Increasing claim denials frustrate providers and patients alike

This article was provided by our sponsor, NC Center for Health and Democracy

On Wednesday, April 26, NC Center for Health and Democracy hosted an in-person and livestream discussion panel about the state of healthcare in North Carolina. Wendell Potter, former health insurance executive, New York Times bestselling author, and advocate for payor reform, released his new white paper, “How Do We Fix Healthcare in North Carolina?” and led a panel discussion with Dr. David McLennan, director of the Meredith Poll, at Meredith College about consumer sentiments around healthcare in North Carolina, current proposals in the state legislature, and potential solutions.

To watch a recording of our recent panel discussion, “How Do We Fix Healthcare in North Carolina?,” visit BCBSNC costing $628 a month and Wellcare running $925.21

One key component to fixing healthcare in North Carolina, Potter suggested, is getting a hold of claim denials.

Throughout the last several years, health systems have faced significant increases in claim denials. According to a report from Kaufman Hall, 67% of healthcare leaders saw increased claim denials in 2022. Research also indicates that in 2022, a total of 11% of all medical claims were denied — an increase from 10.2% in 2021. What does that mean for an average-sized health system? Roughly 110,000 unpaid claims, reports Crowe LLP, a public accounting, consulting, and technology firm.

This rising trend doesn’t just impact commercial insurance members. For Affordable Care Act (ACA) marketplace plan members, Kaiser Family Foundation (KFF) found that 17% of in-network claims were denied in 2021. While 8% of claims were denied due to preauthorization or referral reasoning, and 2% were denied based on medical necessity, 77% were classified as “all other reasons.” It’s a reality that frustrates patients and providers alike. These denials, according to Modern Healthcare, have led to “more administrative work for providers, less cash flow for hospitals, and postponed patient care.”

Claim denials are a threat to the American healthcare system by calling into question the credibility and intentions of doctors and patients. Without any direct interaction with the patient to understand their medical needs, health insurance companies are injecting themselves into the patient-provider relationship and placing an undue burden on health systems.

According to a report by Crowe LLP, a hospital financial data analysis firm, “When healthcare providers are supplying around-the-clock care for the sickest and most vulnerable patients, a denial by the payor implies that the care provided was not warranted and that its necessity must be proved by appeal. Often, these appeals take months to resolve and cost healthcare facilities thousands of dollars. Even then, the payor still might claim that the care was not warranted and not pay the provider.” This is especially problematic as health systems, already in tough financial waters, rely on prompt payment for services to pay their staff, order supplies, and continue operations.

The burden that claim denials put on hospitals is peaking toward unsustainable. “Any increase in denial rates will increase the burden on the provider to resolve the denial and receive payment,” according to Crowe LLP. An American Hospital Association (AHA) survey found that 84% of hospitals and health systems reported that the cost of complying with insurer policies and requirements is increasing. This is especially frustrating for hospitals, as they are facing persistent unprecedented staffing shortages and skating on razor-thin margins as reported in Becker’s Hospital Review. It’s no wonder, then, that according to the AHA survey, 78% of hospitals and health systems report that their experience with insurers is only getting worse.

Indeed, health insurance companies are increasingly getting between doctors and their patients through chronic denials. In 2020, of more than 230 million in-network marketplace claims reported, 42 million claims were denied for reasons including “lacking prior authorization, excluded services and medical necessity,” reports Healthcare Dive. This speaks to an overall trend among health insurance companies inserting themselves into medical decisions they have no business speaking into. Since insurers are not doctors, notes the Washington Post, why do we continue to allow them to make medical decisions?

Providers in North Carolina are especially facing increased scrutiny from payors in the form of claim denials. The Affordable Care Act (ACA) marketplace study by KFF also found that North Carolinians experience higher denial rates than the national average. In North Carolina alone, KFF reports that 2,901,677 in-network claims were denied in 2020. Furthermore, KFF estimates that only .1% of denied claims are ever appealed and according to national insurance and claims numbers, more than 32% of denied claims were overturned once appealed. Also in 2020, Blue Cross Blue Shield of North Carolina (BCBSNC), the state’s largest health insurer, denied nearly 15% of medical claims. This amounts to approximately 2,901,677 claims. As states like North Carolina wrestle with increased claim denials, a patient’s care hangs in the balance.

This article was provided by our sponsor, NC Center for Health and Democracy