Denials and prior authorizations are on the rise, but will AI help or hurt?
A 2023 study found that initial overall health plan denials were 11.99% through last year’s third quarter (Kodiak RCA benchmarking analysis). A 2022 study found that prior authorization and denials increased 67% in 2022. (Acdis).
Recall from part one in this series that, in addition to cost containment, utilization management “helps ensure that patients have the proper care and the required services without overusing resources” and that the “organizations making these decisions are following objective, evidence-based practices” (NCQA).
Before we measure the statistics against the objective, let’s begin with a brief primer of UM.
The types of UM
UM can happen at any point of healthcare service delivery: before delivery (prospective), at delivery (concurrent), and after delivery (retrospective). In addition, health plans apply UM in m multiple ways:
Prior Authorizations (PA): Review of a provider’s service request before they deliver care.
Step Therapy and Quantity Limits: Types of PA that require a less-expensive drug or limited quantities of a drug before a health plan approves or continues current therapies.
Preferred Physician Network and Drug Lists: Steering patients toward providers and medications that demonstrate higher quality and/or lower costs.
Denials: Refusal to pay for a healthcare service
Medical Necessity: Care that is proper and needed to diagnose or treat a medical condition.
This feature will focus on PAs, denials and medical necessity — through the lens of automation and federal regulations.
An automated river in Egypt
When discussing the role of denials in an early UM analysis, CMS (then called HCFA) noted that “denial of certification only means the insurer will not pay for (all or part of) the services.”
“Only” means? CMS continued: “Although this does not prevent the patient from receiving treatment, it may act as a significant deterrent for expensive services.” Given that nearly one-quarter of Americans today report that they could not pay an unexpected medical bill over $250 (2024 Healthcare Financial Experience Study), “expensive” is a highly relative term.
The personal stories of unpaid claims are strain logic — everything from life-saving $140k heart procedures preauthorized then denied to infants receiving denials for extended neonatal ICU care because they could now drink from a bottle and breathe on their own (KFF Health News-NPR “Bill of the Month” project).
Meanwhile, automated denials — including those for medical necessity — strain credulity that payer UM objectives are about little more than cost cutting. Attorney Lindsey Fetzer, chair of multi-disciplinary Managed Care practice at Nashville-based law firm Bass, Berry & Sims, adds: “What’s changed is in how organizations leverage tools to arrive at those decisions – without undermining the need for clinical judgment and decision making.
These tools may be part of the solution, but they are also a part of the problem.
Jama Health Forum notes: “Utilization review by health insurers is the type of problem that seems, on the surface, to cry out for solutions using artificial intelligence (AI) … however, the results illustrate that seemingly perfect opportunities for using AI can become clear examples of how algorithms can go awry when humans do not provide the expected bulwark against error.”
The Jama article notes class-action suits filed against UnitedHealthcare, Humana and Cigna. The Cigna suit involving an algorithm that would “allegedly batch deny thousands of claims in an average of 1.2 seconds each.” A separate investigation found that an automated system allowed human reviewers to sign off on 50 charts in 10 seconds, presumably without medical record review (ProPublica 2023).
Regulators tackle UM irregularities
The Jama article adds: “These reports stoked the ire of congressional committees already provoked by other evidence of insurers’ wrongful denials of prior authorization requests.”
The ire of federal agencies too and on a rapid timeline:
April 2022: The OIG reported its concerns with prior auth denials for medically necessary care by Medicare Advantage plans.
April 2023: CMS clarified in a Final Rule that MA plans must cover inpatient stays that require care for at least two nights (“the two-midnight rule).
January 2024: CMS issues two UM-related Final Rules:
Medical Necessity: MA plans must make medical necessity determinations “based on the circumstances of the specific individual…as opposed to using an algorithm or software that doesn’t account for an individual’s circumstances” and those determinations “must be reviewed by a physician or other appropriate health care professional.”
Prior Authorization: Payers must improve the timeliness and reporting of their prior auth decisions, including clear reasons for denials.
February 2024: CMS issues guidance to emphasize the applicability of not only the two-midnight rule to MA plans but other medically necessary hospital admissions.
“The regulatory landscape continues to evolve, which requires all organizations to adapt when considering the question of medical necessity,” notes Fetzer.
But too often, payer adaptation means simply adhering to their own commitment for clinically appropriate care that members’ plans are supposed to cover.
“Decades ago, insurers’ reviews were reserved for a tiny fraction of expensive treatments to make sure providers were not ordering with an eye on profit instead of patient needs. These reviews — and the denials — have now trickled down to the most mundane medical interventions and needs, including things such as asthma inhalers or the heart medicine that a patient has been on for months or years. What’s approved or denied can be based on an insurer’s shifting contracts with drug and device manufacturers rather than optimal patient treatment” (Jama Network).
Fetzer adds: “UM processes always should focus on driving clinically appropriate decision making . . . Moving forward, we can expect continued use of UM and — in all likelihood — reliance on technology in various ways.”
Part 3 of this series examines how UM can function successfully in these ways and the efforts of Aetna, a CVS Health company, to do so.
The definition of UM has changed. Some of the results remain stubbornly the same (and unclear).
While utilization management clearly has a role in healthcare, the jury is still out on its ability to control costs more broadly, to improve quality — and its primary objective.
The answers to these questions are important: for where healthcare has been, where it’s going, and what role UM will play for payers, providers and patients. In this three-part series, HealthLeaders will examine a brief history of UM and whether it is primarily a cost-control mechanism or an essential component of value-based care.
UM: Early definitions and goals
“Historically, one of the primary purposes of UM has been to address overutilization of services or procedures and address the potential for waste and/or abuse of healthcare dollars,” says attorney Lindsey Fetzer, chair of multi-disciplinary Managed Care practice at Nashville-based law firm Bass, Berry & Sims. This framework bears out the early definitions of UM from the 1980s and 1990s.
