ago. Those surveyed also said that reimbursement times and errors in claims are also increasing, and changes in policy are happening more frequently. This all adds to the problem.
Aside from being time-consuming and annoying, claim denials take a toll on hospitals and patients. One analysis, which made headlines everywhere, showed that hospitals and health systems spent nearly $20 billion in 2022 trying to repeal overturned claims. This analysis was done by Premier, a health insurance performance company.
Breakdown of Denial Rates and Costs
Let’s do some quick whiteboard math. Health insurance companies get about 3 billion claims per year. According to surveys, about 15% of those claims are denied, so that leaves us with 450 million denied claims. Hospitals spend, on average, $43.84 per denied claim in administrative fees trying to get them overturned.
That’s about $19.7 billion spent on claim denials. Here’s the gut punch: Around 54% of those claims are ultimately paid, so that leaves us with $10.7 billion that we definitely should have saved.
Common Reasons for Denials
Let’s take a look at major causes and what’s going on.
Insurance denial rates are all over the place. It depends on state and plan. According to one analysis, the average for in-network claim denials across some states was 4% to 5%. It was 40% in Mississippi. According to HealthCare.gov, in 2021, around 17% of in-network claims were denied.
The most common reasons were excluded services, a lack of referral or preauthorization, or a medical treatment not being deemed necessary. Then there’s the black box of “other,” just some arbitrary reason to make a claim denial.
Many times, these denials are done by an algorithm, not by individual people.
What’s more, a Kaiser Family Foundation analysis found that private insurers, including Medicare Advantage plans, were more likely to deny claims than public options.
When broken down, the problem was higher among employer-sponsored and marketplace insurance, and less so with Medicare and Medicaid.
Impact on Patient Care
Many consumers don’t truly understand what their health insurance covers and what’s going to be out of pocket, and many people don’t know that they have appeal rights. They don’t know who to call for help either.
The ACA set up Consumer Assistance Programs (CAPs), which are designed to help people navigate health insurance problems. By law, private insurers have to share data with CAPs. Yet, only 3% of people who had trouble with health insurance claims called a CAP for help.
We all know some of the downstream effects of this problem. Patients may skip or delay treatments if they can’t get insurance to cover it or it’s too expensive. When post-acute care, such as transfer to a skilled nursing facility or rehab center, isn’t covered and we’re trying to discharge patients from the hospital, hospital stays become lengthened, which means they’re more expensive, and this comes with its own set of complications.
How Can We Address This?
I’m genuinely curious about what you all have done to efficiently address this problem. I’m looking at this publication from the American Health Information Management Association about major reasons for denial. We’ve already talked about a lack of preauthorization or procedures not being covered, but there are also reasons such as missing or incorrect information, duplicate claims, and not filing within the appropriate time.
Also, if treatments or procedures are bundled, they can’t be filed separately.
Preventing all of this would take a large effort. Healthcare systems would have to have a dedicated team, who would understand all the major reasons for denials, identify common patterns, and then fill everything out with accurate information, with referrals, with preauthorizations, high-specificity codes, and the correct modifiers — and do all of this within the filing deadline every time.
You would need physicians on board, but also people from IT, finance, compliance, case management, registration, and probably a bunch of other people who are already stretched too thin.
Perhaps our government can do more to hold insurers accountable and make sure plans, such as Medicare Advantage, are holding up their end of the public health bargain.
It’s an uphill $20 billion battle, but I’m optimistic. What about you? What’s your unfiltered take on claim denials? What more can we be doing? Comment below.
Alok S. Patel, MD, is a pediatric hospitalist, television producer, media contributor, and digital health enthusiast. He splits his time between New York City and San Francisco, as he is on faculty at Columbia University/Morgan Stanley Children’s Hospital and UCSF Benioff Children’s Hospital. He hosts The Hospitalist Retort video blog on Medscape.
