The following is a guest article by Ritesh Ramesh, CEO at MDaudit

Safeguarding revenues in the coming year requires healthcare systems to proactively navigate an evolving landscape with cross-functional collaboration, technological innovation, and increased AI investments. Additionally, going into 2024 operational excellence is the table stakes for healthcare organizations to improve bottom lines, and where AI and automation can provide a boost in productivity and costs.

Those are the high-level findings of MDaudit’s 2023 Benchmark Report on the trends, challenges, and opportunities encountered by U.S. healthcare organizations, which analyzes auditing, charge analysis, and denial assessment data from MDaudit’s network of more than 650,000 providers and 2,200 facilities. Insights are also from auditing professional and hospital claims totaling more than $5 billion and denials from commercial and government payors exceeding $150 billion.

The analysis found that there was a fourfold increase in the volume of external payor audits in 2023, further straining healthcare organizations’ already limited resources. Patient volumes and surgical procedures showed signs of recovery from pandemic-era declines, increasing by 23% and 27% respectively over 2022. However, inflation, staffing shortages, reimbursement concerns, and regulatory challenges continue to threaten the financial well-being of U.S. healthcare organizations.

External Audits Surge

Among the report’s standout findings is the significant uptick in external payor audits in 2023, a result of escalating federal government efforts to address the overpayments made in the past two to three years. Many include tight deadlines for initial response and appeals and have substantially greater Audit Documentation Request (ADR) letters that in some cases exceed 100 pages.

This surge, along with the heightened complexity of billing, coding, and regulatory issues, has created a high-pressure environment with healthcare organizations struggling to stretch already overburdened resources to submit timely and accurate audit responses. The sheer magnitude of these audits also exposes them to considerable revenue risk and potential clawbacks, further emphasizing the critical need for artificial intelligence (AI) and other advanced technologies to aid in effective revenue retention strategies.

Dwindling Internal Resources

As the chronic shortage of experienced billing compliance professionals drags on, teams have adapted by embracing technology and analytics that enable them to do more with less while optimizing a return on investment (ROI). Maximizing efficiency amidst staffing constraints has fueled increased interest in and development of AI-fueled technology. Providers and organizations are embracing innovative technologies to bridge the workforce gap and enhance their financial performance.

MDaudit’s Benchmark Report highlights just how significant these transformations are. Large auditing teams (10-20 people and 20+) experienced a reduction in staff size by 15-20% and an increase in audit activity of 10%. This underscores industry trends toward increased productivity and strategic implementation of technology, automation, and analytics in billing compliance and revenue cycle management operations.

Safeguarding Revenues by Mitigating Denials

The Benchmark Report delves into the critical role of revenue integrity and billing compliance in preserving healthcare organizations’ financial stability and sustainability. Higher denial rates and increasing audit demands underscore the need for operational efficiency in billing, coding, and clinical documentation to enhance profitability.

Future success requires more than managing denials to ensure timely payments. Organizations must also understand and address upstream root causes impacting billing and coding practices in provider operations.

Other Takeaways

Commercial payors were the primary drivers of reimbursement issues for health systems in 2023, exhibiting a higher denial rate for outpatient and inpatient claims (35%) vs. Medicare (20%). Moreover, extended adjudication times (29-35 days) for initial responses to claims impacted cash flows.

Other key takeaways from the 2023 Annual Benchmark Report include:

• Greater Medicare Advantage (MA) Plan Scrutiny – MA plans were under greater scrutiny for submitting claims exaggerating patient severity and risk. Hierarchical conditions coding (HCC) audits skyrocketed by 170%, and final denial dollars on MA plans increased by 25% over 2022.
• Surging Documentation Requests – Pre-authorization denials and documentation requests from commercial payors that were 10 times greater than those from Medicare Part A and Part B created a need for healthcare organizations to up their investments in customer data integration technologies and streamline processes to address objections to high-cost services.
• Coding Challenges Impacting Revenue – Coding remains a significant factor driving revenue losses and margins, despite the buzz around autonomous coding innovations. Billing and coding issues resulted in initial denials of more than 10% of professional claims, 3% of outpatient claims, and 3% of inpatient claims. These challenges account for 16% of overall denials, amounting to $17 billion from the sampled data.

These trends have driven home the need to optimize revenue opportunities and mitigate compliance risks by increasing synergies across cross-functional Billing Compliance, Revenue Cycle, Coding, Clinical Operations, and Pharmacy teams – eliminating team siloes to enable greater collaboration.

On the Horizon

Integration of AI and other emerging payor strategies have increased denials, lengthened payment timelines, and intensified claim scrutiny, forcing healthcare organizations and providers to make strategic decisions that enable them to navigate these challenges and establish a path toward long-term revenue success. A precise mix of technology, subject matter expertise, collaboration, and cross-departmental communication is imperative to success.

By adopting new technologies and processes, teams of all sizes can achieve greater efficiency and safeguard valuable resources crucial for enhanced patient care and outcomes.

About Ritesh Ramesh

Ritesh Ramesh is the CEO of MDaudit, a leading health IT company that harnesses its proven track record and power of analytics to allow the nation’s premier healthcare organizations to retain revenue and reduce risk.