The Institute of Medicine developed one of the earliest definitions of UM (1989) as " ... a set of techniques used by or on behalf of purchasers of health benefits to manage health care costs by influencing patient care decision-making through case-by-case assessments of the appropriateness of care."
CMS — then called Health Care Financing Administration (HCFA) — cited this definition in a 1991 analysis, identifying UM as a “primary cost-containment strategy.” At that time, UM’s focus was on hospital costs and the overutilization of inpatient care, specifically unnecessary admissions and lengthy stays.
The strategy worked, to a degree. The CMS review showed improvements in all areas, noting: “Clearly, UM systems are associated with major changes in practice behavior.”
But that’s where full clarity around UM — its purpose and its benefits — ended.
UM’s early (and continued) mixed results
The 1991 study noted that UM had a limited role in reducing total cost of care. Its role in improving quality was even less known, with CMS noting: “The effect of UM on the quality of care has generated a great deal of speculation but little serious study.”
Flash forward a decade — the time frame by which CMS predicted that “decreased utilization rates will be reflected in significant reductions in the growth of health care costs” — and UM’s effectiveness in improving healthcare’s effectiveness was still unclear.
One 2002 review showed that “evaluations of UM have generated mixed findings, with some studies showing reductions in utilization and costs and others showing little effect” (Annual Review of Public Health).
Two decades later, the prognosis is similar: “What is clear is that additional research is necessary to provide a more robust answer to the question of what the impact is on utilization and quality of care based on UM and payment policies” (National Library of Medicine, 2023).
UM’s (attempted) evolution
In 2024, and depending on the source you consult, UM definitions emphasize either cost, quality or both.
The National Library of Medicine states that UM “remains a well-recognized component of a cost management approach in the health care service delivery and payment arenas.”
The NCQA, which offers UM Accreditation, defines utilization management as a tool that “helps ensure that patients have the proper care and the required services without overusing resources” and that the “organizations making these decisions are following objective, evidence-based practices.”
Another source states that “[r]educing coverage denials is one of the key goals of utilization management.” (Today’s headlines would suggest otherwise; more on this later).
So which is it: Cost or quality? They’re not mutually exclusive. It’s just that it’s so darn hard to achieve both. A 20-year review of commercial payers’ value-based care programs in 2022 showed “mixed and modest effects” on quality, cost, or utilization — and none that impacted all three consistently.
A 10-year review by CMMI of its programs yielded a similar result: only six of 50 alternative payment models had generated savings for Medicare since 2012.
While these results apply to VBC not UM, the parallels are important because the questions they must answer are similar:
Are payer programs lowering healthcare costs and improving quality?
Are they addressing healthcare disparities?
Do they partner with providers and patients to improve experience and outcomes for both?
Fetzer notes: “The tensions inherent to any UM process have always been the same: the goal is to balance healthcare utilization and manage cost while also expecting that the core of any UM framework be focused on whether the service is clinically appropriate/medically necessary.”
And not just clinically appropriate but proven to generate better outcomes.
The many faces of UM
This rolls us, in the words of T.S. Eliot, toward the overwhelming question: What is UM’s real objective? The next two articles in this HealthLeaders UM series will explore the issue from two perspectives:
That UM is largely obstructive, little more than a payer profit-protection mechanism marked by excessive, over-automated denials — even for medically necessary care.
That UM is vital for achieving the highest aims of value-based care.
Fetzer defines UM’s focus as “making sure the right care is delivered at the right time, in a way that optimizes outcomes, reduces risk of adverse clinical outcomes, and considers other data points like quality and compliance — adding that the importance of “also controlling Medicare (and other government and private program) spend so that services can continue to be offered to future generations.”
Parts 2 and 3 of this series will assess how the UM experiment is going.
The risk-based contract marks meaningful expansion for both companies in a state that is growing its Medicaid rolls to include additional vulnerable populations.
Medicaid MCO Alliance Health will partner with value-based care provider Cityblock to deliver “comprehensive, integrated medical and behavioral health care to members with serious mental illness and/or substance use disorder” (SMI/SUD) North Carolina’s Medicaid program.
The partnership began July 1, 2024, and will deliver community-based care to regional members of Alliance Health's Behavioral Health and Intellectual/Development Disability (BH I/DD) Tailored Plan.
The partnership grows both Alliance Health and Cityblock’s presence in North Carolina Alliance Health serves 137,000 Medicaid members in North Carolina’s Cumberland, Durham, Harnett, Johnston, Mecklenburg, Orange and Wake counties. Cityblock serves more than 100,000 Medicaid and Medicare-Medicaid dually eligible beneficiaries in seven states.
Dr. Kam Matthews, Chief Health Officer of Cityblock, tells HealthLeaders: “The partnership with Alliance Health marks a meaningful expansion for us in a state that is making immense progress in its Medicaid expansion efforts. This partnership will not only enhance access to quality healthcare for the most vulnerable members of North Carolina’s Medicaid population but also drive better health outcomes for those with complex care needs.”
An integrated, multi-modal and community-based care model
Alliance Health’s BH I/DD Tailored Plan includes an expanded network of PCPs, SCPs, ancillary providers, pharmacies, and other organizations designed to deliver a more integrated, comprehensive approach to member care and care management.
As one of these providers, Cityblock will apply its multidisciplinary care model that allows patients to see their care team virtually, in their homes, or at a Cityblock clinic. The model’s technology core includes custom-built tools that span care team operations and the member experience.
