Recent findings from a Kodiak Solutions report reveal significant challenges in the healthcare payment landscape. The report, based on data from over 2,300 hospitals and 375,000 physicians, indicates that prior authorization and medical necessity denials are primarily responsible for a 25% increase in revenue leakage. This presents a pressing concern for healthcare practices, as they lost more than $48 billion last year due to final denials and bad debt.
Understanding the nature of these denials is critical. In most instances, clinical denial rates — which correlate closely with missing prior authorizations and disputed medical necessity — have markedly increased, overshadowing other issues such as coding errors or registration mistakes.
The focus many practices place on expanding their revenue cycle strategies may not target the root of the problem. Most discussions surrounding claim denials often stem from perspectives of individuals who analyze the aftermath without addressing the core reasons behind the denials.
Practices generally encounter two main types of denial: data issues (e.g., incorrect policy numbers or typos) and disagreements with payers over the appropriateness of care provided. While data issues can be remedied through better training and improved intake processes, disagreements pose a more complex challenge that no checklist can effectively resolve.
To accurately address these denials, practices are urged to separate their denial tracking systems into two categories at intake: clinical reason codes on one side and data or registration codes on the other. This strategy allows for a clearer understanding of which problems are actually escalating.
A survey conducted by the Medical Group Management Association (MGMA) emphasizes the disconnect between perceived and actual challenges in revenue cycles. In this survey, 48% of 288 medical group leaders identified denials and appeals as the primary source of revenue leakage. However, this perception might overlook the significant role of front-end issues, which actually see a much higher incidence of errors that do not manifest until weeks later, resulting in denials.
Practices are encouraged to implement a more robust tracking system that includes timestamps and accountability for each eligibility and prior authorization check. This improvement enables practices to trace the origins of denials more effectively rather than relying on conjecture.
The disconnect between operational workload and appropriate care is glaring in the realm of prior authorization. A survey by the American Medical Association found that physicians deal with an average of 40 prior authorization requests each week, with an alarming 30% of those requests being outright denied. This high denial rate underscores the pressing concern of care delays—95% of physicians believe that prior authorization results in delays to necessary patient care.
Efforts to expedite the prior authorization process often focus on speeding up submission tools rather than tackling the underlying trust issues within the approval system. Practices that introduce a clinical liaison to review prior authorization requests before submission rather than after they are denied may see improved acceptance rates.
As practices contemplate increasing their staff to address rising denial rates, such approaches yield mixed results. While adding more personnel can initially alleviate some burdens, changes in payer rules and complexities surrounding clinical denials may hinder long-term effectiveness.
To truly resolve these issues, practices should consider reallocating staffing resources strategically rather than relying solely on general hires. Assigning ownership of prior authorization processes to someone specifically knowledgeable in the area—rather than a front-desk generalist—may lead to better oversight and management of changing payer requirements.
Many practices mistakenly perceive the issue of denials as primarily a matter of data entry. Realistically, the nature of the denial is changing, with clinical disputes making up a growing segment. To adapt, practices need to critically evaluate their denial categories and base their responses on accurate tracking and an understanding of the underlying causes. Those addressing their challenges with this clarity are often the ones seeing success in minimizing claim denials and optimizing their revenue cycle management.
Dr. Giriraj Tosh Purohit is a product owner at OmniMD, where he specializes in developing clinical and revenue cycle technology. His extensive experience in healthcare systems positions him to offer insights into the evolving challenges facing medical practices today.
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