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Cost of Denials Saw 67% Increase in 2022

Analysis  |  By Amanda Norris  
   January 23, 2023

The average health system saw 110,000 claim denials due to prior authorization and other factors in 2022, a recent study says.

HealthLeaders has dubbed 2023 as the year of reducing denials for revenue cycle. More and more studies are pointing to the growing concern of denials for revenue cycle leaders as more pressure is put on these leaders to help increase their bottom lines.

Now, one more study is shedding light on the burden denials have had in the revenue cycle in 2022, and one type in particular—prior authorization denials.

Denials rose to 11% of all claims last year, up nearly 8% from 2021 according to the recent Crowe RCA benchmarking analysis. That 11% rate translates into 110,000 unpaid claims for an average-sized health system, according to the report.

According to the report, prior-authorization denials were at the heart of the cost increase.

Prior authorization denials on inpatient accounts in particular were a key driver behind the dollar value of denials increasing to 2.5% of gross revenue in August 2022 up from 1.5% of gross revenue in January 2021—an increase of 67%, according to the report.

"When healthcare providers are supplying around-the-clock care for the sickest and most vulnerable patients, a denial by the payer implies that the care provided was not warranted and that its necessity must be proved by appeal. Often, these appeals take months to resolve and cost healthcare facilities thousands of dollars. Even then, the payer still might claim that the care was not warranted and not pay the provider," the report said.

According to a previous survey, the top three reasons for an increase in claims denials were insufficient data analytics (62%), lack of automation in claims/denials process (61%), and lack of thorough training (46%).

Those who reported denials increasing pointed to operational challenges such as insufficient data and analytics to identify submission issues, lack of automation in claim submission/denials prevention process, lack of staff training, and lack of in-house expertise, among others.

“When healthcare providers are supplying around-the-clock care for the sickest and most vulnerable patients, a denial by the payer implies that the care provided was not warranted.”

Amanda Norris is the Revenue Cycle Editor for HealthLeaders.


KEY TAKEAWAYS

Revenue cycle leaders are placing denials management at the top of the list of areas to improve for 2023.

Denials rose to 11% of all claims last year, up nearly 8% from 2021, according to a recent study.

Prior authorization denials on inpatient accounts were a key driver behind the dollar value of denials increasing by 67% in 2022.


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