"Alliance believes that Cityblock's treatment approach of providing community-based integrated primary care, behavioral health care, and attention to social supports is an ideal model to address the complex needs of our members," noted Alliance Health COO Sean Schreiber in the partnership press release. "We have been impressed with their desire and commitment to engage and serve our population."
Cityblock’s Matthews adds: “With Alliance Health’s extensive experience serving the state’s Medicaid population, our community-based care model . . . will aim to address both the clinical and non-clinical needs of those in Alliance Health’s Tailored Plan.”
A number of firsts
The partnership with Cityblock is Alliance Health’s first risk-bearing contract and includes performance targets for better quality, outcomes, equity and sustained value. More broadly, these targets will help support North Carolina’s new Tailored Plans, which went into effect as part of the state’s Medicaid Expansion.
Tailored Plans are “a new kind of NC Medicaid Managed Care health plan” that support the more complex needs of members with SMI, SUD or IDD. North Carolina’s Tailored Plans went into effect as part of the state’s Medicaid Expansion efforts. The expansion has enrolled 500,000 new members in seven months — far exceeding the goal of 600,000 people in two years. Nearly 1 in 4 people in North Carolina were already on Medicaid, or 3.5 million statewide.
It’s great news in a year that has seen 23 million people disenrolled from Medicaid since April 2023 and the beginning of the “unwinding” — the return to Medicaid program eligibility redeterminations suspended during the pandemic.
It’s also great news for Medicaid expansion in general. As of May 2024, 41 states (including DC) have expanded their program eligibility to adults earning up to 138% of the Federal Poverty Level as approved by the Affordable Care Act. North Carolina’s expansion in December 2023 makes it the newest state to approve. Other state innovations include a July 1 request to CMS that make hospitals’ receipt of enhanced Medicaid funds contingent on their waiver of $4B in existing medical debt for low and middle-income residents.
“We want you to innovate”
Additional callouts from the Alliance Health-Cityblock press release speak to the importance of Medicaid innovation in North Carolina.
"Access to integrated care for people with behavioral health needs is critical to . . . [our] priority of behavioral health and resilience. People have better outcomes when we treat the mind and body – the whole person," said Kelly Crosbie, Director, Division of Mental Health, Developmental Disabilities, and Substance Use Services, NC Department of Health and Human Services. "NCDHHS applauds Alliance and Cityblock's leadership in tailoring this innovative model to address the whole-person needs of people with behavioral and substance use disorder needs."
Cityblock CEO and cofounder Dr. Toyin Ajayi adds: "Together, and on the heels of North Carolina's groundbreaking transition to Medicaid managed care, we will deploy care to treat individuals holistically and reduce health disparities, and we look forward to delivering clinical and financial outcomes for marginalized and underserved communities throughout the state."
In a prior interview with HealthLeaders, Dr. Ajayi noted the overall move toward advancing Medicaid not only by her company but in programs nationwide.
"There's been a real trend there, States aren't just saying, 'We want you to manage the population. Here's the rate book.' They're saying, 'We want you to innovate.'"
After years of coverage growth, the very factors that are protecting more Americans could reverse progress.
New Congressional Budget Office projections factor the end of Marketplace premium subsidies
While the number of Americans without health insurance dropped to 7.7% in 2024, the Congressional Budget Office expects this number to rise to 8.9% over the next decade. This from the CBO’s latest report on the issue — Health Insurance Coverage Projections For The US Population And Sources Of Coverage, By Age, 2024–34— published in Health Affairs.
Why uninsured rates are at record lows
There are two primary reasons why uninsured rates have dropped below 8%: Expanded Marketplace subsidies and a pause in Medicaid eligibility redeterminations.
Before COVID-19, the ACA-created Marketplace was still struggling. [pull from my priors]. In 2019, Marketplace enrollment was 10 million. Five years later, enrollment has more than doubled as 22 million people now have Marketplace coverage. The CBO projects that number will rise to 23 million in 2025 — an all-time high — before tapering if expanded Marketplace subsidies end.
The CBO anticipates that some Marketplace gains will stand. Even the projected enrollment drop to 16 million by 2034 is still 60% higher than pre-pandemic rates.
The pandemic also reduced uninsured rates by suspending Medicaid and CHIP eligibility review and keeping members on the books that no longer qualify for enrollment. The result? Some 92 million adults and children were enrolled in the two programs in 2023.
The combined Marketplace and Medicaid enrollment gains had another effect: Less delayed care due to high healthcare costs. In a separate Urban Institute study, the share of adults who delayed care dropped from 12.1% in 2019 to 9.7% in 2022.
But headwinds are coming.
Why gains will become losses
The CBO projects that the number of uninsured Americans will increase from 26 million in 2024 to 32 million in 2027.
Urban Institute study author Michael Karpman noted: “The continued unwinding of the Medicaid continuous coverage requirement and the potential expiration of enhanced Marketplace subsidies after 2025 could make these gains in coverage and access difficult to sustain.”
In other words, the very factors that have brought uninsured rates down will likely raise them again: the return of Medicaid eligibility determinations, the possible end of expanded Marketplace summaries — plus another factor, growth in immigration.
The CBO projects a “surge in immigration through 2026.” While some will gain health insurance coverage during this period, the overall uninsured rate for this population is approximately four times higher than the rest of the U.S.
As for Medicaid, most of the COVID-19 waivers that suspended redeterminations have expired. With eligibility again under review, the CBO projects that enrollment in the two programs will decline 14% — from 92 million in 2023 to 79 million in 2024 as states complete redeterminations through September of this year.
Then there is the Marketplace. If Congress does not renew the expanded subsidies currently in place, the CBO projects enrollment will drop by 5 million between 2025 and 2026. The agency notes that most of that decrease will occur for those making more than 250 percent of the federal poverty level. The current subsidies give premium tax credits to those who earn more than 400% above the FPL.
