Experian Health’s State of Claims 2022 report reveals a worrying trend in the increasing rate of denied claims in healthcare. Three-quarters of the 200 health professionals surveyed said that claims are denied 5%–15% of the time. Nearly a third see claims denied 10–15% of the time. Denials at this scale represent billions of dollars in lost or delayed reimbursements plus extra overhead to rework and resubmit claims. It’s no wonder that reducing claim denial reasons remains a top concern for revenue cycle decision-makers.
With billions of dollars at stake, reducing health insurance claim denials tops healthcare providers’ “must-fix” list. However, despite being highly motivated to resolve the challenge, many organizations face operational roadblocks. In the State of Claims 2022 report, 62% of healthcare executives said they lack sufficient data and analytics to identify issues when claims are being submitted. Meanwhile, 61% believe a lack of automation is slowing performance improvements. While challenges in claims management that contribute to denials are nothing new, the pandemic intensified obstacles to reimbursement. For 72% of respondents, claims management is more critical now than before the pandemic.
This article looks at the challenges and reasons driving increased claim denial rates, as well as automation and artificial intelligence (AI)-driven solutions that can help healthcare providers overcome these obstacles, increase operational efficiency, and improve cash flow.
Major operational challenges leading to increased claim denials
Revenue cycle leaders face technological and staffing challenges that reflect procedural, technical, and quality control issues and increase denials. As respondents in Experian Health’s State of Claims 2022 report observed, accurate and efficient claims submissions can only be achieved with robust processes and reliable data.
Insufficient data and analytics technology
Insufficient data and analytics technology is the number one operational challenge responsible for the increase in medical billing claim denials. The State of Claims 2022 report found that 62% of respondents admitted their organizations lacked sufficient data and analytics technology to identify submission issues.
This shortfall forces hospitals to work with mounting patient data and ever-changing payer rules, heavily relying on manual processing. Consequently, manual paperwork processing leads to inefficient use of limited hospital resources and staff and creates opportunities for human errors, contributing to claim denials. In addition, the absence of data and analytics technology hinders hospitals from swiftly identifying and addressing potential issues that could lead to health insurance claim denials, putting a dent in their denial prevention strategies.
Lack of automation in claims submission and denial prevention
Revenue cycle leaders who embrace automation in their claims submission and denial prevention strategy set themselves up for success that marginally benefits their bottom line. Unfortunately, despite technology’s clear benefits and potential in optimizing denial management, many providers have yet to embrace automation fully. According to the State of Claims 2022 report, 61% cited lacking automation in the claims submission and denial prevention process, another primary factor driving the increase in healthcare claims denials.
This reluctance to embrace automation is leading to additional operational inefficiencies. Without the right automation to increase the speed and accuracy of claim submissions, valuable staff time and effort are wasted on manually processing error-prone claims, increasing the likelihood of claims denial. The lack of automation also places unnecessary strain on staff, diverting their attention from more complex claims issues.
Staffing issues: shortages and lack of training or expertise
The shortage of healthcare workers is a global issue that is projected to persist. More than 80% of healthcare executives confirm that chronic staffing shortages pose dire risks for organizations. One potential consequence is an increase in claim denials. This prediction is supported by the State of Claims 2022 report, which revealed that 30% of respondents identified staffing shortages as a critical factor behind denied claims in healthcare.
Experian Health’s recent survey, “Short Staffed for the Long-Term,” explored the impact of healthcare staffing shortages. Unsurprisingly, the survey also found that 70% of respondents who reported staff shortages experienced increasing denial rates.
In addition to staff shortages, a lack of staff training is also contributing to the increasing claim denial reasons. Staff must be trained to prepare and submit accurate claims using appropriate resources and procedures to increase successful claim rates. However, staff training is another area revenue cycle leaders need to address. The State of Claims 2022 report revealed that 46% of respondents identified lack of staff training as a top challenge.
Revenue cycle teams, overburdened by staffing shortages with existing ones lacking the proper training and expertise with claims denial, are more likely to make avoidable errors during claim submission.
Top reasons for healthcare claim denials
Here are the top three claim denial reasons and how automation and artificial intelligence (AI) can efficiently solve them.
Missing or incomplete prior authorizations
Claim denials often stem from poor communication between payer and provider systems, with the prior authorization process as a prime example. The process requires providers to seek agreement from the payer to cover a service or item before it is administered to the patient—failure to do so results in the claim for that treatment being denied. Unfortunately, obtaining prior authorizations is not always straightforward; sometimes, the patient’s treatment must begin before the authorization process is concluded. Other times, the authorization only covers certain aspects of the treatment.
