Patient Access, Registration Errors Lead to Most Claim Denials

Hospitals and health systems are facing more claim denials as front-end revenue cycle processes lead to errors.

A recent survey conducted by the Healthcare Financial Management Association’s Pulse Survey program for AKASA polled more than 350 CFOs and revenue cycle leaders at hospitals and health systems. Nearly half of the financial leaders (47 percent) said claim denial rates increased compared to last year, with 37 percent reporting an increase of at least 5 percent.

While most hospitals and health systems saw a significant increase in claim denial rates, only 2 percent of respondents said their claim denial rates decreased by 5 percent or more. Meanwhile, 27 percent said there was no change in claim denial rates versus last year and 24 percent reported a decrease under 5 percent.

As claim denial rates ticked up, healthcare CFOs and revenue cycle leaders agreed that errors on the front end of the revenue cycle caused the most claim denials.

When asked to rank the most common reasons for initial claim denials, the top reason was errors in patient access and registration. This means eligibility errors and missing prior authorizations were the most common reasons for hospital claim denials this year.

Healthcare CFOs and revenue cycle leaders also ranked a lack of documentation to support medical necessity and missing or incorrect patient information as the most common reasons for initial claim denials behind errors in patient access and registration.

Other reasons for initial claim denials included physician documentation issues, utilization management, coding errors, duplicate claims, and untimely filing.

Claim denials are an expensive problem for healthcare providers. Another recent survey conducted by Plutus Health found that claim denials are the greatest revenue cycle management challenge for healthcare organizations as the process faces regular backlogs. More than one in five respondents (22 percent) said organizations — which generate annual revenues between $25 million and $5 billion — lose over half a million dollars in annual revenue each year because of denied claims.

Healthcare organizations are making claims denial management a top priority as they cannot afford to lose more money. Trends in initial claim denials indicate a need to improve front-end revenue cycle processes to prevent denials from happening in the first place.

“This new data confirms what we all know: Issues at the front end trickle down into the entire reimbursement process. When your patient access operations run smoothly, you’re setting your downstream workflows and teams up for success,” Amy Raymond, SVP of revenue cycle operations and deployments at AKASA, said in the survey.

Hospitals and health systems also can’t hire themselves out of claims denial management challenges. The healthcare industry, at large, is facing a shortage of qualified revenue cycle management staff, among other professionals and clinicians. Without the human resources to chase down and rework claims, healthcare organizations have to turn elsewhere.

“Evaluating processes and looking for strategic opportunities to streamline workflows with AI-powered automation can help fully utilize the team you have,” Raymond stated.

However, Thomas John, founder and CEO of Plutus Health, Inc, noted in the previous survey that “providers still seem hesitant to implement these new technologies into their [revenue cycle management] process” despite proven successes tied to AI and robotic process automation (RPA).

Almost 20 percent of respondents in that survey who used AI and RPA said it led to faster cash flow and collections. Another 20 percent of these technology users also said the solutions resulted in more insightful and readily accessible business analytics.

There is an opportunity to leverage AI, including generative AI, in claims denial management to prevent costly initial denials, including those tied to front-end errors. Healthcare organizations now need to seize these opportunities to automate in order to maximize revenue.