The biggest losses and gains
The CBO projects that the biggest increases in uninsured rates will be for any adults between the ages of 19–44, who are “more likely to be eligible for Medicaid than older nonelderly adults (ages 45–64) but less likely to take up available private coverage, leading more to be uninsured.”
While lack of insurance may rise for this group, access is projected to increase for those with employer-based coverage — from 164 million to 170 million, and again related to possible Marketplace changes.
“In 2026 and 2027, employment-based coverage will expand after the scheduled expiration of
the enhanced Marketplace subsidies, as some workers newly take up existing offers (particularly those defined as not affordable under the Affordable Care Act) and some employers newly offer coverage to their workers,” notes the CBO, adding: “That increase
will be spread over two years because, the agency expects, employers and workers will react slowly to the change.”
The CBO expects Medicare enrollment to jump from 61 million in 2024 to 74 million by 2034, calling out that Medicare Advantage now represents more than half of this population and could be nearly two-thirds by 2034 based on enrollment and payment trends.
The caveats
Projections can be wrong and the circumstances that drive them often change.
For example, the CBO underestimated the effect that both continuous Medicaid eligibility and expanded Marketplace subsidies would have on enrollment.
The agency adds: “The CBO’s projections are intended to show what would happen to health insurance coverage if current law and regulation remained in place. But over time, applicable laws and regulations do change, and uncertainty increases as the projections extend. Certain changes to laws and regulations, such as extending the temporary enhanced Marketplace subsidies, would cause enrollment outcomes to diverge considerably from the CBO’s projections.”
Time — and the results of this year’s presidential election — will tell.
New Kaiser Family Foundation research reports state challenges and some successes despite mass disenrollment.
During the pandemic, CMS allowed states to use Section 1902(e)(14)(A) waivers to keep members continuously enrolled in Medicaid. These waivers offered financial protection to vulnerable individuals and softened administrative burdens for states by suspending enrollment eligibility verification and renewal.
Most of those continuous enrollment provisions ended March 31, 2023, after which state Medicaid programs began their unwinding process: once again verifying eligibility and disenrolling those who no longer meet requirements or haven’t provided the necessary information to prove that they do. The unwinding has resulted in nearly 23 million people losing their Medicaid coverage since April 2023.
States have conducted this unwinding in multiple ways, reporting diverse process challenges — as well as improvements, despite the devastating coverage losses. These changes will have an impact on Medicaid eligibility, enrollment, and renewal for years to come. Below are the top insights from a June 20 Kaiser Family Foundation webinar based on new research.
More Medicaid members could be disenrolled as the unwinding continues.
States have focused on enrollment renewals throughout 2024 with completion expected by July 2024 and based on the following timetables:
Before/During March 2024: 5 states
April 2024: 12 states
May 2024: 15 states
June 2024: 8 states
After June 2024 or In Development: 11 states
Medicaid workforce challenges impacted enrollment renewals in more than 25 states.
Medicaid is one of the many healthcare employers that have been affected by workforce challenges. States reported significant to moderate impact in the following areas among Medicaid eligibility staff.
Vacancy challenges in 32 states
Recruiting and retention challenges in 29 states
Training challenges in 27 states
States will continue many of their new renewal processes after the unwinding.
There are some upsides the unwinding — ranging from new partnerships to more member-focused activities (e.g., outreach, update and access options, paperwork and response timeframes). They include the “ex parte” process, which allows states to automate Medicaid renewal by using multiple data sources:
Improved Ex Parte Renewal: All 50 states
Increased Member Renewal Outreach: 37 states
Partnered with MCOs and Community Organizations: 34 states
Gave Members New Ways to Update Their Contact Information: 27 states
Improved Member Online Portals: 26 states
In addition, 22 states updated their renewal notices and another 15 either simplified their renewal forms or game members longer to respond.
States want the federal government to make some 1902(e)(14)(A) waiver provisions permanent.
X waivers allowed states to use information from other sources to update Medicaid member contact and renewal information. Two of these waiver strategies — using updated contact information from either the National Change Of Address database/US Postal Service or from MCOs — are now permanent thanks to the Medicaid Eligibility and Enrollment Rule.
Some 34 and 29 states, respectively, used these waiver strategies to update member information, in addition to:
Ex Parte Renewal for Members with $0 Income: 29 states
Ex Parte Renewal for Members with Low Income: 17 states
Renewal Based on SNAP/TANF Eligibility: 25 states
At least some states (15) want to continue working with MCOs to support member renewals.
Automation helped most states increase ex parte renewals.
Ex parte decreases paperwork and workload volume for State Medicaid agencies. In addition to allowing states to use additional data sources to verify eligibility, it has promoted further automation of the process:
Most of Ex Parte Automated: 34 states
Ex Parte Both Manual and Automated: 14 states
Ex Parte Still Mostly Manual: 2 states
Improved enrollee and stakeholder engagement were states’ top successes.
When asked to list their top three successes from the Medicaid unwinding, 24 states reported that enrollee outreach and communication improved and 18 reported the same with stakeholders. Other successes tapered off from there but included:
Increased Ex Parte Rates or Systems Automation: Reported by 11 states
Better Data Reporting: 9 states
More Streamlined Renewal Processes: 6 states
Federal guidance uncertainties and workforce issues were states’ leading challenges.
Nearly half of states (22) reported that either changing or unclear federal guidelines made the unwinding process difficult. Once again, workforce was a top issue (20 states), followed by an associated challenge: workload (18 states).
Some state successes have been challenges for others, including the need to upgrade their enrollment systems (14 states) due to existing limitations (13 states).
Most states have now aligned Medicaid eligibility with other programs.
