Report finds that commercial insurers issue more denials, take longer to pay than Medicare

Wednesday, May 31, 2023

Although commercial payers typically pay more per claim, it is significantly easier for providers to get reimbursed by Medicare, according to a May 2023 Crowe Revenue Cycle Analytics (RCA) report.

The report revealed that $18,156.50 and $14,887.10 is paid in average net revenue per inpatient case by commercial payers and Medicare, respectively. For outpatient cases, commercial payers on average pay   $1,606.86 and Medicare pays $707.30

However, the study found that commercial payers’ behavior causes more problems along the way. “Commercial payers take the longest to pay, require providers to jump through more administrative hoops to get paid, and delay payments to providers via claim denials at a higher frequency than government payers,” said the report.

The report highlighted the rate of prior authorization and precertification denials. Through the first quarter of 2023, the rate for inpatient claims was 3.2% for commercial payers and 0.2% for Medicare.

In addition, the report revealed that the commercial payer rate for these denials has increased by 0.4% annually since 2021. With a higher volume of denials, providers will have to engage in the labor-intensive appeal process more frequently. “This effort can be significant, costly, time-consuming, and difficult,” said the report. “It often doesn’t end with the payer making the full and appropriate payment to the provider.”

The report also included an initial denial rate metric. Through the first quarter of 2023, commercial payers initially denied 15.1% of inpatient and outpatient claims. In comparison, Medicare only initially denied 3.9%. The report noted that most of these claims are eventually paid, but achieving a positive resolution requires a lot of administrative effort and is very costly to the provider.

Request for information (RFI) denials were also measured in the report. For the first quarter of 2023, the RFI denial rate was 4.8% for commercial payers and 0.4% for Medicare. Based on its finding that RFI denials delay payment by at least 45 days, Crowe RCA said that these denials “by a provider’s best payers can wreak havoc on cash flow and accounts receivable (AR) performance.”

All three of these denial metrics factor into the AR metric, according to the report. For the first quarter of 2023, over 30% of inpatient and outpatient claims submitted to commercial payers weren’t paid for more than three months, compared to just over 10% of Medicare claims. The report also details bad debt, final denials, and payer takebacks.

Approximately 45% of any given hospital’s patient population is insured by a commercial payer, according to the report. To maximize reimbursement, revenue integrity professionals should ensure their organization has systems in place to prevent and manage denials. Review contracts with commercial payers and make sure they are adhering to the terms.

Editor's note: Find more NAHRI resources on denials here.