Not only is the prior authorization process complex, but it is also costly, laborious, and time-consuming to navigate successfully. According to the 2022 AMA Prior Authorization (PA) physician survey, physicians and their staff work on prior authorizations twice weekly. Providers must stay on top of frequent changes to payer policies, and staff must use multiple payer portals to track authorization requests. Unsurprisingly, authorizations are among the top three claim denial reasons for 48% of respondents in the State of Claims 2022 survey.
As with any challenge involving digital systems “talking” to one another, authorizations are a great use case for automation. Automation can be used to check payer policy changes, alert staff when prior authorization is needed, gather relevant documentation, and review authorization requests for accuracy. This significantly reduces the burden on staff and minimizes the risk of claims being submitted without the necessary authorizations in place.
Experian Health’s Prior Authorizations technology automates authorization inquiries and checks requirements in real time. It uses AI to help users find and access the appropriate payer portal to speed up the authorization workflow. Users will have confidence that they’re looking at the same account information and policy details as the payer, which means lengthy negotiations can be avoided. Staff can also get accurate status updates on pending and denied submissions so they can take appropriate action and maximize reimbursement.
Failure to verify provider eligibility
For 42% of healthcare executives, provider eligibility is one of the top three claim denial reasons. The payer may deny the claim if a provider is out-of-network or the patient’s health plan does not cover a service or procedure. To avoid denials, providers must run checks to verify that planned treatment will be eligible for reimbursement. As with authorizations, these checks generate mountains of work for patient access teams. Staff must pore over payer websites and call insurance agents to track down information.
Manually verifying accurate coverage is labor-intensive, error-prone, and time-consuming. On the flip side, automating this process offers significant time savings, reduces the risk of erroneous claims, boosts staff productivity, and reduces the incidence of payment delays and claim denials.
Experian Health’s Eligibility Verification software gives providers accurate eligibility data from over 900 payers to eliminate billing errors and avoid claims for services that aren’t covered. The data is accessible via a user-friendly dashboard so staff can view patient information clearly and consistently, regardless of which payer it comes from. This format helps prevent avoidable denials, increases revenue, and provides the detailed reporting and analytics many healthcare executives desire.
Coding inaccuracies and the role of automation in mitigating errors
Inaccurate medical coding is a frequent culprit behind denied claims, as stated by 42% of healthcare executives. Even the slightest mistake can result in a denial, leading to payment delays and extra work for the staff. These denials are particularly frustrating because they should be avoidable. But with thousands of coding terms to factor in – that are frequently being updated – medical coders have their work cut out for them. Matching patient encounters to the correct codes with automation drastically reduces the workload and risks of errors. Automated claims management solutions do the hard work of pulling out relevant information from clinical charts and cross-referencing them with coding directories to ensure the claim is filled out correctly.
Automation can also be used to check the accuracy of other aspects of the claim. These solutions can check for duplicate charges and missing fields and ensure patient information is correct and typo-free. A tool like Claim Scrubber can help providers prepare error-free claims for processing by reviewing each line of the claim before it’s submitted. ClaimSource® can help providers manage the entire claims cycle by creating custom work queues and automating claims processing to ensure that claims are clean the first time.
Implementing technology to prevent claim denial reasons
Healthcare organizations and providers increasingly appreciate digital technology’s role in improving claims management. The right automation and analytics can significantly improve the speed and accuracy of claim submissions. For example, with Denials Workflow Manager, providers can track claim status and appeals and quickly identify those that need to be followed up on. Automation eliminates the need for manual review, while analysis and reporting give staff insights into the root causes of denials so they can optimize performance.
This solution can be integrated with tools like Enhanced Claim Status, which sends automatic status requests based on the type of claim and specific payer timeframes, generating accurate adjudication reports within 24-72 hours to accelerate the revenue cycle. The output can be viewed in ClaimSource to streamline workflows and manage the claims process in a single online application.
Automation and digital technology are also valuable counterweights to the shortage of qualified staff. More than half (53%) of respondents in the State of Claims 2022 survey said that staff shortages continue to slow submission speed and undercut the efficient resubmission of denials. By reducing the need for manual input, claims management can be accelerated while freeing staff to focus their attention where it matters most. For these reasons, 52% of respondents said they’d upgraded or replaced previous claims process technology in the last 12 months.