The majority of states now align their renewal processes for their Medicaid and Seniors and People with Disabilities programs. Those processes include not requiring in-person renewal interviews, a 90-day reconsideration period after a procedural disenrollment, 30 days to respond to renewal notice, and providing pre-populated renewal forms.
States have also aligned their Medicaid and CHIP eligibility systems to other programs as well:
SNAP (food assistance for families with low incomes): 28 states
TANF (income assistance for families with low incomes): 28 states
Child Care Subsidy Programs: 15 states
States are also building bridge between their Medicaid and CHIP programs.
Some states (28) manage their Medicaid and Children’s Health Insurance Programs (CHIP) separately. Of these, 21 are now automatically transferring children to CHIP when the ex parte review confirms eligibility.
State eligibility expansions have helped offset disenrollment.
During the past year, 13 states expanded Medicaid eligibility for three populations:
Children: 2 states
Pregnant persons: 7 states
Combined: 4 states
Continued premium breaks have been another positive.
During the unwinding, some states suspended premium payments in their CHIP programs. Now many plan to continue those practices, with nine states eliminating CHIP premiums permanently and another four keeping them suspended.
The partnership seeks to highlight the impact of social determinants of health on costs and outcomes.
It will take the biggest government payers and agencies to affect the biggest changes in social drivers of health — the non-clinical factors (e.g., housing, food, transportation) that affect 80% of clinical health outcomes.
And while that process has begun through a “whole of government” approach that brings these players together (The U.S. Playbook To Address Social Determinants of Health), it will take robust SDOH data and analytics. One new collaboration may help.
Socially Determined is partnering with Mathematica to help government organizations “improve programs, refine strategies, and deepen their understanding” of SDOH. Specifically, Mathematica will look for opportunities to support its federal and state consultancy clients by applying Socially Determined’s social risk data and analytics. Desired outcomes include:
insights into SDoH risk factors and risk exposure
the impacts of this risk on both individuals and communities
the downstream effects on healthcare utilization, costs, outcome, and equity.
Mathematica already works with Medicare, Medicaid, CHIP and other federal and state programs on multiple initiatives. Socially Determined’s clients include health systems, health plans, and other risk-bearing organizations.
“Mathematica and Socially Determined are remarkably aligned on our mission-driven focus and academic roots in a way that enables us to begin delivering value to clients on day one,” notes Trenor Williams, CEO and Co-Founder of Socially Determined in the partnership press release.
Breaking down silos
The Socially Determined-Mathematica partnership comes at a time when “[h]ealth and social service agency leaders are more focused than ever on breaking down silos between programs to improve wellbeing of the whole person,” notes Joshua Baker, Mathematica’s VP of State Health, in the partnership press release.
These silos are the very focus of the previously mentioned U.S. SDOH Playbook.
The Playbook states: "The frequent organizational separation of health care from services such as housing or nutrition programs complicates efforts to address interconnected health needs. This Playbook lays out an initial set of structural actions federal agencies are undertaking to break down these silos and to support equitable health outcomes by improving the social circumstances of individuals and communities.”
The three pillars needed for SDOH impact
The Playbook includes three pillars:
Pillar 1: Expand Data Gathering and Sharing
Pillar 2: Support Flexible Funding to Address Social Needs
Pillar 3: Support Backbone Organizations
Focusing on Pillar 1, the Playbook notes that The Biden-Harris Administration is “working to improve data gathering and interoperability to address SDOH [and] . . . expand the collection of SDOH data for health research” across the federal government.
Specific objectives of Pillar 1 that can support SDOH data gathering and sharing include:
establishing a federal data work group
improving data collection and exchange across federal and state agencies and programs
aligning federal agencies and community organizations for better SDOH referrals
reducing SDOH data gaps to improve health outcomes
identifying communities and populations with the greatest SDOH risks
The Playbook notes how these objectives will meet SDOH challenges across all three Pillars.
“Enhancing data infrastructure and interoperability (the ability to capture, share and exchange the data safely and effectively) can facilitate progress on Pillars 2 and 3 and provide data to help measure the impact of an initiative."
The Playbook adds: “Community-level data on SDOH and individual-level data on HRSNs are not routinely collected in a standardized way across both health and social care services organizations. Further, due to interoperability hurdles and in order to preserve patient privacy, data sharing among organizations can be a complex field to navigate. This limited data gathering and sharing capacity makes coordinating comprehensive care, answering key policy and programmatic questions, and supporting quality improvement efforts challenging.”
How partnerships can help
The Socially Determined-Mathematica press release notes that their “unique combination of technology, expertise, and experience” can help government organizations “understand and quantify the impact of SDoH initiatives on healthcare cost and outcomes.”
“With the high-tech and high-touch strategy that our partnership enables us to deliver, we’re in a unique position to help organizations at all levels of government implement and realize value from data-driven strategies around SDoH that they couldn’t access before,” notes Williams.
Baker adds: “The data and policy expertise brought to bear through this new partnership, combined with our reach and experience serving state and local governments, is a powerful force for public good.”
Davis details how cloud-based partnerships with Microsoft and Salesforce are activating real-time data to promote healthcare innovation and improve the member and provider experience.
“The cloud can bring the healthcare sector into the digital age.”
This from Lisa Davis, EVP and CIO of Blue Shield of California and a champion of the real-time data capabilities that the cloud can bring to the industry.
Davis’s professional background gives her a unique perspective on healthcare information technology. She was previously CIO for the DOJ’s U.S. Marshals Service and of Counterintelligence Field Activity for the U.S. Department of Defense. She has also had major heart surgery, giving her first-hand understanding of the patient care experience.
HealthLeaders: Why is the cloud so important for healthcare?
Lisa Davis, Blue Shield of California EVP and CIO:
“Think about banking. The financial sector moved to the cloud so I can effortlessly transfer money online. The same experience exists with retail; when I go into a store or shop online, there are real-time transactions.”
