Hospitals, providers spent $25B on battles over claims, report finds

Hospitals and other providers are spending a lot more money in battles over insurers over paying claims, according to a new analysis by Premier Inc.

Soumi Saha, senior vice president of government affairs at Premier, Inc., says hospitals and health systems are spending more on fighting payers over claim denials.

Health systems, hospitals and post-acute care providers paid more than $25.7 billion in claims adjudication in 2023, up from $19.7 billion the previous year, an increase of 23%.

Most claims that are initially denied are eventually overturned and paid. Premier’s analysis found that nearly 70% of claim denials are reversed. Nearly $18 billion was spent unnecessarily on battles over paying claims in 2023, according to the Premier report released this week.

Dr. Soumi Saha, senior vice president of government affairs at Premier, Inc., talked about the broken claims adjudication process during the ViVE health conference in Nashville last week. She also foreshadowed some of the key findings in the report.

“Here's the spoiler alert: Nothing's changed,” Saha said at ViVE.

“We were hoping that things would have been improved given how this was a conversation in healthcare. And the reality is, nothing changed,” she said.

The rate of claim denials remained fairly consistent, at around 15 percent.

But Saha noted one change, which wasn’t good: hospitals are spending more on each claim.

The average cost of adjudication rose to $57.23 per claim in 2023, up from $43.84 per claim the previous year, according to the new Premier analysis. So even though denials aren’t rising, hospitals and providers are spending more money and time on them.

Providers say it’s not just a matter of picking up a phone and resolving a dispute with one call. Premier surveyed hospital and health system executives and found that with most claim denials, providers undertook three rounds of reviews with payers. Each review cycle takes between 45 and 60 days.

One of the most frequent claim denials involve hospitals seeking to discharge patients to post-acute care facilities, Saha said at the ViVE conference. About one in five claims involving discharge to a post-acute facility are initially denied, even though the need for a move to a rehab facility or long-term care facility is well documented, she said.

“What ends up happening is, that patient sits in a hospital bed for longer than they need to, and that frustrates the family, that frustrates the patient, that frustrates their providers,” Saha said. She said resolving those disputes would significantly improve patient care and the claim adjudication process.

Hospitals and providers are seeing an increase in prior authorization demands from insurers. With prior authorization, hospitals and physicians must obtain pre-approval from payers on certain treatment plans, procedures and medications. Insurers say it’s a necessary tool to contain costs and avoid unnecessary procedures, but hospitals and clinicians counter that the process hurts patient care.

Insurers required pre-approval on more claims in 2023, according to the new report. Payers required prior authorization on more than 20% of claims in 2023, up from 17% in 2022.

But providers saw more frequent prior approval demands from some payers. Notably, among Medicare Advantage plans, 30.5% of claims called for pre-approval in 2023, compared to 25% in 2022. The Premier report comes just days after an American Hospital Association report that also found Medicare Advantage plans are hurting rural hospitals by providing insufficient reimbursements on claims.

In its analysis, Premier surveyed executives representing 280 hospitals in 23 states.

Premier says it continues to push the government for reform in prior authorization, and in prohibiting payers from denying claims that had already been pre-approved. Premier has also advocated for greater automation to help streamline the process, including alerting providers when prior authorization is needed.

Some have also said AI technologies could help, but Saha and others at the ViVE panel on claim denials said that AI won’t be the cure. As Saha said, “The process itself is broken.”

“Fix the process first,” she said. “And then let's think about, as we're facing that process, what is the role of technology and AI as part of a new process?”

Rick Gundling, senior vice president of healthcare financial practice at the Healthcare Financial Management Association, said at the ViVE conference that there are greater conflicts between hospitals and insurers over claims. He said both providers and payers need to come together to improve the process for the sake of patients.

“Who falls through the gap? It’s the patient. It’s the consumer,” Gundling said.