Healthcare Finance News: Claim denials and payer audits are affecting the revenue cycle

Susan Morse | December 18, 2023

Claim denials are increasing, especially in Medicare Advantage, and it's affecting hospital's revenue cycles and patient care.

"We definitely are seeing an increase in denials," said Sherri Liebl, executive director of Revenue Cycle, CentraCare Health, a large multispecialty system in Minnesota. CareCare has two acute care hospitals, seven Critical Access Hospitals and 30 standalone clinics, many of them in rural areas. 

CentraCare reported a positive margin this year, but in no way realizes the profits of insurers, especially the national insurers where Liebl is having the most difficulty with claims.

CentraCare's goal in its cost to collect – not all-around denials – is to be at 2%. The health system is closer to 7% on its cost to collect. 

"The cost for our organization is exorbitant," Lieble said.

Much of the blame for denials is falling to artificial intelligence being used in algorithms to deny claims.

UnitedHealthcare has been sued in a class action lawsuit that alleges the insurer unlawfully used an artificial intelligence algorithm to deny rehabilitative care to sick Medicare Advantage patients.

Cigna has also been sued for allegedly using algorithms to deny claims. The lawsuit claims the Cigna PXDX algorithm enables automatic denials for treatments that do not match preset criteria, evading the legally required individual physician review process.

A Cigna Healthcare spokesperson said the vast majority of claims reviewed through PXDX are automatically paid, and that the PXDX process does not involve algorithms, AI or machine learning, but a simple sorting technology that has been used for more than a decade to match up codes. Claims declined for payment via PXDX represent less than 1% of the total volume of claims, the spokesperson said.

Industry consultant Adam Hjerpe, who formerly worked for UnitedHealth Group, said there's nothing new about payers using artificial intelligence. AI has been used for 20 years in robotic processes, statements in Excel and algorithms, he said.

Everybody is working with good intent, Hjerpe said. There are reasonable controls in place to avoid fraud and abuse.

Claims are being denied for missing information, or for the information being out of sequence, or for the claim giving an incomplete picture of the care.

"We don't want care delayed," he said.

Nobody wins in claims denials, said Susan Taylor, Pega's vice president of Healthcare and Life Sciences.

While payers save money in the short-term, in the long-term, the best arrangement is to have payers and providers work together to prevent denials, said Taylor, who has worked in healthcare for more than 25 years, starting on the health system side before moving into IT. 

"There are more claims of note being denied," Taylor said. "If you look at the ecosystem, there are a lot of opportunities for error." 

The solution is building an agility layer to streamline workflows throughout the revenue cycle, from initial claim submission to the complex denials processing stage. 


Liebl said that denials have increased over the past two years and that there's also been an uptick in payer audits months after payment has been made. 

Insurers want justification for why CentraCare should keep its payments, and this is especially true for Medicare Advantage claims, she said. 

One insurer said the claim didn't meet inpatient criteria and downgraded the claim to an observation patient.

"We have a pretty good success rate as far as being able to justify we did the right care," Liebl said.

Asked what's driving the higher denial rates Lieble said, "Everybody wants to keep margins and expand their business. I think it comes down to profit margins, trying to keep profit margins high; we're just trying to stay afloat."

To combat denials and work with payers, CentraCare founded a joint operating committee to have successful partnerships. They've been more successful with the local Minnesota plans than the national plans, but Liebl is optimistic, she said.

"I am hopeful we can create partnerships …" she said. "Some of the denials we receive are against their payer policy. We need to be able to hold payers accountable."

Larger health systems have a little more clout, and CentraCare is able to partner with other health systems through the Minnesota Hospital Association.

What's being lost in all this is the patient, Liebl said. Sometimes a patient is getting a bill up to a year after a procedure.

"Sometimes the patient focus is lost when we work through some of this," she said.

"They keep our money longer," Liebl said. "They hold our money hostage. We have denials sitting out there for 300 days. It's a lot of administrative burden on our part. We've spent a lot of money just to get the money in the door. Finally when that claim has been resolved, it's a year later. No one wins? I think there is some winning going on one side." (Healthcare Finance News)