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New Health Care Revenue Analysis Suggests More Workers Compensation may be in Store

23 May, 2023 F.J. Thomas

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Sarasota, FL ( – For many health care organizations, commercial payers and Medicare, along with Medicare Advantage plans have been the bulk of provider revenue for many years. However, providers may be leaning harder on workers compensation business in the coming months, according to the most recent Crowe RCA benchmarking analysis suggesting that increased delays in commercial and Medicare payments are impeding providers from recovering financially from the upheaval of the last several years.

Analyst from Crowe LLP, a global public accounting, consulting and technology firm reviewed provider claims and revenue data from the first quarter of this year to determine prior authorization and claims denials, balances over 90 days, bad debt, and payer recoupments. What they discovered is frankly alarming. In fact, the analysts state that while most believed revenue would improve in 2023 because quite honestly there was nowhere to go but up, the results indicate that even that perspective was a bit too optimistic.

According to the data of more than 1,800 hospitals and 200,000 physicians, around 45 percent of a typical hospital patient population was insured by a commercial carrier. Traditionally, this would be a good payer mix, as commercial payers tend to pay claims quicker than Medicare due to less red tape, and generally offer a little better rate. For example, for an average inpatient case commercial payers pay around $18,156.50 compared to $14,887.10 paid by Medicare, which equates to 82 percent. For an outpatient case, commercial payers pay an average of $1,606.86, compared to $707.30, which equates to 44 percent.

A common theme in prior authorization and precertification denials is medical necessity claim denials due to place of service. For instance, a provider’s office requests an authorization for inpatient but the commercial payer states the service should be provided in an outpatient or observational place of service. While prior authorizations can be due to a payer disagreeing with the place of service for a procedure, there are also often times when the denial is due to an error in choosing or entering an incorrect place of service by both the payer and the provider.

While medical necessity denial rate for inpatient claims remained the same from 2021 forward at .2 percent, mainly because of fewer prior authorization requirements, the number of denials increased steadily for commercial payers. The denial rate in 2021 was 2.4 percent, which increased to 2.8 percent in 2022. As of first quarter of this year, the denial rate has increased again at 3.2 percent.

To give background on prior authorization denials in general, the denial does not just affect the individual provider or facility. Such a denial can determine whether or not the other providers in the course of care are paid. For instance, if the facility’s claim is denied for an authorization issue, there is a good chance the claim for the provider performing the surgery will be denied as well.

The overall percentage of denied claims for both inpatient and outpatient have increased for both commercial and Medicare payers. In 2021, the overall denial percentage for commercial claims was 14.1 percent, and the Medicare denial percentage was 3.4 percent. In 2022, the denial percentage increased to 14.8 percent for commercial, and Medicare decreased just slightly to 3.3 percent. For the first quarter of this year however, the denial percentage has increased even higher to 15.1 percent for commercial, and 3.9 percent for Medicare.

In the first quarter of this year, the value of final denials as a percentage of gross patient services revenue was 2.8 percent for commercial payers. What this comes down to is that revenue is decreased by 3 cents for every dollar from a commercial payer. Additionally, around 1.9 percent of bad debt was attributed to commercial payers. According to the analysts, this essentially means that for every commercial dollar made, an additional 2 cents is lost.

Around a third of claims submitted to commercial payers went unpaid for more than 3 months in the first quarter of this year. For inpatient claims, 31 percent of commercial claims and 12 percent of Medicare claims had not been paid within 90 days, even though a 30-day payment floor is the requirement. For outpatient claims, 12 percent of commercial claims and 11 percent of Medicare claims had not been paid by the 90-day time period.

One large issue for providers are takebacks or recoups by commercial payers. A common issue that providers face is a lack of information provided when the commercial payers automatically take their money back out of another patient’s payments. Additionally, the amounts recouped or requested are most often at partial line item rates, making it extremely difficult if not possible to balance and track to verify that the recoup is correct. While balancing is difficult by itself, most practice management systems are not set up to make this task efficient or easily understood. Both of these recoup scenarios require more experienced staff to track down the information, resulting in more cost to the provider for money they are going to have to give back. To make matters worse, while payers are not under strict guidelines to provide adequate information, providers are under a time requirement, facing penalties and potentially criminal charges if the money is not returned timely.

The analyst in the Crowe report highlight that commercial recoupments account for at least 3.2 percent of net patient revenue, essentially equaling to 3 cents off of every commercial dollar earned. By comparison, the percentage for Medicare is only 1 percent.

While workers compensation has its burden with medical records requirements, and approval for services, the claims adjudication and payment process is generally straightforward in comparison. If nothing else, it’s uncommon to see a large volume of recoupments with no information from workers compensation payers, and usually there is no patient balance to try to collect. If the trends in the report continue, it is very possible that providers will start looking to workers compensation to fill a much larger part of their payer mix.

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    About The Author

    • F.J. Thomas

      F.J. Thomas has worked in healthcare business for more than fifteen years in Tennessee. Her experience as a contract appeals analyst has given her an intimate grasp of the inner workings of both the provider and insurance world. Knowing first hand that the industry is constantly changing, she strives to find resources and information you can use.

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