Claims denials are costing hospitals nearly $20B per year

Hospitals and health systems are spending an estimated $19.7 billion per year to fight denied claims, according to a March 21 report from healthcare solutions company Premier. 

Premier conducted a survey of hospital and health system leaders representing 516 hospitals across 36 states between Oct. 10 and Dec. 31, 2023. The respondents were asked to consider all claims from Jan. 1 to Dec. 31, 2022. Findings were weighted by the acute bed capacity of the respondents, which ranged from a small 12-bed critical access hospital to large multi-state health systems.  

To calculate the cost associated with fighting payer denials, Premier multiplied the 3 billion claims processed per year by 0.15 — the average denial rate identified in the survey — to determine that 450 million claims were subjected to denials, according to the report's methodology. That figure was then multiplied by the average cost incurred per denial ($43.84) to calculate the $19.7 billion in costs. 

Four things to know from the report:

1. About 15 percent of all claims submitted to private payers for reimbursement are initially denied, including many that were pre-approved to move forward through the prior authorization process. 

2. More than half — 54.3% — of denials from private payers were initially denied were ultimately overturned and paid, "but only after multiple, costly rounds of provider appeals."

3. Denied claims were more prevalent for higher-cost treatments, with the average denial pegged to charges of $14,000 and above. 

4. The average cost of fighting a claim is $43.84, not including the costs associated with added clinical labor, which the American Medical Association estimated adds $13.23 to the adjudication cost per claim for a general inpatient stay and $51.20 to the cost of inpatient surgery. 

Read the full report here.

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