Hospitals face escalating claim denials, with Medicare Advantage and commercial payers showing significant increases. The report, analyzing 1,300+ healthcare entities, reveals a 56% spike in Medicare Advantage denials and a 20% rise in commercial denials. Shrinking cash reserves, a 28% drop in days cash on hand, and escalating operating expenses compound financial challenges. Fluctuating accounts receivable further strain hospitals. Amidst this, increased scrutiny and lawsuits over claims management practices heighten concerns. Diminished reserves jeopardize readiness for market shifts and emergencies. Resolving these issues demands collaborative action to ensure fair claims processing and fortify healthcare resilience.
Rising claim denials pose a profound threat to hospitals and health systems, evident in a comprehensive analysis encompassing over 1,300 healthcare entities. The report underscores an alarming surge—56% in Medicare Advantage and 20% in commercial denials between January 2022 and July 2023. Coupled with declining cash reserves, a 28% reduction in days cash on hand, and soaring operating expenses, hospitals grapple with financial strain. Fluctuating accounts receivable exacerbate these challenges while increased scrutiny and lawsuits over claims practices add complexity. The report highlights the urgency of collaborative intervention to ensure fair claims processing and fortify healthcare resilience against unforeseen disruptions.
In recent times, hospitals and health systems have encountered a surge in claim denials, significantly affecting their financial stability alongside dwindling cash reserves, according to a comprehensive report by Syntellis Performance Solutions and the American Hospital Association (AHA).
The report’s analysis, based on data from over 1,300 hospitals and health systems, unveils an alarming trend. Between January 2022 and July 2023, Medicare Advantage denials witnessed a staggering 56 percent increase. Simultaneously, denials from commercial payers rose by approximately 20 percent, amplifying the financial strain on healthcare providers.
In terms of net patient service revenue, the median hospital experienced a notable surge in denial rates, marking a worrisome 63 percent increase for Medicare Advantage and a 20 percent increase for commercial denials during this period.
This uptick in denials arrives amid a broader financial challenge. Hospitals witnessed a decline in cash reserves, with the median days cash on hand dropping by 28 percent since January 2022, resting at 124 days by June 2023. Additionally, overall unrestricted cash and investments decreased by 6.5 percent for the median health system during the same timeframe.
Operating expenses skyrocketed across several categories over 19 months, with nearly a 90 percent increase in maintenance costs, a 35 percent surge in utility expenses, and a 33 percent rise in professional fees. Notably, total labor expenses escalated by 24 percent, propelled by workforce challenges and the resumption of projects deferred during the COVID-19 pandemic.
The fluctuations in accounts receivable (A/R) exacerbated the financial strain, with hospitals encountering more denials and delayed reimbursements. Monthly variations in A/R, measured per $1 million in net patient service revenue, showcased drastic shifts, ranging from $18,896 to $33,598. Similarly, A/R from Medicare Advantage payers fluctuated from $15,289 to $27,443 per $1 million in net patient service revenue.
The report emphasizes that diminishing cash reserves have left healthcare organizations ill-prepared to navigate sudden market shifts and disruptions, especially concerning post-pandemic uncertainties. These reductions in cash reserves not only hinder the day-to-day operations of hospitals but also compromise their ability to respond effectively to unforeseen emergencies like natural disasters or future pandemics.
Furthermore, the escalating denials from payers coincide with increased Congressional scrutiny and lawsuits concerning claims management practices. Allegations have surfaced, suggesting that certain algorithms, including those driven by artificial intelligence, systematically deny claims without proper medical review, prompting concerns about fair and accurate claims processing.
The report underlines the critical impact of these financial challenges on hospitals and health systems, potentially hindering their ability to provide essential healthcare services and respond swiftly to emergencies. The ramifications of these denials extend beyond financial strain, affecting the very core of healthcare delivery and emergency responsiveness.
The report paints a dire picture of healthcare’s financial landscape, spotlighting a distressing surge in claim denials impacting hospitals and health systems. The 56% spike in Medicare Advantage and 20% rise in commercial denials signal an impending crisis. Diminishing cash reserves, soaring operating expenses, and fluctuating accounts receivable compound this challenge. Heightened scrutiny and lawsuits further complicate matters. Urgent action is imperative to safeguard fair claims processing, reinforce financial stability, and fortify the healthcare system’s resilience against uncertainties. Collaborative efforts among stakeholders, policymakers, and payers are essential to mitigate these challenges and ensure the uninterrupted delivery of critical healthcare services.