Why Claim Denials Are on the Increase

An increase in healthcare claim denials in recent years has left many people wondering why.

Denials are frustrating for multiple reasons, affecting providers and their patients. When a claim is denied, revenue cycle staff must spend significant time and effort to understand the reason for the denial, file an appeal, and communicate with insurers. This additional time not only translates to financial costs for hospitals and health systems but also imposes an administrative burden that takes away from the primary goal of providing an exceptional patient experience. And that can take a toll on the patient’s physical, mental, and financial health. It’s imperative to streamline these processes, alleviating the burden of payment concerns and optimizing revenue pathways.

Reasons Claim Denials Are Increasing

So why are claim denials on the increase? Several insurance claim denial trends are impacting hospitals and health systems nationwide, including increased workloads and staffing shortages, new documentation requirements, and the overall increasing complexity of the healthcare system. Insurers have also become more aggressive in denying claims.

Reasons include:

• Increased workload and staffing shortages brought on by the COVID-19 pandemic have caused backlogs of claims and burnout of staff struggling to submit accurate and complete claims under strict timely filing constraints.

• New documentation requirements introduced during the pandemic can be challenging to keep up with, and even minor errors in documentation can lead to denials.
• The increasing complexity of the healthcare system and changing rules and regulations governing insurance coverage make it more difficult to ensure claims meet all applicable requirements.
• Complex and ever-changing billing codes have become more numerous and intricate, which can cause the unintended use of incorrect codes.
• Changing insurance policies and regulations can be hard to keep up with and lead to billing errors.
• Increased scrutiny by payers during their claims review processes can result in denials for even minor discrepancies.
• Aggressive claims denial practices have increased in recent years as insurers aim to reduce costs and increase profits.

Insurance Claim Denial Trends

The increased number of denials has and continues to have a significant impact on healthcare providers, patients, and the healthcare system as a whole. It is important to understand the root causes of these trends and develop strategies to address them, or at least lean into them and make them work to your advantage. These trends include:

• Rising administrative burdens can divert time and resources from patient care, strain resources, and contribute to higher instances of claim denials.
• Automation and artificial intelligence in claims processing have streamlined many aspects of healthcare while introducing new challenges on the payer side, such as algorithms flagging claims for denial based on predefined criteria, overlooking nuances a human eye might catch.
• Evolving payment models due to a shift from fee-for-service to value-based care models have altered the way providers are reimbursed and made navigating these new models complex, potentially leading to more claim denials.
• Increased patient responsibility caused by the rise in high-deductible health plans has patients shouldering more financial burden, which can lead to billing disputes and, in turn, an increase in claim denials as providers seek to collect payments.
• Data security and privacy concerns have led to stricter protocols for handling patient information, which can lead to more stringent documentation requirements, which, if not met, can result in claim denials.

Impact of Claim Denials on Healthcare Providers

Claim denials are a significant concern for healthcare providers. They can lead to financial losses, increased administrative burden, and frustration for staff. In some cases, denials can place an unnecessary burden of payment on the patient and, ultimately, impact the overall patient experience.

A lack of transparency in insurer denial rates is also an issue. Neither provider nor patient may know how often and which types of denials are likely to occur from which payers. This information would be helpful when patients and employers choose an insurance company and would likely hold insurers to a higher level of accountability.

Several organizations are working to address the issue of rising claim denials and the impact on healthcare providers. The American Medical Association (AMA) has created a coalition of healthcare organizations advocating for reforms to the claims denial process. So, it’s important to remember that you’re not alone in this fight. 

What Healthcare Providers Can Do to Reduce Claim Denials

In addition to causing financial hardship for patients, health insurance claim denials can result in delayed treatment or even prevent patients from receiving essential care because of coverage limitations. To reduce claim denials and ensure patients have a high-quality experience without the added burden of financial barriers, healthcare providers can:

• Implement additional staff education and training
• Communicate with insurers to better understand their coverage policies and requirements
• Administer corrective action plans to help manage backlogs and denial queues
• Outsource or partner with experts who specialize in complex claims management

Addressing the surge in claim denials also requires a collaborative effort from healthcare providers, billing teams, and insurance companies. By remaining informed about the underlying reasons for the increase and proactively adapting to evolving trends, you can better mitigate the impact of claim denials on your health systems and, in turn, your patients.

However, with fragmented revenue cycle processes, manual workflows, and evolving payer requirements, it’s difficult for hospitals and health systems to make significant strides in reducing claim denials without specialized expertise in denial prevention and resolution.

EnableComp helps healthcare providers maximize revenue with our comprehensive suite of revenue cycle management for complex claims and denial prevention solutions. Combining industry-leading technology, expert teams, and specialized recovery services, EnableComp can help you identify and prevent denials, boost revenue and yield, and rework even the most complex claims. 

EnableComp is committed to helping you get paid for the work you do, providing you and your team with the resources and expertise you need to optimize your revenue cycle and achieve financial success.