Rev Cycle Leaders Are Stuck in Denial

RCM leaders turn to strategic infrastructure, tech to stem the tide.

HealthLeaders christened 2023 the year of managing denials, but a spate of recent reports suggests revenue cycle leaders could be in for more of an era.

Payer denial activity was chief among the contributors to Community Health System's (CHS) net loss of $391 million in the third quarter, according to the Franklin, Tennessee–headquartered organization's report for the fiscal period ending September 30.

"We are seeing some payers aggressively deny payment for medically necessary services that have been provided for our patients," Tim Hingtgen, CEO of the 69-hospital system, told investors and analysts on a call. Medicare Advantage plans are driving more than half of denials and downgrades, CFO Kevin Hammons added.

Denials are a common denominator

CHS is hardly alone here. In a September report from the Healthcare Financial Management Association (HFMA) and consulting firm Guidehouse, roughly 40% of health system executives surveyed reported higher fatal denial rates and more than half saw upticks in MA denials.

"Many payers have increased requirements for prior authorizations, leading to more denials and increased cost to collect due to appeal activities," Timothy Kinney, Guidehouse partner and finance and revenue cycle advisory leader, said in a press release.

Denials, it seems, can be big business.

A ProPublica and Capitol Forum investigation published in October found that medical benefits management firm EviCore by Evernorth uses an AI-backed algorithm that can be adjusted to lead to higher denials. The Cigna-owned company, which contracts with major insurers on medical reviews and covers some 100 million consumers, "makes more money the more it cuts health spending" under some arrangements, investigators said.

"An analysis of the company's data shows that, since 2021, EviCore turned down prior authorization requests, in full or in part, almost 20% of the time in Arkansas, which requires the publication of denial rates," reporters explained. The equivalent figure for MA plans was about 7% in 2022.

Solutions require multiple streams

When it comes to stemming denial tides, the most successful RCM leaders will take a well-rounded approach to solutioning, according to McKinsey & Company. In a recent article, the firm's healthcare practice leaders pointed to a few best practices:

• Brush up on fundamentals like continuous quality improvement
• Seek out smart partnerships with peers and vendors
• Clear internal pathways for better cross-functional collaboration
• Strengthen data-driven decision making

Strong infrastructure is also essential.

CHS leaders are investing in their centralized patient financial and physician adviser services, which include enhanced utilization review, to keep championing appropriate care classification and payment, Hingtgen said in the system's Q3 earnings call. Their physician adviser program has secured a high rate of reversal on initial denials, he noted.

Aside from shoring up support structures, "industry leaders are turning to digital solutions and supplemental staffing to better navigate payer processes, maximize reimbursement and boost returns," Kinney said of the HFMA-Guidehouse report findings.

Such efforts should start with increasing the value of tech that's likely already in play in a system's RCM space, such as automation, machine learning, and advanced EHR functionality, according to McKinsey. "These tools remain underused in high-value areas such as enabling timely requests for prior authorizations, checking on the status of submitted claims, and managing denials of claims by payers," the firm said.

When it comes to investing strategically in new RCM tech, "gen AI shows immense potential to complement human efforts," McKinsey noted, so long as risks to privacy, compliance, patient safety, and change management are mitigated.

Beyond growing applications in coding and denial management, gen AI could help system RCM leaders learn why payers deny claims, proactively address causes, and tackle the complexities of prior authorization to reduce friction, executives in HealthLeaders' Mastermind program on AI previously shared.

The tech could also become a powerful tool for education and financial counseling, helping patients to understand their financial responsibilities and payment options, said mastermind member Shannan Bolton, Stanford Health Care's vice president of optimization and performance improvement. "That's where we fall short with patients."