From Denials to Dollars: Combat Rising Denials by Leveraging AI and Automation
Hospitals and clinicians are facing a rising wall of claim denials. In many cases, they find that efforts to recover revenue are time-consuming, costly, and often fruitless.
According to the Optum 2024 Revenue Cycle Denials Index, national denial rates remain at about 12%, with the average denial rate up from 9% in 2016. Further, Optum reported that 84% of claims denied in 2023 were potentially avoidable, while 22% were not recoverable.
High denial rates are squeezing healthcare organizations’ already fragile margins. Many find themselves fighting denials after the fact, with a higher-than-desired failure rate and spending scarce resources on administrative costs to recover critically needed revenue.
There is a better way. Organizations can shift their approach to denials from reactive resolutions to preactive prevention, reducing the need to chase private and public insurers for reimbursement. The key is technology, particularly artificial intelligence (AI) and machine learning, that helps healthcare organizations improve revenue cycle management.
Soaring Denial Rates Hurt Provider Organizations, Clinicians and Patients
High denial rates burden health systems and clinicians, who are already challenged by workforce shortages, rising costs, aging (and unhealthy) populations, and low margins.
The American Hospital Association, in a report of a 2022 survey of member hospitals, said that 35% reported $50 million or more in foregone revenue from appeals after claims were exhausted.
Denials also affect patients, sometimes with catastrophic consequences. A KFF brief published in 2023 analyzed federal data on claims denials and appeals for insurers on healthcare.gov, the health insurance marketplace. Nearly 17% of in-network claims were denied in 2021, KFF reported, with insurer denial rates ranging widely from 2% to 49%.
Denials can leave patients holding the bill, but they lack the expertise and resources of healthcare organizations. In 2021, patients covered by the plans scrutinized by KFF appealed less than two-tenths of 1% of denied in-network claims. Insurers upheld 59% of denials on appeal.
Denials may play into patients not receiving needed care, as concerns about healthcare costs often lead patients to delay or skip medical care, according to The Commonwealth Fund.
AI and Tech-Driven Automation’s New Role in Denials Prevention and Management
To reduce the number and financial impact of denials, healthcare organizations must identify and address their root causes. Then, they must look to a combination of human training and autonomous tools to address the denial trend at every stage — front, middle, and back end — of the revenue cycle.
Nipping Denials at the Front End of the Revenue Cycle
According to Optum, front-end registration and eligibility confirmation processes were the top causes of denials, at 24%. Authorization or precertification was third, at 13%. Organizations can address these common reasons for denials by adopting technology solutions to:
- Profile patients
- Verify insurance coverage
- Estimate the patient’s share of costs
- Identify any prior authorization requirements
Such platforms are comprehensive, with mobile-enabled onboarding interfaces for patient use that help relieve some staff work. These solutions use cognitive software to understand, continuously learn, and adapt to patient and payer behaviors and propensities.
Tech solutions for patient access create an autonomous flow to reduce errors — and compress the likelihood of denials later in the revenue cycle. Real-time insights flag cases where staff intervention is needed to prevent denials later in the revenue cycle.
Patient eligibility solutions address many reasons why denials happen later, including:
- Outdated or incomplete insurance information: Patients may have changed jobs since their last encounter with the healthcare system, have secondary coverage they don’t provide, or become eligible for Medicare or Medicaid. Digital patient access solutions allow patients to enter, review, and correct information with ease. Then, organizations can use automation to verify coverage.
- Ever-widening prior authorization requirements: Clinicians responding to the American Medical Association’s (AMA) annual survey on prior authorization overwhelmingly say this common insurer practice negatively affects patients’ clinical outcomes and leads to clinician burnout. It also contributes to delayed payments, extra work, and claims denials.
Fortunately, new technology can intervene by tracking prior authorization requirements and alerting organizations in advance when procedures, tests, or treatments will require prior approval.
- Multiple tools collect patient data for claims submission: Healthcare systems often rely on numerous solutions to collect all the patient information needed to submit a claim. Other industries, such as financial services, also wrestle with the burden of disparate, legacy, and unintegrated systems. However, new technology allows healthcare and other industries to connect their systems for more comprehensive management and better ease of operation.
Applying Technology to Prevent Claims Denials Downstream in the Revenue Cycle
Past claims denial experiences and payer behavior are rich sources of intelligence for automated systems used in claims management. Healthcare organizations can learn from this experience and adapt their processes to reduce denials in the future.
- Payers’ propensity to pay: With AI, organizations can analyze historical payer behavior for particular types of claims and identify trends in denial reasons and timing. Organizations can use that intelligence to adjust their approach to specific payers and increase their reimbursements.
- Charge reconciliation rules: Reconciling payments from insurers and other payers is another opportunity for AI and automation. By processing vast amounts of data from payers, AI can reduce errors from manual data entry and allow staff to focus on more strategic activities in revenue cycle management.
- Compliance checks: The regulations governing medical coding are always changing. Automation can help ensure that an organization’s coding practices are aligned with the most up-to-date regulations, lowering the risks of claims denials due to noncompliance.
Autonomous Coding and Preventing Denials
Medical coders are in short supply. The AMA estimated a 30% shortage, a serious concern for hospitals trying to expand services and deal with higher inpatient levels than before the COVID-19 pandemic.
One solution for the coder shortage — and one that dovetails with the need to prevent denials — is autonomous coding, or coding powered by AI. To prepare for the transition 10 years ago from ICD-9 to ICD-10, healthcare organizations started down the path to greater automation of medical coding.
Now, the pace has accelerated. Sixty percent (60%) of healthcare organizations surveyed at the Healthcare Financial Management Association (HFMA) 2023 annual conference said they either use autonomous coding or plan to. Naturally, doubts remain: Slightly more than 1 in 4 were unsure they could trust it, the survey showed.
For autonomous coding to contribute to lower denial rates, the electronic information in medical records and clinical documentation needs to be thorough and accurate so it generates a code set for reimbursement submission — with minimal human touch.
AI depends on high-quality data to improve its performance, meaning that performance will improve over time. Machine learning feeds data into the AI-driven technology to increase the information available for autonomous coding.
Human coders remain part of the process, but their status can rise to that of trainers and auditors. Carefully built autonomous coding systems also include rules and flags for when automated coding needs a human to review it before submission to an insurance company or other payer.
Prevent Denials, Protect Revenue
IKS Health helps healthcare organizations with administrative tasks and revenue cycle management so clinicians can focus on patient care. Our solutions work together to address the increase in denials and help organizations maximize their revenue. They include:
- Patient Access Solutions to prevent insurance and billing issues
- Denial Prediction solutions that use information like experience with payers to prevent future denials
- Denial prevention through a pre-bill code-over-code audit conducted by an SME auditor
- The IKS Medical Coding Suite, an autonomous, preemptive, end-to-end coding solution that automates up to 70% of coding volume with more than 95% accuracy
- The IKS Review Module, a pre-billing review engine integrated with the IKS Coding Suite, performs three critical checks for revenue rules (charge reconciliation), compliance rules, and propensity to pay
By addressing the root causes of denials and streamlining the revenue cycle, organizations can improve cash flow, reduce administrative burden, and ensure more accurate reimbursements. Contact IKS Health for more information on our solutions that allow clinicians to focus on delivering quality care while optimizing their organization’s financial performance.
