Little debate exists about the high administrative costs of the healthcare industry. A recent study published in JAMA found that the costs of billing and insurance-related activities amounted to around 14.5 percent of revenue for PCP visits, and as much as 25.3 percent of emergency department visit revenue. But new research published in Health Affairs narrows in on one component of revenue cycle management that significantly contributes to the problem.
The healthcare industry sees anywhere from $11 billion to $54 billion in challenged revenue each year, according to the authors of “The Complexity Of Billing And Paying For Physician Care,” with claims denial rates of 22 percent for traditional fee-for-service Medicaid, 10 percent for insurer-run Medicaid, 3 percent for fee-for-service Medicare, and 4 percent for both insurer-run Medicare Advantage and private insurance plans.
“These results are dramatic and striking,” said Joshua Gottlieb, the study’s first author and an associate professor at the Vancouver School of Economics at the University of British Columbia, Canada, in a statement reported by Medscape. “Conventional wisdom held that it should be more challenging for doctors to bill private insurers. Yet, when it comes to Medicaid, our results show the opposite.”
The study did reveal signs of improvement, with Medicaid Managed Care’s share of challenged payments declining from 26.2 percent in 2013 to 20.0 percent in 2015; its denial rate fell from 17.1 percent to 8.9 percent. Denial rates for private insurance also shrank from 5.6 percent to 3.9 percent, as well as for Medicare Advantage, from 4.2 percent to 3.0 percent. Rates for fee-for-service Medicare stayed essentially the same, the authors noted.
What Should You Do?
Knowing the rates of challenged revenue and the high percentage of claim denials, what should physicians and their staffs do? Here are a few suggestions.
Focus on submitting clean claims by confirming eligibility and demographic information or using a claims scrubber to look for coding and billing errors or anomalies, all of which could lead to denials or claim challenges.
Compare actual payments with payer fee schedules to ensure your denial rate doesn’t look better than it actually is through payers underpaying claims.
Be sure to document medical necessity, keeping in mind payer guidelines and National and Local Coverage Determinations. Then, when a claim is challenged or denied, you’ll have the information you need to file an appeal.
Continue to appeal every claim that is denied or paid incorrectly. The administrative burden of challenged and denied claims doesn’t lie with providers only. Every claim that has to be looked at a second time and later is paid creates additional cost and administrative burden for payers, too. By continuing to shine a light on the problem, hopefully payers will evaluate their own processes to help reduce the burden for everyone.
The study evaluated 44.5 million claims covering 37.2 million physician visits worth a total of $8.4 billion and was performed by Gottlieb, Adam Hale Shapiro, PhD, a research advisor at the Federal Reserve Bank of San Francisco, California, and Abe Dunn, PhD, an assistant chief economist in the Office of the Chief Economist, Bureau of Economic Analysis, Department of Commerce. While research was limited to five specialties—cardiology, internal and family medicine, obstetrics and gynecology, orthopedics and pediatrics—conclusions were drawn about the industry as a whole.
For more information, review the following articles which we used to research this article:
- The Complexity Of Billing And Paying For Physician Care from Health Affairs
- A study that looked at physician billing estimates $11B-$54B in challenged revenue each year from Fiercehealth
- With physician billing, there’s $11-54 billion of challenged revenue each year, study finds from Healthcare Finance
- Billing Costs, Complexities for Physicians Called ‘Absurd’ from Medscape
- Billing Costs Consume 14.5% of Primary Care Visit Revenue from Medscape
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