“The sector where we haven’t provided real-time access is healthcare: transforming experiences for our members requires data interoperability, data access, and sharing that data amongst the payer, our providers, and members. The cloud makes this possible and also provides scalability, agility, flexibility and connection among systems.”
HealthLeaders: What specific impacts has moving to the cloud made at Blue Shield?
Davis: “Moving infrastructure to the cloud is really at the heart of our strategy because having more data available in near real time ultimately allows us to create better member experiences.”
“To transform healthcare, we asked ourselves ‘How do we create a system that is more personalized and more holistic?’ We can now create high-tech and high-touch experiences for members, such as with Care Connect.”
“Salesforce is the platform we used to build Care Connect — our new care management system that empowers clinical teams with real-time access to data so that we can coordinate personalized services and care faster.”
In July 2023, Blue Shield partnered with Microsoft to build out Experience Cube, an integrated data hub that runs on the Microsoft Azure cloud platform. The health plan deployed Experience Cube as part of a multi-year cloud development plan that included launching the Care Connect platform with Salesforce in September 2023.
In February 2024, Blue Shield teams enabled Healthcare Effectiveness Data and Information Set (HEDIS) and pharmacy data to begin flowing from Experience Cube to Care Connect. A Blue Shield of California representative notes that, in under four weeks, the plan’s care managers used Care Connect to address 1,716 care gaps — including but not limited to:
In the continued Q&A below, Blue Shield’s Davis describes her health plan’s pre- and post-cloud environment.
Davis: “Previously, data resided in 13 different on-premise systems, all with different capabilities. Now that our care management data is in the cloud, our clinical teams can address care gaps seamlessly. By communicating with our provider networks in real-time, we can schedule appointments and connect members to critical care and services that ultimately improve their health. That ease of experience would have never happened before Care Connect.”
HealthLeaders: How does Blue Shield decide which tech companies to partner with — including Salesforce and Microsoft specifically?
Davis: “What's really important is a hybrid, balanced approach. We partner with Big Tech companies and with startups that are bringing innovations to the table, helping us transform the healthcare system.”
”We collaborate with some of the Big Tech companies because a lot of them, such as Salesforce and Microsoft, are now focusing on developing innovative healthcare capabilities — and they can help us scale solutions for our members.”
“It’s really important that a partner is aligned to our values, to our guiding principles, and to our mission to create a healthcare system that is worthy of our family and friends. Then, we start talking about technology solutions and capabilities and creating experiences that are personal, holistic, and high-tech and high-touch.”
“As a CIO, I want partners that understand what we're trying to do — to help us accelerate goals and fulfill our mission. Then we get something really special, because we're working on the problem set together. If they see the opportunities where they can transform and improve healthcare — and that becomes part of their mission and core principles — then magic happens as we work together.”
“Salesforce and Microsoft understand how we're trying to transform the healthcare system, and we bring our capabilities together to help accelerate our strategies.”
HealthLeaders: What else is important about your Care Connect partnership with Salesforce?
Davis: “When you partner with these Big Tech companies as a nonprofit, you might naturally ask yourself, ‘Why did they choose to partner with us when others might bring more capital to the equation?’ The Salesforce team will tell you, ‘Because Blue Shield is committed to transforming the system, and when we show up and say we're going to do something, we execute.’ Salesforce is an incredible partner because of their commitment to improving healthcare.
“We were a definitional partner, helping to define Salesforce’s care management product. That's a huge role that we played as a nonprofit, and it really calls out not only our innovation, but also our technical subject matter expertise as well as our ability to engage and stay committed to develop with a tech partner a transformative capability in Care Connect. We also used Agile methodologies to deliver the core Care Connect platform in just nine months — this required incredible hard work to deliver a transformative capability for our members so quickly.”
HealthLeaders: What does it mean to be a definitional partner?
Davis: “We want to be thinking 5-10 years ahead. The worst thing you can do when you're innovating and using technology is to do it like you were doing it before. I don't want to do it that way, so when we knew we needed to innovate and modernize our clinical care management system, we discussed that with Salesforce.”
“There's a better way of doing business, there's a better way of connecting the systems and the data to provide greater access to care. It required both of us to think differently about how healthcare processes are done today in order to create that transformative experience for our members. That’s what’s special about the transformation and the innovation we’re doing together.”
HealthLeaders: What has surprised you most about working with Big Tech overall?
Davis: “I've been most surprised about their willingness to learn and engage. I think they recognize that healthcare is one of the most complicated ecosystems, so their openness to listen and learn from subject matter experts and the health plan to ultimately improve their capabilities.”
“That has been really refreshing to see because it's going to take a village to transform the healthcare ecosystem.”
A new program from the Digital Therapeutics Alliance and DirectTrust is betting yes.
Healthcare’s acceptance of digital therapeutics (DTx) continues to be a long and winding road. Two organizations hope to change that. DirectTrust and the Digital Therapeutics Alliance (DTA) are creating an accreditation program for DTx applications and platforms. The program will independently evaluate DTx products for their efficacy, and for data privacy, security, transparency and interoperability.
These characteristics are key for DTx regulatory approval (when required) and for another kind of approval: that of payers. DTx requires confidence: that it can improve outcomes as well or better than traditional therapies and thus be worth including in treatment recommendations, benefit designs, formularies and reimbursement.
DTx accreditation program details
In the new accreditation program, DirectTrust will administer and the DTA will develop the DTx evaluation criteria.
DirectTrust — a non-profit alliance that develops, promotes, and helps enforce healthcare data rules and best practices — already offers DTx evaluation services but is expanding them for the new accreditation program.
