Rising Claims Denials and the Growing Burden on Healthcare Providers: A Call for Proactive Solutions

The recent surge in claims denials is creating significant challenges for healthcare providers. According to Experian Health’s 2024 State of Claims survey, nearly three-quarters of providers reported a spike in denials over the last two years. This trend is exacerbating financial pressures on providers and straining the often-complex relationships between healthcare providers and payers.

Key Reasons Behind the Increase in Claims Denials

Providers point to several core reasons for the uptick in denied claims, including:

1. Prior Authorization Requirements: Prior authorizations are a consistent challenge, with stringent requirements and frequent policy changes leading to increased denials. Providers must ensure authorizations are obtained and correctly documented to avoid claims rejections.

2. Data Accuracy Issues: Missing or inaccurate data is another leading cause of denials. Incomplete or incorrect patient information, coding errors, and omissions in medical records all increase the risk of claims rejection.

3. Policy Changes and Reimbursement Challenges: Rapid shifts in payer policies are complicating claims processing. These changes often catch providers off guard, leading to delays or outright rejections.

With denials rising, healthcare providers face growing financial uncertainty. The survey revealed that 77% of providers are concerned that payers may not fulfill their financial obligations, adding to the strain on already tight budgets.

The Impact of Denials on Revenue Cycle Management

As denials rise, revenue cycle management (RCM) becomes more challenging. Nearly 40% of providers report that at least 10% of their claims are denied, while 11% face denial rates of 15% or higher. Additionally, 67% of providers report longer wait times for reimbursement, creating further cash flow challenges.

In response, reducing denials has become a priority for 84% of organizations. However, only 31% are using automation or artificial intelligence (AI) in claims processing, a significant drop from 62% in 2022. This decline signals a “retreat” from automation, likely due to a “comfort gap” with new technologies, as only 28% of providers report confidence in understanding AI and machine learning—down from 68% two years ago.

Strategies for Reducing Claims Denials

To address this growing crisis, providers must adopt proactive strategies and utilize advanced technology. Some key steps include:

1. Investing in Staff Training and Technology: Ensuring that staff members are trained on accurate data collection, coding practices, and timely submission processes can significantly reduce the likelihood of errors leading to denials.

2. Leveraging Predictive Analytics: Tools that forecast denial risks and identify potential errors before claims submission can help reduce rejections and improve RCM efficiency.

3. Exploring Automation Solutions: While there is hesitancy around adopting AI, automation can offer significant benefits. Automated claims processing and predictive analytics can streamline workflows, reduce manual errors, and ultimately improve the financial health of healthcare organizations.

4. Enhanced Communication with Payers: Providers should maintain open channels with payers to stay updated on policy changes and prior authorization requirements. Establishing a strong payer relationship can mitigate the risk of unexpected denials.

As healthcare providers continue to navigate these challenges, there’s a growing consensus that traditional claims management strategies are no longer sufficient. By embracing technology, improving staff training, and fostering transparent payer relationships, healthcare organizations can minimize the impact of claims denials and maintain a healthy revenue cycle. This shift is essential for providers to remain financially sustainable and focused on delivering high-quality patient care.