A quarterly analysis of KPI data shows claim denial rates on the rise while patients struggle to pay their growing share of medical bills. How can provider organizations navigate the headwinds impacting revenue cycle operations?
Revenue cycle leaders are facing an unfamiliar landscape.
A new federal administration, with unconventional picks to lead the Health and Human Services Department and the Centers for Medicare & Medicaid Services, has raised valid questions about the future of government reimbursement policy. Payers continue strong-arming provider organizations into lower reimbursement amounts while patients experience economic anxiety that limits their ability to pay healthcare bills.
In a quarterly analysis of its KPI benchmarking data, Kodiak maps out the headwinds that are driving revenue cycle decisions. The results offer guidance to revenue cycle leaders who are uncertain of their direction.
Surprise, surprise: Claim denial rates make the list
Kodiak data shows an ongoing trend for the past five years. Initial denial rates have risen from 10.2% in 2020 to 11.8% in 2024, while final denial rates have increased from 2.4% to 2.8% over the same time, dipping briefly to 2.1% in 2021 before rising again.
Kodiak is hardly the first RCM-adjacent entity to raise the alarm over rising claim denial rates. The 2024 State of Claims survey from Experian Health showed that the issue is a top concern for revenue cycle leaders.
On the bright side, regulatory relief could be on the way. State lawmakers seem increasingly willing to target payers for their frustrating claim denial practices.
Medicare Advantage and commercial plans to blame for rising claim denial rates
Digging deeper into the data, Kodiak shows that claim denial rates are not shifting at the same rate across different types of health plans.
Claim denial rates fell for traditional Medicare patients from 2023 to 2024 and remained largely the same for Medicaid managed care patients.
Increases in claim denial rates were mostly concentrated among patients covered by commercial health plans (up 1.5% from 2023 to 2024) and Medicare Advantage plans (up 4.8%).
Cash-strapped patients take on greater financial responsibility
First, the good news:
- Bad debt as a percentage of gross patient service revenue decreased 5.7% from 2023 to 2024.
- Point-of-service cash collections as a percentage of total patient payments increased 4.8%.
Now, the bad news: commercially insured patients are being asked to pay larger portions of their medical bills, but they are paying less of what they owe after insurance.
- Patients were responsible for 21.7% of allowed amounts in 2023 compared to 21.85% in 2024.
- Meanwhile, collection rates after insurance payments dropped from 37.58% to 34.46%.
These results align with recent data indicating that patients are nearing a financial breaking point. Recent polling from Gallup shows that more patients are concerned about their ability to pay for their healthcare.
Only 55% of Americans said they can afford their healthcare bills, a six-point decline since 2022. Additionally, about one-third of survey respondents indicated they forego care due to costs, and nearly 60% expressed concern that they would need to take on debt if any major health events arise.
The three trends outlined by Kodiak suggest revenue cycle leaders may have a long year ahead. Payers and patients both seem to be in belt-tightening mode, which means health systems will need to adjust their approach and engage in new strategies to keep the wind in their sails.
Luke Gale is the revenue cycle editor for HealthLeaders.
KEY TAKEAWAYS
Medicare Advantage and commercial health plans are primarily responsible for rising claim denial rates.
While bad debt is trending downwards, patient collection rates are also falling at a time when many healthcare consumers express concerns over their ability to pay.