“This collaboration will add to DirectTrust’s growing suite of programs designed to assess the diverse digital health app and platform market,” said Scott Stuewe, DirectTrust President and CEO. Accreditation assessment will include data privacy, security, transparency — as well as interoperability to create “effective, scalable [DTx] connections to national health networks using the FHIR standard.”
The DTA is a non-profit trade association that promotes DTx understanding, adoption, and integration in healthcare.
“As the digital therapeutics industry grows, an increasing number of U.S. clinicians, provider systems, health plans, employers, and patients are evaluating how to best incorporate DTx products into their care plans to provide the highest quality of care,” said Andy Molnar, CEO of the DTA, in the program press release.
Making these decisions requires regulatory and reimbursement support.
DTx evolution: Approval and payment
Just as regulatory and reimbursement changes supported telehealth expansion during the pandemic, DTx products and developers need these tools to grow and scale.
Regulatory: Not all DTx products require regulatory approval. For those that do, the U.S. Food and Drug Administration (FDA) offers multiple pathways to demonstrate safety and efficacy, with the 21st Century Cures Act helping to further speed review. HIPAA and theThe HITECH Act govern most but not all DTx data privacy, security, and transparency requirements.
Reimbursement: “Yes, but limited” is how the DTA describes the status of most DTx reimbursement — when it occurs at all. Among public payers, Medicaid and Medicare Advantage offer more flexibility than traditional Medicare while employer-sponsored coverage requires negotiation.
According to BGO software, the FDA approved 50% more digital therapeutics in 2023 than in 2022.
There have also been setbacks and advances. Pear Therapeutics, one of the most promising DTx companies to emerge, declared bankruptcy in 2023 — just two years after going public with a $1.6 billion valuation and after securing multiple Medicaid contracts. Conversely, the Centers for Medicare & Medicaid Services (CMS) approved a new reimbursement code for AppliedVR’s DTx product that combines virtual reality hardware and software and likely helped expand the company’s partnership with the Veterans Administration.
Overall, digital health investment has cooled since the pandemic due to continued economic uncertainties, but as any private equity firm will tell you: there is a lot of dry powder in search of valuable investment. Could accreditation make DTx a stronger bet?
Why it matters: Trust and economics
The DTA’s CEO Molnar continues: “With an overwhelming number of products touting a wide range of clinical rigor, it is critical that we set a high bar to build trust.”
Efficacy is one hurdle. Providers and payers must have confidence that DTx options are as good as or better than or a worthwhile companion to traditional treatments.
Another hurdle is sustainability: Does DTx not only demonstrate but sustain outcomes in a way that makes it a sound investment? That answer will vary — by condition and treatment, by product and business, and by payer.
All of the above impact payer DTx decisions: Whether to cover it, how to cover it (medical or pharmacy benefit, formulary placement), and how to pay for it.
Will DTx accreditation matter?
Bigger changes must occur for DTx to become more integrated into healthcare’s delivery system and reimbursement framework. Is accreditation one of them?
As a baby step, maybe. Accreditation does lend credibility, particularly to new directions and initiatives. For example, there's the NCQA’s newer Health Equity Accreditation (HEA) and HEA Plus programs for health plans and health systems — designations that reflect an organization’s ability to create a health equity culture, to collect vital race, ethnicity, and language (REaL) data to support patients’ needs, and to identify equity needs overall.
Accreditation signals that key frameworks are in place that support strong healthcare practices and continuous improvement. The DTA and DirectTrust hope that accreditation will achieve the same for digital therapeutics.
64% of providers agree that health plan data exchange is "very important" to VBC success
33% of providers and 25% of plans, however, believe that current data exchange helps them identify care gaps "very well."
The state of VBC
The Azara Healthcare report defines VBC goals and progress as:
Expansion of healthcare coverage
Implementation of EHRs
Transition from FFS payments
Reductions in healthcare spending
Azara gives the first two goals the “green light,” citing a 92% healthcare coverage (Medical Economics) and 96% hospital EHR adoption rates (HealthIT.gov).
The shift from FFS reimbursement and reduced spending don’t fare as well. Here, Azara notes in its report that VBC uptake “has been slower than the market expected” — despite the 50+ alternative payment models that CMS has tested over the past decade — and has not curbed healthcare spending increases despite a mutual interest by providers and payers to reduce total cost of care.
Consolidation hasn’t curbed costs — what will?
To reduce spending, the Azara report notes that the health plan and provider strategy has been “to get bigger” through consolidation but that this strategy “does not address the underlying challenges of shifting to value-based care—nor does it necessarily streamline operations as expected.”
If consolidation hasn’t worked, what will? Just as there is lack of trust between providers and plans, there is also lack of agreement on how to accelerate VBC, including their biggest obstacles, who benefits most from VBC, and again, lack of trust.
First, the Azara report notes that “[p]roviders and health plans share different views on their core challenges:
Providers cite lack of buy-in (64%), care coordination staff (58%) and care management staff (53%) as their top challenges
Health plans rate lack of provider engagement (71%), member acceptance of narrow networks (47%) and market forces (47%) as their main obstacles
Lack of care coordination and management staff are where plans and providers are most closely aligned but the gap is still wide.
Lack of VBC buy-in is followed by perceived lack of benefit, particularly by providers. Only 19% of providers believe they benefit most from VBC versus the 58% who see health plans as the biggest VBC winners. Health plans agree, with 62% believing they benefit the most.
Both parties believe that they benefit more than patients or members. 50% of providers believe their patients benefit most from VBC, while 68% of health plans believe their members do.
For providers, the lack of payoff contributes to lack of trust. “Providers are over
3 times more likely to report little to no trust in health plans (57% of respondents) than health
plans are to report low trust in providers (18% of respondents),” Azara reports.
