Low Reimbursement, Increasing Admin Tasks Putting Providers Deeper in the Hole

Providers continue to struggle to maintain financial stability, despite their attempts to stretch budgets and develop strategies to contain costs.

HealthLeaders recently reported on the 8% increase to practice costs, predicted for 2025—noticeable jump from the 3.6% increase previously predicted.

Cost containment has been a priority for many systems, monitoring expenditures to ensure a healthy operating margin.

OSF HealthCare’s operating margin fell to -3% in 2022, attributed to workforce disruption, according to senior vice president of financial operations, Kirsten Largent.

To contain costs, the system reduced agency spending, carefully negotiated their managed care contracts, and focused on improving the performance of value-based contracts. Revenue cycle management solutions for billing, denials management, and collections were also instrumental in the system’s financial rebound.

With more evergreen issues like denials management, maintaining diligent and consistent communication with payers can pay off, despite how time consuming the process is.

That in mind, the revenue cycle staff for One Grady, Grady Health’s billing subsidiary, are intentional and strategic in their approach to denials management efforts. Utilizing the full capabilities of their RCM solutions, which make up almost half of their revenue cycle, they’re able to minimize staff burden, contain costs, and increase efficiency.

A Financial (and Regulatory) Bind

In July, the Centers for Medicaid and Medicare Services’ released its proposal for the 2025 Physician Fee Schedule, slashing reimbursement rates by 2.8%. Providers will also see additional scrutiny around billing practices, with the agency striving to crack down on suspicious billing practices within Medicare’s Shared Savings Program.

Andy Talford, senior director of patient financial services for Moffitt Cancer Center, has watched these issues build up over recent years, witnessing and experiencing the strain on the healthcare sector.

“The combination of decreased reimbursements, escalating bureaucracy, and more rigorous documentation requirements has substantially increased the financial burden on physician groups imposed by CMS,” he told HealthLeaders.

“While efforts to balance budgets are underway, the number of Medicare recipients continues to grow, thereby intensifying the strain on healthcare providers who are already grappling with diminished funding.

Additionally, instead of alleviating provider’s substantial administrative burdens, Talford noted the increased bureaucratic requirements have resulted in a higher rate of claim rejections. To add fuel to the fire, provider’s labor costs increase due to the time-consuming process of appealing denials.

Baby Steps

As reimbursement rates and time-consuming administrative tasks pull providers away from providing care, patients are beginning to feel the effects, which are impacting their health decisions.

Of the 1000 physicians polled for the American Medical Association’s annual prior authorization survey, 78% said issues with prior authorization resulted in patients forgoing care or treatment. 94% of physicians surveyed claimed prior authorization “always, often, or sometimes” delayed a patients access to necessary care.

In January, CMS finalized its Interoperability and Prior Authorization Rule to streamline the process for Medicare Advantage, Children’s Health Insurance Program (CHIP), and Medicaid managed care plans.

Payers are also now required to specify the reason for denying a prior authorization request and publicly report their metrics. The increased transparency, Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association, will “shine a light” on the way payers abuse their decision-making power with prior authorization requests.