The Center and CHAMPS Sign Premier’s Letter to CMS on Reimbursement Denials and Delays
Premier Inc., a national supply chain leader and technology-driven healthcare improvement company providing solutions to two-thirds of all healthcare providers in the U.S., published the results of their recent survey indicating claims adjudication cost health providers more than $25.7 billion in 2023 — a 23% increase over the previous year.
Showing support of driving policy change on these reimbursement issues, The Center for Health Affairs and its affiliate, CHAMPS Group Purchasing, signed onto a letter drafted and circulated by Premier to the Centers for Medicare & Medicaid Services (CMS) explaining the significance of this issue and recommending action steps.
Claim Denials are Frequently Reversed
Approximately 3 billion medical claims are processed by health insurers annually. Overall, about 15% of claims are denied – with 15% of Medicare Advantage and 28.5% of Medicaid health plan claims experiencing denials. Yet 70% of denials were overturned and paid, indicating that nearly $18 billion was potentially wasted arguing over claims that should have been paid at the time of submission.
Additionally, Premier’s survey of its member hospitals and health systems found administrative costs associated with fighting denials increased from $43.84 per claim in 2022 to $57.23 in 2023.
These expenditures continue to have a significant impact on the financial stability of healthcare providers. In 2023, the average number of days of cash on hand for nonprofit hospitals and health systems was 196.8, the lowest level in a decade. Without sufficient cash reserves, providers are unable to reinvest in patient care and may face a downgrade in bond rating, which can make borrowing more expensive and difficult to secure.
Survey Results Regarding Prior Authorization
Premier reports payers required prior authorization for a higher percentage of claims in 2023, rising to more than 30% from 17% in 2022. In some areas, the increase was even more significant. For example, in Medicare Advantage, 30.5% of claims required prior authorization in 2023, up from 25% in 2022. Premier notes that denied claims tend to be more prevalent for higher-cost treatments, with the average denial being charges of $14,000 and up.
While prior authorization became more widespread in 2023, the number of claims denied after approval increased across the board, often doubling or tripling the rate seen in 2022. On average, 10.4% of claims that had received prior authorization were denied, up from 3.2% in 2022.
The prior authorization process is lengthy, requiring clinical and administrative reviews of complex, constantly changing policies. As a result, the process can take days or even months to complete. In some cases, providers may choose to perform what they deem a medically necessary service before obtaining prior authorization, which can lead to a denial.
Premier’s Letter and the Path Forward
Premier will continue to work with Congress and CMS to develop policy initiatives to address the root causes of delays and inappropriate denials in claims processing, removing barriers to high-quality care. The Center for Health Affairs & CHAMPS will continue to partner with Premier and support these efforts.
This includes working on policy solutions that improve patient experiences while minimizing additional regulatory burden. These include prohibiting Medicare Advantage (MA) plans from reopening approved authorizations for acute care and taking enforcement action against MA plans that fail to abide by the coverage rules of Medicare.
In 2024, Premier utilized their first survey responses to send a letter to CMS. This letter, signed by 119 Premier members, outlined data-drive policy changes to the Medicare Advantage program and led to a response from CMS.
A segment on the Today Show last week shared the patient perspective on health insurer claims denials and included data from Premier’s recently released report.
