Over Third of Hospital Execs Report Claim Denial Rates Nearing 10%

Hospital claim denial rates are at an all-time high, signaling a need for better claims denial management, a recent survey from Harmony Healthcare reveals. The healthcare industry has seen a 20 percent increase in claim denial rates in the past five years, and the COVID-19 pandemic has only worsened the trend.

The survey of 131 hospital executives conducted between April and May of 2021 revealed that 33 percent of hospital executives reported average claims denial rates of 10 percent or more, a figure that indicates hospitals are nearing a “denials danger zone.” Across the nation, hospitals face average denials rates between 6 and 13 percent.

“The public health emergency understandably diverted attention away from addressing this critical business issue,” said Randy Verdino, CEO of Harmony Healthcare, in the press release. “While the crisis is not fully behind us, we feel that many of the hospitals and healthcare systems we support are ready to pick back up the torch to lower denials and increase recovery to more acceptable levels of performance.”

Additionally, 31 percent of hospital executives reported average denial rates of 5 percent or less, while 20 percent reported average rates of 5 to 7 percent, and 16 percent reported average rates of 8 to 10 percent.

Recent analysis from Change Healthcare confirmed that hospital claim denials saw an increase of 23 percent in 2020 alone. Change Healthcare’s analysis showed that claim denials upon initial submission increased from 9 percent in 2016 and 10 percent in early 2020 to a total of 11 percent by the third quarter of 2020.

Harmony Healthcare’s research indicates that 85 percent of claim denials are avoidable. Improved leadership and process improvements regarding medical coding and billing are crucial to preventing denials. In addition, education and training among a hospitals’ recovery and prevention teams could improve outcomes.

Coding was a top concern for 32 percent of survey respondents, while 30 percent reported that medical necessity acute IP was their top concern. Meanwhile, an additional 20 percent reported front-end issues as their top concern, and 18 percent reported that their primary concern was clinical validation denials.

“Payers continue to deny claims, so facilities and the revenue cycle team must focus on finding and correcting systemic issues,” explained Lisa Knowles, Harmony Healthcare’s senior director of client solutions, in the press release.

The pandemic tested the healthcare industry’s claims denial management systems, leading to immense confusion surrounding claim requirements and coding in 2020. Unpredictability, increased workloads, and new requirements for claims relating to COVID-19 caused confusion for many revenue cycle leaders. This confusion points to systemic problems and could explain in part the steady increase in claim denials since the start of the pandemic.

COVID-19 revealed the shortcomings of claim denial management for many hospitals, but it also identified opportunities for improvement within coding and medical billing practices. Additional education and staff training could enable better coding and billing practices, and updated technology could help to automate certain aspects of the revenue cycle, possibly leading to a reduction in denial rates.