‘We need everybody to work together’: As denials grow, health systems are responding with strategic, data-driven approaches

Originally Published on Becker’s Healthcare

The nation’s largest payers reported billions in profits in 2023. Yet, denials continue to rise. 

Further, a recent survey of consumers found 18% of insured adults experienced denied healthcare claims in the past year. Meanwhile, many health systems are operating with negative margins or margins hovering close to zero. 

Becker’s Healthcare recently spoke with Jerilyn Morrissey, MD, chief medical officer at CorroHealth, about how effective denial management strategies can improve the quality of patient care, as well as financial stability for hospitals and health systems. 

Question: What are the most common reasons for healthcare denials today, and how have these reasons evolved in recent years? 

Dr. Jerilyn Morrissey: There’s a plethora of reasons for healthcare denials, and they seem to be growing exponentially. The most common denials relate to prior authorizations, medical necessity, coding and diagnosis-related groups (DRGs) documentation, and technical or administrative issues. Denials reduce access to patient care and impact hospital and health system reimbursements. 

Looking back in time, the most significant change is the increasing number and frequency of denials. Decades ago, denials were reserved for a tiny fraction of expensive treatments or procedures. Now, denials occur for everyday encounters and medical treatments. We routinely see diabetics whose insulin is denied or asthmatics whose inhalers are denied. We can clearly demonstrate that denial rates were steadily rising prior to and after the COVID-19 pandemic. In 2022 and 2023, we saw a nearly 56% increase in Medicare Advantage denials and a 20% increase in commercial denials. 

Where is the ceiling on what and how much can be denied? Automation of claims processing by payers makes claims review cheap and easy. As a result, the opportunities and reasons to deny seem to be limitless. 

Q: Can you describe some of the innovative strategies that have proven effective in managing and reducing payer denials? 

JM: If we had this conversation five or six years ago, we would have discussed the tactics that hospitals and health systems used to anticipate or prevent denials. Unfortunately, we as an industry slowly and painfully discovered that this approach only led to significantly less reimbursement, and denial rates continued to increase. 

Today, especially in the Medicare Advantage space, hospitals and health systems are taking a different approach. Effective strategies start with understanding what’s in an organization’s ability to control. Organizations can influence how they behave, what they expect to be reimbursed for and how they hold payers accountable. 

Understanding whether your current tools and systems are inadvertently supporting denial activity requires sophisticated data that goes beyond common metrics like denial, observation and overturn rates. You must look at these rates as an end-to-end process and in relation to the overarching goal of fair and compliant reimbursement for services. 

Everyone turns to automation as a quick fix. But automating a broken workflow will only get you more of the same or possibly worse outcomes. Successful approaches for managing denials address specific payer tactics in a strategic manner. It’s not a one-size-fits-all solution. 

Q: How do effective denial management practices influence healthcare organizations’ financial stability and patient care quality? 

JM: When we talk about denial management or anything in healthcare, we must remember that patients are at the heart of all these conversations. Denials are a significant burden on patients, resulting in care being delayed or not received altogether. This potentially leads to further declines in health status. Patients are often faced with weighing increased out-of-pocket costs and not receiving necessary care. 

Forty percent of hospitals continue to lose money from operating costs. Challenging denials requires a lot of sophisticated resources that are already scarce. The appeals process is incredibly complicated. 

Q: Could you share an example where strategic changes to denial management processes led to significant improvements? 

JM: Denials are not overcome on a case-by-case basis. We recently worked with a health system that understood that. In collaboration, we developed an analytical infrastructure that measured and compared denial behavior across multiple payers. This informed the organization’s denial management strategy. They drove payer behavior change at the contract level by exercising escalation paths. Using data, they identified consistent trends that the payer was demonstrating. Not only did the organization change payer behavior, but they also obtained a cash settlement for inappropriately denied claims and added an independent review organization into the contract to resolve denials more fairly moving forward. 

Once the organization got their biggest payer performing better, they used the same steps for the second-biggest payer and achieved a similar level of success. It’s an approach they can use on a payer-by-payer basis. 

Q: What role do clinical leaders play in the denial management process, and how can their involvement be optimized? 

JM: Denials management is an all-hands-on-deck situation. It’s crucial to remember that at the center is first and foremost a patient, and second a provider. Patients are more than a bunch of codes in a medical record, and physicians are more than automatons that document. Providers have insight and experience that can help us navigate denial challenges. We need everybody to work together.