The Impact of Medical Claims Processing on Cost Reduction Opportunities in Healthcare

Hospital administrative costs make up more than 40% of the total money spent on patient care. These costs have been going up because billing rules and insurance policies are more complex. For example, from 2022 to 2023, care denials for commercial insurance claims rose by 20.2%, and for Medicare Advantage claims, they increased by 55.7%. Many denials come from automated insurer checks using machine learning and AI, but sometimes these systems deny claims incorrectly without enough human review.

These denials happen a lot. Medicare Advantage denials can be between 10.5% and 15.5% in some health systems, and about 56% of these denials get overturned after appeals. This shows that the original denials might be causing extra work. Hospital staff spend a lot of time and resources appealing these denials, which raises costs and delays getting paid.

Claims unpaid for over 90 days can be between 27.1% and 46.7% of all claims in some hospitals. This creates cash flow problems and limits money available for improving facilities or hiring staff. Hospitals and health systems spend nearly $40 billion every year on billing and collection administration. Smaller medical practices also feel this pressure since they work under the same payment system.

Commercial insurance companies took 19.7% longer to process claims in 2023. This makes payment delays worse and causes financial strain on healthcare providers who need reliable cash flow to operate.

Insurer Policies and Claims Denials: Impact on Cost and Care Delivery

Insurance company rules like prior authorizations, step therapy protocols, and fail-first policies aim to control costs but add complexity. Prior authorization means providers must get permission before giving some services. This takes a lot of staff time and can delay care. The American Medical Association says doctors and staff find this process tough and suggests reducing the number of services needing prior authorization.

More use of automatic claim reviews means more automatic denials that might not be medically right. In 2018, a government report said about 75% of Medicare Advantage denials were overturned on appeal. This shows automated denial systems are often inefficient. These denials slow down payments and may delay important treatments for patients.

Insurers also do post-payment checks to get back money paid by mistake. These checks create more financial risks and extra work for healthcare providers.

Cybersecurity problems are rising in claims processing. For example, attacks like the one on Change Healthcare disrupt work, increase admin costs, and need more resources to fix systems and improve security.

All these issues make billing difficult. Staff spend a lot of effort handling denials, appeals, and payment adjustments. This raises costs and makes managing money flow harder.

Electronic Transactions and Administrative Simplification

To address rising administrative problems, organizations like the American Medical Association promote electronic healthcare tools. These tools simplify medical claims by standardizing electronic transactions that follow HIPAA rules.

• Electronic funds transfer (EFT) replaces slow paper checks with faster, safer electronic payments through systems like the Automated Clearing House (ACH).
• Electronic remittance advice (ERA) sends payment details electronically, helping medical offices match received payments to claims easily.

Using EFT and ERA together reduces errors, cuts manual work, and speeds up receiving money.

However, practices are cautious about virtual credit cards (VCCs). Even though VCCs make payments faster, they can cause revenue loss because of fees and complex processes.

Electronic eligibility verification lets practices check patient insurance coverage instantly. This lowers claim denials and makes billing more accurate from the start. Automated claim submission also reduces mistakes and speeds payment.

Practice management software that includes these electronic tools helps handle revenue processes in one place. It supports things like appointment scheduling, submitting claims, and payment reconciliation. These systems also help follow regulations and reduce issues with health plan rules.

Cost Reduction Strategies Through Claims Processing Improvements

Small and independent healthcare practices face financial pressures from rising costs, inflation, staff shortages, and lower payments. They try to cut unnecessary expenses while keeping care quality and staying financially stable.

One way is by improving medical claims processing. Efficient claims handling lowers billing errors and speeds up approvals. This improves cash flow and cuts admin costs.

Some small practices outsource billing to specialized companies. This moves tasks like claims accuracy, denial handling, and collections to experts. It leads to fewer errors, less waste, faster claims, and better revenue. Natalie Tornese from the American Academy of Professional Coders says working with billing experts helps practices reduce costs and get more predictable finances.

Using organized workflows and cross-training staff helps avoid downtime, increase productivity, and reduce the need to hire more people. Regular financial reviews with key performance indicators like revenue per patient and cost per procedure help find waste and adjust payment plans quickly.

Negotiating better contracts with payers and suppliers, including bulk discounts, lowers expenses and gives small and medium practices an advantage.

Physician engagement matters too. Studies show doctors who are fully involved bring 51% more inpatient referrals and 3% more outpatient referrals than less engaged doctors. This helps practices have steady or growing patient numbers, which supports revenue.

Integrating AI and Workflow Automation in Medical Claims Processing

Automation and artificial intelligence (AI) are becoming important in changing medical claims processing. AI can lower costs by automating routine tasks and speeding up claims decisions.

AI systems check patient eligibility, verify data, submit claims, manage appeals, and find errors before claims go out. This lowers denied claims, cuts revenue delays, and improves following rules like HIPAA.

AI coding tools use machine learning to suggest diagnosis and procedure codes by looking at past claims and patient records. They mark records needing human review. This helps coding staff focus on tough cases and make fewer errors. This teamwork raises productivity and reduces claim rejections caused by coding mistakes.

Even with these benefits, AI doesn’t replace medical billing and coding staff. Skilled people are still needed to understand clinical details, make ethical choices, check AI work, and handle complex appeals. Those who know how to use AI tools find their work easier and workflows better.

AI tools are expected to work more with electronic health records (EHRs) and appointment systems. For example, AI patient portals might soon offer real-time claim tracking and solve billing questions. This would improve transparency and patient involvement.

Some companies focus on AI-powered analytics to cut costs by finding savings in medical charges. These companies process millions of claims every month and negotiate fair payments. One example is Claritev, which analyzes large amounts of medical charges to find potential savings and reduce extra billing for patients.

Medical practice owners and managers can use AI-enabled claims processing and front-office automation like Simbo AI’s phone services. These tools cut the time spent verifying and managing claims. They also improve customer service and patient communication while lessening the need for more staff.

Managing the Financial Impact of Administrative Burdens in Healthcare

Medical practices and hospitals must check how claims processing affects their finances. Rules that cause more denials and delays cost time and money. Reviewing and appealing many claims takes staff away from patient care and building improvements.

Hospitals’ cash flow is at risk because of many unpaid and denied claims. Smaller practices may find it hard to stay profitable with rising costs and slower payments.

Investing in technology to reduce manual work, improve data accuracy, and speed up payments can bring good returns. These changes help sustain finances, use resources better, and make patient services more available. This helps healthcare providers stay competitive.

Medical practice administrators, owners, and IT managers who focus on improving claims processing through smart technology use, staff training, and good payer negotiations can lower costs and reach better financial stability. AI and automation are now important parts of managing revenue cycles. Changing with these tools is needed for healthcare providers to succeed in the United States.