Hospitals losing billions to rising costs, denials and takebacks

Many hospitals and health systems are facing their toughest financial year in decades as they simultaneously address revenue and expense issues, with rising costs, payer denials and takebacks costing them billions of dollars, according to research published by Crowe Revenue Cycle Analytics.

The rate of claims payers are denying increased from 10.2 percent in 2021 to 11 percent in 2022, which equates to 110,000 unpaid claims for an average-size health system, Crowe said in a Nov. 9 news release. 

Prior-authorization denials on inpatient accounts were a significant driver behind the dollar value of denials rising to 2.5 percent of gross revenue in August, up from 1.5 percent of gross revenue in January 2021, according to Crowe. To deal with this spike, providers are spending more time and energy on denials.

"Even if a medical claim isn't denied by payers, hospitals are struggling to collect expected revenue months after a service is provided," Colleen Hall, managing principal of Crowe's healthcare services group, said in the release. "Between increasing pressures and mounting expenses, including rising employee costs brought about by inflation and staffing shortages, hospitals' finances are taking a hit."

Takebacks, when payers retract provider payments after an audit, are also becoming more prominent. Payer takebacks averaged 1.4 percent of debit accounts receivable per month from January 2021 to June 2022. In July and August of 2022, that jumped to 1.8 percent, the highest percentage on record, equating to more than $1.6 billion in takebacks per month for providers on the Crowe RCA platform, which monitors every patient transaction every day from more than 1,700 hospitals and over 200,000 physicians, according to the company.

Three more findings from the report:

  • This summer, hospitals on average collected 94 percent of their expected cash within six months, down from 97 percent the prior summer.
  • The three-percentage-point decrease in cash coupled with a more than 9 percent spike in expenses creates a minimum of a 12 percent negative impact on a health system's finances.
  • Accounts receivable that aged more than 90 days went from 32 percent in January 2021 to 37 percent in August 2022. The five-percentage-point jump directly affects the cost of care.

"With so much economic uncertainty, it is important for healthcare financial leaders to take immediate action and implement innovative solutions," Ms. Hall said. "Utilizing proven automation solutions to help alleviate the administrative burden and creating more data-driven payor conversations to monitor shared key performance indicators can be effective strategies to help mitigate these revenue cycle challenges."

To access the Crowe report in full, click here.

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