Hospitals need 'relentless expense management' to boost margins

Health insurers will raise rates next year, predicts Moody's Investor Services, but hospitals will still need to focus on tight cost controls as inflation remains high.


Moody's projected in a Nov. 8 report that insurers will increase rates in the mid-single-digits but "rate increases will vary widely among providers and boosting margins will require relentless expense management for some hospitals, including efforts to reduce premium pay and increase net hires," according to the report.

The revenue cycle management team will be thrust front-and-center as crucial to the hospital's financial success in an environment where health insurers are denying claims and delaying payments at a higher rate than before. In recent months insurers have doubled down on prior authorization requirements and have begun asking for extensive documentation before approving procedures. The additional resources needed to comply with private insurers' requests could be a drain on hospitals next year.

"Growth in managed care plans like Medicare Advantage, where insurers have a greater denial incentive than plans in which they simply administer payments with no insurance risk, will likely lead to more denials," the report states. "In turn, we anticipate a rise in lawsuits by hospitals for underpayment and contract violations, leading to more contentious contract negotiations with insurers and terminations in relationships."

The last year has already been ripe with examples of health systems and commercial insurers finding themselves at an impasse in contract negotiations. In some cases, health systems are dropping in-network status with the health plans.

Medicare reimbursement levels are also below inflation rates, and Medicaid redeterminations will continue to leave people uninsured or under-insured.

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