AI solutions for reducing claim denials
Healthcare organizations can unlock the full potential of automation and achieve optimal results in claims processing by integrating or utilizing these solutions alongside AI. Experian Health launched AI Advantage™ to help providers combat challenges contributing to claims denial. This solution combines two components that optimize denial management using AI and automation. It gives providers real-time insights so they can be proactive and avoid unnecessary denials:
AI Advantage™ – Predictive Denials uses AI to identify undocumented payer adjudication rules that result in new denials. It identifies claims with a high likelihood of denial based on an organization’s historical payment data and allows them to intervene before claim submission.
AI Advantage™ – Denial Triage comes into play if a claim has been denied. This component uses advanced algorithms to identify and intelligently segment denials based on potential value so that organizations can focus on resubmissions that impact their bottom line most. Doing so removes the guesswork, alleviates staff burdens, and eliminates time spent on low-value denials.
This solution can complement existing claims management workflows, such as ClaimSource and Denials Workflow Manager. As providers look to mitigate the growing volume of health insurance claim denials, these brand-new solutions respond to two weak spots reported in the State of Claims survey: the lack of data automation. AI Advantage combines the two seamlessly to help providers expedite claims processing, reduce denials, and maximize revenue.
Patient Access Curator, Experian Health’s most robust revenue cycle solution – helps patient access teams prevent claim denials – in seconds – by solving for bad data quality with real-time data correction. This solution uses AI and RPA to perform eligibility, COB, Medicare Beneficiary Identifier (MBI), demographics and discovery in a single solution, preventing claim denials at the front end with a single click.
The financial impact of denials and the ROI of technology
As the most expensive healthcare system in the world, the US healthcare system loses about $600 billion annually to wasteful medical care spending. To compound this issue, hospitals face significant financial hits from the relentless rise in claim denial rates.
If reducing denials is priority number one for providers, priority number two is improving performance and increasing ROI. 78% of respondents in The State of Claims 2022 report said their organizations are at least somewhat likely to replace their existing claims management solution if convinced that something else can deliver better ROI.
What does better ROI look like? For survey respondents, the top metric was the number of hours spent appealing or resubmitting claims (61%), closely followed by time spent appealing or resubmitting claims versus reimbursement totals (52%), clean claims rate (47%, and denials rate (41%).
Patients also want to see improved performance when it comes to reducing denials. If healthcare organizations cannot offer a reliable, error-free system, they risk losing patients’ trust and loyalty. Providers who can demonstrate a well-managed claims system with swift and accurate results will inspire confidence and improve patient engagement.
Automation and AI can meaningfully impact all these metrics. While many respondents have evaluated their claims technology in the last two years, a quarter haven’t reviewed it for over three years. Given the scale of change and disruption over the last few years, it’s essential to take stock of how existing solutions perform against these metrics and implement upgraded solutions to deliver a more substantial ROI.
One solution that has demonstrated real-life ROI optimizing claims processing and reducing denial rates is AI Advantage™. In only six months of adopting AI Advantage for claims processing and reducing claims denial, Schneck Medical Center saw denials fall by an average of 4.6% each month. In addition, the time needed to correct claims, previously up to 15 minutes, went down to less than five minutes.
The ambulatory clinic Summit Medical Group Oregon implemented Experian Health’s claims management solutions—Enhanced Claim Status and Claim Scrubber—to improve its registration and coding processes. These two solutions helped the team submit cleaner claims, resulting in a decrease in denials. As a result, the company now maintains a 92 percent primary clean claims rate.
Another compelling example of the positive impact of technology on healthcare claims management is IU Health’s experience with the all-in-one claim cycle management platform ClaimSource. With ClaimSource, IU Health managed the transmission of $632 million in claims in five days and processed $1.1 billion of claims backlog.
Clients who have implemented Experian Health’s Patient Access Curator have saved over $1 billion in denied claims, significantly boosting their bottom lines.
Enhancing revenue cycles by addressing claim denial reasons
By pinpointing the most common health insurance claim denial reasons and adopting automation and AI-driven solutions, providers can increase the first-pass clean claim rate, ramp up the likelihood of reimbursement, and reduce the overhead of reworking and resubmitting claims. Inevitably, hospitals will witness a surge in their financial performance.
Contact us to learn how Experian Health can use data-driven claims management technology to help your organization reduce denials and increase ROI today.
