External audit volume more than doubled in 2024 over 2023, while total at-risk dollars increased fivefold to $11.2 million, according to a report outlining a recent study sampling a group of providers’ bottom lines, impacting the affected healthcare provider organizations’ cash flow and exposing them to potentially higher denial rates.
While revenues and operating margins improved throughout 2024, the gains were tempered by these higher denial rates, including an increase in coding-related denials of more than 125 percent and medical necessity-related denials of 75 percent for outpatient claims and 140 percent for inpatient claims. Additionally, cybersecurity and timely payer reimbursement marked the two biggest risks seen in 2024, threatening the financial stability of healthcare providers.
This backdrop of challenges is among the key findings of the newly released 2024 MDaudit Annual Benchmark Report. This report’s findings elevate the transformation of revenue cycle management (RCM) to a strategic imperative for health systems in 2025. They also highlight the pressing need to continuously monitor financial risk to proactively mitigate issues before they impact operations.
The Benchmark Report includes a comprehensive examination of real-world data representing the first three quarters of 2024, collected from a network of over 650,000 providers and more than 2,200 facilities that provide data to MDaudit for auditing, charge analysis, and denial assessment. It encompasses insights from more than $8 billion in audited professional and hospital claims and more than $150 billion in denials by commercial and government payers. Over 5 billion claims and remits were used for benchmarking.
In 2023, the annual report forecasted that strong volumes for healthcare organizations would provide tailwinds for the healthcare industry, while headwinds would include challenges related to controlling costs, improving margins, and seizing opportunities to generate new revenue streams. The 2023 findings foreshadowed the need for operational excellence to improve bottom lines and greater adoption of artificial intelligence (AI) and automation to boost productivity and costs.
These predictions held true, as operating margins improved by more than 4 percent against a surge in audits and denials in 2024. Looking ahead to 2025, the 2024 report finds that those same headwinds remain. This time, they are strengthened by new risks regarding timely reimbursement and cybersecurity costs, which will impede ongoing progress toward financial stability for healthcare organizations that don’t take action to transform their approach to RCM.
The latest Benchmark Report found a more than twofold increase in external payer audit volumes over 2023 levels, and a fivefold increase in “at-risk” dollars. A driving force behind the rise in external audits – which led to an increase in the average denied amount per claim across professional (~4 percent), hospital outpatient (~5 percent), and hospital inpatient (~7 percent) settings – was an increase in pre-payment audits, which expose health systems to potential denials and cash-flow issues.
Additionally, coding-related denials surged by 126 percent in 2024, one of the largest increases in the last three years, despite billions of dollars spent across the healthcare industry for outsourcing coding operations and automated coding technologies. The average denied amount also increased across all care settings, led by hospital inpatient-related denial (~200 percent). As such, coding remains one of the biggest revenue capture and margin expansion improvement opportunities.
Payers also stepped up clinical documentation scrutiny, sending audits surging by 100 percent over 2023 levels and contributing to a three-year increase in clinical denials of 51 percent. Medicare and commercial payers denied more claim dollars in 2024 due to a lack of information submitted for the service and medical necessity, sending final denial dollars surging across professional (34 percent), hospital outpatient (84 percent), and hospital inpatient (148 percent) settings – numbers driven by a 122-percent increase in commercial payers’ request for information (RFI) denials.
To counter these audit and denial trends, providers must focus on driving healthy operating margins, which are enabled by high-value outpatient services like elective surgeries and some inpatient services. In addition to pinpointing what those services are, each organization should:
Medicare Advantage (MA) plans played a prominent role in the 2024 Benchmark Report, as scrutiny by the Centers for Medicare & Medicaid Services (CMS) has intensified as part of its ongoing initiative to ferret out fraud and abuse – efforts CMS anticipates will ultimately recover $4.7 billion from MA plans by 2032.
MDaudit data found that HCC and Medicare Risk Adjustment Data Validation (RADV) audits increased by 72 percent over 2023, leading to a 51-percent increase in total denial amounts for MA plans in 2024. The findings of those RADV audits revealed a high risk of overpayments that, coupled with reports that those overpayments totaled nearly $50 billion, are fueling even more audits focused on instances of overcoding.
This heightened scrutiny, along with more strident authorization requirements and higher denial rates, has many providers rethinking participation in MA plans. At a minimum, billing compliance and coding teams should be focused on eliminating improper practices that could lead to heavy fines and penalties. This is particularly critical considering the MDaudit findings that more than a quarter of providers, on average, failed audits across both professional (33 percent) and hospital (23 percent) care settings.
Many healthcare organizations are working to proactively identify and address billing issues by leveraging data and AI to unlock insights and patterns from their historical data. Overall, retrospective audits in MDaudit increased by 10 percent, and prospective audits increased by 275 percent in 2024 over 2023.
