Over the last few years, there has been a trend toward automating the medical necessity UR screening process using software to extract clinical data and either apply commercial criteria or create an acuity score. As I have strolled across trade show floors, I see company after company touting what appears to be an attractive value proposition – “Reduce Denials” and “Align with the Payers.” There seems to be this idea that if we can only get along better with the payers that will help the hospital.

Do not believe it! Let’s be clear: Payers are ultimately interested in one thing and one thing only – profits. In the first 6 months of last year, the top payers profited over $16 Billion – a significant increase from the year before. Does anyone believe this profitability comes from better relationships with UR staff at hospitals? While hospitals have focused on metrics like denial rates, payers have employed a large variety of tactics to achieve their primary goal – pay the hospital as little as possible.

Watch Out For Self-Denials

So how do criteria-based UR reviews limit denials? On one company’s website, a testimonial from a client says it all – “They help us identify patients who were incorrectly admitted, preventing payer denials down the road.”  I understand that sentiment – managing denials is costly, and it is generally true that hospitals want to get it “right” up front to prevent long fights. But automated criteria are not the answer. Using a criteria-based approach to “avoid denials” is really another way of saying you are doing the payer’s job for them. Essentially, you are self-denying cases that the payer has not reviewed, spending money on the criteria tool to achieve a reduction in hospital revenue. Your “denial rate” may drop, but for the payers, it is a dream come true. They do not have to issue denials, and they get to pay the hospital less for the care delivered. If you are using software to automate this process, the software learns that these self-denied cases should always be self-denied, and the drop-in hospital payment becomes a permanent, long term revenue drain.

A Tug of War 

The payer-provider relationship is a zero-sum game, a tug of war. Whoever pulls harder, works smarter and deploys the right resources will win – and make no mistake, when the payer wins, the hospital loses.  It’s time to take an honest look at your payer performance – not with metrics that hide revenue loss, but by using the same metrics that payers use to judge their financial performance – gross yield, net yield, and revenue leakage. I will be covering these topics and how specific payers deploy unique tactics to erode provider revenues, sometimes without anyone knowing, and often with the full cooperation of hospital staffs and UR vendors, in future posts. If you can’t wait until the next post,  go to the Versalus Health Resource Center to learn more about how to measure Payer performance.