A new analysis from Change Healthcare has revealed that out of an estimated $3 trillion in medical claims submitted by hospitals in the U.S. last year, an estimated 9 percent of charges—representing $262 billion—were initially denied.
As the analysis showed, for the typical health system, as much as 3.3 percent of net patient revenue, an average of $4.9 million per hospital, was put at risk due to denials. While an estimated 63 percent of these claims were recoverable on average, reworking each denial costs providers roughly $118 per claim, or as much as $8.6 billion in appeals-related administrative costs, according to the research from Change Healthcare, a Nashville-based vendor.
These takeaways were included in the Change Healthcare Healthy Hospital Revenue Cycle Index, published June 26th at the HFMA ANI 2017 conference. “The insights reinforce the tremendous opportunity hospitals have to accelerate cash flow and reduce administrative costs by using advanced analytics to better manage the revenue cycle,” according to Change Healthcare officials.
The revenue cycle index data was culled from a sample of more than 3.3 billion hospital transactions valued at $1.8 trillion, and is based on primary institutional inpatient and outpatient claims processed by Change Healthcare in 2016, and the average charged amount and first denied amount for 724 hospitals in the claims sample. The total claimed charges and denied amounts for the nation’s 5,683 hospitals was then extrapolated from this sample data. An appeal success rate of 63 percent for hospital customers and average reimbursement rate of 29 percent were used to calculate the amount denied.
“Eye-opening insights like these are only possible with advanced analytics and revenue cycle tools that let you identify the root causes of denials, and implement and automate practices that prevent them,” Marcy Tatsch, senior vice president and general manager, reimbursement and analytics solutions, Change Healthcare, said in a statement. “You can’t fix what you can’t see. But by reinventing the revenue cycle with analytics, a hospital can improve its success rate in appealing denied claims and increase how much revenue is recovered—not to mention reducing the number of denials in the first place.”
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