Delayed payments increase hospitals’ administrative tasks, drive up costs

CHICAGO (April 26, 2018) – Using data gathered by the Crowe Revenue Cycle Analytics (Crowe RCA) software, Crowe Horwath LLP analyses revealed significant differences in the time it takes to reimburse hospitals for services rendered by traditional Medicare versus commercial payers (insurance companies). Differences in days-to-pay among individual commercial payers also take time to resolve and increase healthcare providers’ “cost to collect.”

The Crowe report, “It’s Not Just Denials – It’s Delays: Delayed Payments for Clinical Services a Drag on Hospital Cash Flow,” provides supporting analyses of these findings. Crowe is one of the largest public accounting, consulting and technology firms in the U.S. and the Crowe RCA solution captures every patient financial transaction in more than 850 hospitals.

The report takes a deep look at denials, when payers request more information before determining if the claim will be paid. Final denials, when payment is never made, represent a nearly 2 percent decrease to an average hospital’s annual net revenue. Payment delays on denied services, when a payment is ultimately made after the denial is resolved, also have a profound effect on cash flow, requiring an average of 16.4 more days to pay than claims that have not been denied. The expense and cash flow implications of payments secured 16 days later than usual are generally equivalent to at least 1 percent of a provider’s cost structure, illustrating the impact that denial-related delays have on the bottom line.

According to the data, more than 76 percent of denied claims are ultimately paid. “Healthcare providers generally have entire departments dedicated to resolving denials, and their success begs the question of why hospitals need to incur such expensive and compromised cash flow for services that will ultimately be paid anyway,” said Brian Sanderson, managing principal of Crowe healthcare services.

Denied services generally are categorized as administrative (membership not on file, lack of coordination of benefits, bills not sent on a timely basis) or clinical (not medically necessary, prior authorization required, unfulfilled request for medical records). Significant investments by healthcare providers related to revenue cycle accuracy have gradually improved administrative denial rates. However, the data shows many providers may not have sufficient control over their clinical denials, as each commercial payer has its own process for medical necessity requirements, precertification of services and requests for medical records.

For example, one type of clinical denial is “request for information,” where the payer requests medical record information or asks the patient to provide clarification. This could be for an orthopedic claim where a payer seeks to confirm that the services were not related to an auto accident or workers’ compensation-related accident and therefore another payer’s responsibility. These requests for data frequently involve traditional mail, hard copies of medical records or coordination with clinical care departments and take resources to coordinate. Despite this, more than 80 percent of these denials end up paid but take, on average, more than two months to resolve. In a comparison of five major commercial payers, request for information denials resulted in average days-to-payment ranging from 76 to 121 days, illustrating the variance that hospitals are dealing with on a payer-by-payer basis.

“With the increasing emphasis on controlling healthcare costs, it appears as though a focused collaboration between providers and payers may decrease the administrative expenses related to securing payment for appropriate clinical services,” added Sanderson.

To download a copy of the report, please visit www.crowehorwath.com/benchmarking-release.

About the Crowe RCA Benchmarking Analysis 
The Crowe RCA benchmarking analysis includes more than 850 distinct hospitals classified as acute, critical-access, rehabilitation, psychiatric or cardiovascular care facilities.

About Crowe Horwath
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting, consulting and technology firms in the United States. Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in nearly 130 countries around the world.

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