In addition to generating a clear snapshot of problem areas – led by medical coding (39 percent) and secondary diagnosis documented but not billed (37 percent) in hospital billings and diagnosis documented but not billed (58 percent) in professional billing – MDaudit data revealed revenue opportunities when claims are billed correctly. For professional billings, the revenue opportunity of eliminating diagnosis undercoding was $202, followed by CT/HCPCS ($55) and modifiers ($13). For hospital billing, opportunities from accurate codes are:
The story these findings tell is that a hybrid auditing strategy with both retrospective and prospective audits will result in organizations catching and correcting more errors before payment, resulting in cleaner claims and higher first-pass payment rates. That, in turn, translates into higher cash flows and margins.
As the 2024 MDaudit Benchmark Report clearly indicates that the difference between winners and losers in the healthcare margin race will essentially be determined by investments in technology, data, and analytics to enable real-time and continuous monitoring of billing risks. Those who cling to spreadsheets, random data samples, and manual processes will ultimately be left behind in the race toward financial stability and operational excellence.
EDITOR’S NOTE: Ritesh Ramesh is CEO of MDaudit, is a cloud-based continuous risk monitoring platform for RCM.
External audit volume more than doubled in 2024 over 2023 while total at-risk dollars increased fivefold to $11.2 million, impacting healthcare provider organizations’ cash flow
A listener, who is a risk adjustment program manager, asked me to elucidate when a congenital condition code is appropriate. She was most interested in
Please log in to your account to comment on this article.
Join Beth Wolf, MD, CPC, CCDS, for an in-depth webcast on the FY2025 spinal fusion MS-DRG updates. Discover key changes in DRG classification, understand impacts on documentation and CMI, and learn strategies to ensure compliance.
Join Angela Comfort, DBA, MBA, RHIA, CDIP, CCS, CCS-P, as she presents effective strategies to strengthen collaboration between CDI, coding, and quality departments in acute care hospitals. Angela will also share guidance on implementing cross-departmental meetings, using shared KPIs, and engaging leadership to foster a culture of collaboration. Attendees will gain actionable tools to optimize documentation accuracy, elevate quality metrics, and drive a unified approach to healthcare goals, ultimately enhancing both patient outcomes and organizational performance.
Optimize your outpatient clinical documentation and gain comprehensive knowledge from foundational practices to advanced technologies, ensuring improved patient care and organizational and financial success. This webcast bundle provides a holistic approach to outpatient CDI, empowering you to implement best practices from the ground up and leverage advanced strategies for superior results. You will gain actionable insights to improve documentation quality, patient care, compliance, and financial outcomes.
Enhancing outpatient clinical documentation is crucial for maintaining accuracy, compliance, and proper reimbursement in today’s complex healthcare environment. This webcast, presented by industry expert Angela Comfort, DBA, RHIA, CDIP, CCS, CCS-P, will provide you with actionable strategies to tackle complex challenges in outpatient documentation. You’ll learn how to craft detailed clinical narratives, utilize advanced EHR features, and implement accurate risk adjustment and HCC coding. The session also covers essential regulatory updates to keep your documentation practices compliant. Join us to gain the tools you need to improve documentation quality, support better patient care, and ensure financial integrity.
Dr. Ronald Hirsch provides critical details on the new Medicare Appeal Process for Status Changes for patients whose status changes during their hospital stay. He also delves into other scenarios of hospital patients receiving custodial care or medically unnecessary services where patient notifications may be needed along with the processes necessary to ensure compliance with state and federal guidance.
Healthcare organizations face complex regulatory requirements under the No Surprises Act and Price Transparency rules. These policies mandate extensive fee disclosures across settings, and confusion is widespread—many hospitals remain unaware they must post every contracted rate. Non-compliance could lead to costly penalties, financial loss, and legal risks. Join David M. Glaser Esq. as he shows you how to navigate these regulations effectively.
Protect your facility from unwanted audits! Join Becky Jacobsen, BSN, RN, MBS, CCS-P, CPC, CPEDC, CBCS, CEMC, and take a deep dive into both the CMS and AMA guidelines for reporting post operative pain blocks. You’ll learn how to determine if the nerve block is separately codable with real life examples for better understanding. Becky will also cover how to evaluate whether documentation supports medical necessity, offer recommendations for stronger documentation practices, and provide guidance on educating providers about documentation requirements. She’ll include a discussion of appropriate modifier and diagnosis coding assignment so that you can be confident that your billing of post operative pain blocks is fully supported and compliant.
During this RACmonitor webcast Dr. Ronald Hirsch spotlights the areas of the OIG’s Work Plan and the findings of their most recent audits that impact utilization review, case management, and audit staff. He also provides his common-sense interpretation of the prevailing regulations related to those target issues. You’ll walk away better equipped with strategies to put in place immediately to reduce your risk of paybacks, increased scrutiny, and criminal penalties.
Copyright © 2024 ICD10monitor. Powered by MedLearn Media.
Happy National Doctor’s Day! Learn how to get a complimentary webcast on ‘Decoding Social Admissions’ as a token of our heartfelt appreciation! Click here to learn more →
