What you need to know
Financially strained providers face immense pressure to collect reimbursements from reluctant payers. Addressing avoidable friction from inconsistent payer policies, excessive information requests, interoperability issues and non-equitable rate increases is crucial to ensure that healthcare systems can continue to provide efficient, cost-effective care.
Friction between health systems and insurance companies is a $200 billion problem. The process for determining what services insurance companies will cover and how much they’ll pay has become mired in administrative complexity, driving up unnecessary costs for payers, providers and patients.
For healthcare organizations grappling with rising expenses and nationwide staffing shortages, delayed and denied payment resulting from this avoidable friction — in addition to high administrative expense — is untenable. To ease financial strain on providers and reduce administrative costs across the healthcare system, the issues causing this friction must be addressed.
1. Inconsistent, unclear coverage policies
Utilization management policies are essential to ensure appropriate care is delivered at the appropriate cost. But instead of leveraging an industry standard like the clinical guidelines recognized by CMS, payers exploit vague regulatory language to enforce their own rules for deciding what care will be covered or denied based on what they consider to be the right care choices at the right time.
Not only do these policies vary widely by payer, they’re also difficult to locate and keep track of. There’s no single, streamlined repository for this information, and the rules change constantly — Ensemble’s proprietary tracking system shows upward of 180 new payment requirements and policy updates made per day across payers.
This constant flux significantly burdens providers with the task of staying updated on all payer changes, a time-consuming and complex process. Meanwhile, payers spend their time making updates and changes, and creating loopholes that often benefit them. This dynamic creates a one-sided situation that heavily favors payers, leaving providers on their own to ensure compliance and appropriate reimbursement in the face of shifting updates.
Keeping track of coverage details across policies to determine which services require prior authorizations and which services are covered is such a huge administrative burden that most payers outsource the process to third parties.
The real cost of friction:
A patient with a history of bone cancer was in the hospital for 10 days, receiving an open skull biopsy, an MRI confirming brain lesions and a CT scan confirming rib fractures and lesions throughout the chest. Despite meeting inpatient criteria defined by InterQual, MCG and CMS’ Two-Midnight Rule, the payer denied inpatient status for the patient. After exhausting the single peer-to-peer review allowed by the payer, the provider was left to choose between downgrading the case to observation status and accepting lower reimbursement, or billing the claim accurately and waiting for the ability to appeal. If appealed, the majority of these types of denials are eventually overturned, but only after an average of three appeal attempts, which significantly diminishes and delays payment for providers.
2. Broken, burdensome information exchange
The more insurance companies invest in AI-driven payment integrity systems, the more data they require from providers to approve coverage and determine payment. Payment scrutiny, which historically occurred as a post-payment audit, now occurs before care can be delivered or billed. Providers are increasingly required to submit detailed information like thorough medical records before a treatment plan is authorized and itemized bills before a payment decision is made.
Complying with authorization requirements and increasing requests for additional information is resource-intensive and the submission process is error-prone and varies by payer. Like coverage policies, submission requirements are difficult to find and often require providers to learn by trial and error.
Some payers still require providers to fax information or make phone calls to process prior authorizations. Some require files to be uploaded to a third-party tool or web-based portal, which are often out of sync with the rest of the payer’s systems, resulting in lost files and duplicate requests.
Frequently, despite providers following the correct initial process for sending the data, they must also make manual phone calls and inquiries to ensure the data is attached to the correct patient. The backlogs of waiting for requested data to properly transfer — and be attached to the correct claim — often lead to delays in both care and payment, all while consuming unnecessary resources on both sides.
In one AMA survey, 92% of physicians reported that prior authorizations delay necessary care, with decisions taking anywhere from three days to more than a month. Nearly half of physicians surveyed said these policies led to urgent or emergency care for their patients. Even once authorization has been granted, denials by payers often still occur on the back end. This forces providers to continue fighting for care that has already been authorized and deemed medically necessary for patients. This ongoing battle consumes significant resources and time, further complicating the delivery of timely and appropriate care.
The real cost of friction:
To schedule an MRI, a staff member from the provider’s office called the patient’s insurance company to determine if an authorization was required. After multiple phone calls and trial and error, they learned that while the payer didn’t require any prior authorization, a third-party was engaged to manage coverage determination for the payer and that the third-party actually required specific documentation for the MRI to be authorized. After gathering and uploading the necessary information to the designated portal, they were told there was an issue sharing the documentation back to the payer’s system and the information would need to be resubmitted.
3. Inequitable, unsustainable contract rates
Many providers are struggling just to secure standard rate increases. Major payers have approached negotiations with demands for rate concessions, making it increasingly challenging for providers to maintain financial stability. But even standard rate increases offered by payers aren’t enough cover the real-life costs of patient care, with Medicare rates historically only covering around 80% of a hospital’s actual costs.
Despite contracting at the same rate or higher, Medicare Advantage (MA) plans only reimburse hospitals around 90% of Medicare once the cost of underpayments, delays and denials is factored in. With more than half of the Medicare-eligible population enrolled in MA plans, settling of every dollar owed is simply not sustainable for providers.
The top five U.S. health insurers have collectively amassed over $371 billion in profits since the passage of the Affordable Care Act. Despite lobbying CMS to increase their own subsidy rates to keep up with inflation, payers are typically unwilling to offer material rate increases to address the same market pressures impacting providers.
Aggressive tactics like terminating contracts with uncooperative payers are becoming more commonplace, pitting payers and providers against each other in arduous, and often public, battles for months. Not only are these negotiations costly and time-consuming, they also cause concern and uncertainty within communities.
The real cost of friction:
When its contract was up for renewal with Florida Blue Cross Blue Shield, NCH requested moderate rate increases to cover the rising cost of patient care and preserve local access to doctors and vital services for families across Southwest Florida. Despite being the third most profitable Blue Cross program in the nation and paying NCH less than other insurers in the region, Florida Blue refused to negotiate, waiting three months to even respond to NCH’s initial proposal. NCH launched a public campaign to help educate patients and community members on the need for Florida Blue to offer fair payment and the implications of terminating its contract if agreement wasn’t reached. It wasn’t until the day that the contract was set to expire that Florida Blue started to negotiate, ultimately agreeing to a rate increase.
The bottom line
There’s immense pressure for financially strained providers to collect reimbursements from reluctant payers — but there seem to be roadblocks at every turn, given payers’ complex policies, delays, requests for information and a reluctance to offer equitable rates to providers.
As part of the larger healthcare ecosystem, payers and providers should share a goal of getting care to patients in need. Both parties must therefore work toward a joint understanding of the problems at hand as well as mutually agreed-upon end goals — an action that will pay dividends in reducing friction for payers, providers and patients.
You know the causes. Now what?
Learn 3 key steps to proactively counteract payer denials and delays.