In addition, both parties cite very little improvement in their trust levels over the past two to three years, with 52% of providers and 47% of plans reporting no change.
Lack of trust but not lack of agreement
“When we looked more closely at the pain points and goals of health plan and provider leaders, one common theme emerged: effective, transparent data exchange and integration,” notes that Avalere report, adding that “because this integration inherently involves both parties, it’s a worthwhile place to begin untangling distrust.”
Some 61% of providers and 47% of health plans cite lack of data integration as their biggest VBC implementation challenge. Plans and providers are matched (47%) in their belief that data infrastructure to support whole-person, longitudinal care is lacking. Interestingly, both stakeholders also cite lack of patient/member engagement as a challenge: 31% by providers, 44% by plans.
As for data exchange, identifying and closing care gaps was seen as the primary benefit. Neither providers nor plans believe that current data exchange with one another helps them with these gaps. The stakeholders differ on other goals that data exchange can solve, with 67% of providers wanting to use data to identify high utilization patients versus the 50% of health plans who are seeking better primary and behavioral health integration.
Both parties are motivated to overcome these challenges, with the Azara report concluding:
“Providers and health plans are at a tipping point where the incremental shift toward VBC is poised to accelerate. More VBC contracts alone are not going to move the dial when it comes to delivering more value for providers, health plans, and patients. Moreover, when it comes to perceiving that value, providers need to feel more trust in health plans (and to some extent, vice versa).”
“If transparency is one of the key principles to building trust, then transparent, effective data exchange is a specific, measurable way for health plans and providers to start collaborating more effectively.”
A provider study highlights 2024 revenue cycle challenges and opportunities and payers are in the cross hairs.
Their mind’s on their money and their money’s on their mind — a/k/a physician practices and their revenue. In a recent survey, practices reported they spend 41% of their time, nearly half of every day, thinking about revenue cycle management (RCM).
Other than the obvious reason of getting paid: Why? The same survey spotlights the challenges and opportunities: from “shifting payer requirements” and a “fragmented claims management process” on both sides to the need for streamlined automation powered by, you guessed it, AI.
The survey in question —The State of Payer Reimbursement in 2024: It’s Time to Stop Living in Denials — was commissioned by Encoda, a claims and denial software vendor, and conducted by healthcare consultancy Sage Growth Partners. The survey included 84 practice leaders and administrators from single- and multi-specialty practices ranging from 10 to 200+ physicians.
Level setting: The state of revenue cycle in 2024
The Encoda-Sage survey notes that providers are meeting financial and workforce shortages by “going back to basics” and doubling down on RCM. It’s apparently a good time to refocus. Among practice personnel:
Only 25% are “confident they’re receiving every dollar they’ve earned from payers through their medical billing process”
Only 31% “feel strongly that they have the data insights needed to identify patterns in claim denials
Some 25% think they spend too much time on RCM issues
“With shifting payer requirements and other challenges impacting returns, it’s no wonder leaders are looking for ways to optimize their financial operations,” said Lisa Taylor, CEO of Encoda, in the survey report press release.
But how to optimize? How much money is left on the table from unpaid/underpaid claims and inefficient claims management? And are health plans the only reason why?
The best it can be? Attitudes toward current reimbursement processes
Survey respondents repeatedly state that payer rules present the greatest challenge to managing revenue and that it’s increasing.
“Changing payer rules (62%) and difficult payer relationships (45%) were far and away the top two challenges that respondents named when it comes to managing revenue. Furthermore, for the 44% of respondents who said their ability to manage and collect revenue over the past three years has gotten harder.”
When payer rules change, practices must update their practice management systems and workflows to maintain automation and efficiency.
Other reimbursement challenges that impact automation and efficiency include data deficiencies and claims denial mismanagement — on both the payer and practice side.
Yes, providers cite payer rules and relationships as well as a lack of payer data transparency. But the report’s top reasons for claim denials aren’t limited to health plans.
The root of the issue: Unpacking claims and denials
In the survey, practices identified the top five reasons for denials:
Duplicate claims (30%)
Lack of coverage (28%)
Missing data (27%)
Coordination of benefits (23%)
Timely filings (22%)
Providers may be frustrated with payer denials but most of the top five reasons track back to practice management.
Once a claim is denied, however, reversing the denial and securing reimbursement is challenging for survey respondents:
55% claim that > 75% of their denied claims are followed up on, but . . .
73% said that 75% or less are paid when resubmitted with . . .
25-50% of resubmitted claims “going nowhere.”
Time’s up: What’s next for RCM and practice management
Practices are looking at multiple solutions to address claims errors, denials and impacted reimbursement and revenue.
The Encoda report notes that current claims submission methods leave dollars on the table because claims and denial processes — and the tools and workflows to support them — are lacking. The report adds: “Solutions that employ automation and AI will be critical to updating today’s RCM processes to help ensure practices get paid more efficiently and accurately from the payers.”
Some 51% of survey respondents were comfortable exploring AI to increase efficiency and automation in the claims and denial process and thus revenue recognition. Specific focus areas included:
Using scrubbers to validate claims pre-submission and prevent/reduce problematic claims
Focusing billers on problematic claims only increase efficiency and speed payment
Having a practice management system with multiple capabilities — ranging from denial, revenue cycle and claims management to data extraction, analytics and reporting
Having a system “with a single interface to be able to work all claims in one work queue”
From these findings, Encoda concludes: “It’s clear—current solutions for maximizing payer
reimbursement are falling short . . . However, today’s new technologies have been proven to streamline billers’ work and increase automation and transparency, while allowing practices to accomplish more with less.”
“In other words, practices that don’t settle for the current fragmented set of tools will be able to cost-effectively collect the most revenue in the shortest time possible.”
