MDaudit recently released its 2023 Benchmark Report on the trends, challenges, and opportunities being encountered by healthcare organizations in the United States.
Crucial needs emphasize that healthcare systems must proactively navigate an evolving landscape with cross-functional collaboration, technological innovation, and increased artificial intelligence (AI) investments to safeguard revenues. Going into 2024, operational excellence is the table stakes for healthcare organizations to improve bottom lines – and where AI and automation can provide a boost in productivity and costs.
In 2023, the volume of external payer audits experienced a fourfold increase, challenging healthcare organizations to provide timely responses despite limited resources. Patient volumes and surgical procedures witnessed a 23-percent and 27-percent increase, respectively, compared to 2022, showing signs of recovery from the declines caused by COVID-19.
Yet the persistent issues of inflation, staffing shortages, reimbursement concerns, and regulatory challenges threaten the financial well-being of U.S. healthcare organizations.
The report’s analysis covers data from a network of over 650,000 providers and 2,200 facilities – all contributing auditing, charge analysis, and denial assessment data to MDaudit. Insights are also from auditing professional and hospital claims totaling over $5 billion and denials from commercial and government payers exceeding $150 billion.
Surge in External Payer Audits
One of the standout findings of the report is the fourfold increase in external payer audits in 2023, compared to the previous year. The federal government is escalating efforts to address the overpayments made in the past two to three years. The heightened complexity of billing, coding, and regulatory issues adds to the challenge, creating an environment in which timely and accurate responses are more critical than ever.
Many of these audits include tight deadlines for initial response and appeals, challenging resource-restricted organizations. In addition to the rising volume of audits, the associated Additional Documentation Request (ADR) letters have grown substantially, with some exceeding 100 pages. The sheer magnitude of these audits exposes healthcare organizations to considerable revenue risk and potential clawbacks, emphasizing the critical need for AI technologies to aid in effective revenue retention strategies.
Challenges Faced by Shrinking Teams
Billing compliance teams have adapted to workforce shortages by embracing technology and analytics, exemplifying the approach of “doing more with less” while optimizing a return on investment (ROI). Maximizing efficiency amid staffing constraints has fueled increased interest and development in technological solutions. Providers and organizations are turning to innovative technologies to bridge the gap created by workforce shortages, ultimately enhancing their financial performance.
MDaudit’s report highlights significant transformations, with large auditing teams (10-20 people and 20+ people) experiencing a reduction in staff size by 15-20 percent. These same teams saw a simultaneous 10-percent increase in audit activity. This shift underscores industry trends toward increased productivity and strategic implementation of technology, automation, and analytics in billing compliance and revenue cycle management operations.
Mitigating Denials to Protect Revenues
The report also delves into the critical role of revenue integrity and billing compliance in preserving the financial stability and sustainability of healthcare organizations. Denials and increasing demand underscore the need for operational efficiency in billing, coding, and clinical documentation to enhance profitability.
Future success requires more than managing denials to ensure timely payments. Organizations must now understand and address upstream root causes that impact billing and coding practices in provider operations.
Other Key Takeaways
The spotlight shifted from Medicare to commercial payers as the primary drivers of reimbursement issues for health systems in 2023. Commercial payers exhibited a higher denial rate for outpatient and inpatient claims (35 percent versus Medicare’s 20 percent). Moreover, extended adjudication times (29-35 days) for initial responses to claims impacted the cash flows of healthcare organizations.
Other key takeaways from the 2023 Annual Benchmark Report include the following:
- Scrutiny on Medicare Advantage Plans – Medicare Advantage (MA) plans came under increased scrutiny for submitting claims that exaggerated patient condition severity and risk. As a result, Hierarchical Condition Category (HCC) audits skyrocketed by 170 percent, and final denial dollars on MA plans increased by 25 percent, compared to the previous year.
- Increase in Documentation Requests – Facing pre-authorization denials and documentation requests from commercial payers that were 10 times greater than those from Medicare Part A and Part B, healthcare organizations emphasized the need for investments in customer data integration (CDI) technologies and streamlined processes to address objections to high-cost services.
- Coding Challenges Impacting Revenue – Despite the buzz around autonomous coding innovations, coding remains a significant factor driving revenue losses and margins. More than 10 percent of professional claims, 3 percent of outpatient claims, and 3 percent of inpatient claims faced initial denials related to billing and coding issues. These challenges accounted for 16 percent of overall denials, amounting to $17 billion from the sampled data.
Healthcare organizations are discovering that optimizing revenue opportunities and mitigating compliance risks requires increased synergy across cross-functional billing compliance, revenue cycle, coding, clinical operations, and pharmacy teams. Team silos must give way to collaboration.
New payer strategies, including the integration of AI, have heightened denials, prolonged payment timelines, and intensified claim scrutiny. Organizations and providers must make strategic decisions in navigating these challenges and developing long-term success. The right technology, subject matter expertise, collaboration, and communication among departments are imperative. Through adopting new technologies and processes, teams of every size are achieving greater efficiency and safeguarding valuable resources crucial for enhanced patient care and outcomes.