The Financial Damage of the COVID-19 Pandemic Runs Deep

The impact is expected to be felt for years to come.

Three years into the global pandemic and health systems remain stretched to the breaking point, financially battered by losses projected to exceed $100 billion. Beginning to undo some of this damage starts with optimizing revenue flow and addressing billing compliance risk. To do this properly, requires understanding the exact drivers behind the devastating losses.

The primary drivers of claim denials and audit concerns in 2021 were bundling errors, COVID-19 claim issues, and coding problems. These findings are shown in Hayes’ inaugural auditing and revenue integrity report, Healthcare Auditing, and Revenue Integrity: 2021 Benchmarking and Trends Report. We analyzed more than $100 billion worth of denials and $2.5 billion in audited claims.

We found that bundling errors were the top problem, driving the initial denial of 34 percent of inpatient hospital charges in 2021 – each of which possessed an average value of $5,300. Auditors also discovered concerns related to disagreements between procedure codes and diagnoses, which caused 33 percent of all internal audits containing “disagree” findings.

The benchmark report reviewed professional and hospital claims, including current charge and remit data sent to all payer types, audited through the MDaudit Enterprise revenue integrity platform over the first 10 months of 2021. In all, more than 900 facilities, 50,000 providers, 1,500 coders, and 700 auditors from U.S.-based acute care and children’s hospitals, academic medical centers, healthcare systems, and single and multi-specialty physician groups’ data were reviewed.

Bundling claims was also the top category for outpatient hospital charge denials, which averaged $585 for each claim. The top reason was that the benefit had been included in a previously adjudicated service or procedure. Professional services had a first-time denial rate of 15 percent, led by claim submission and billing errors, with an average value of $283 each.

Under-coding also was a problem, with audits showing underpayments averaging $3,200 for a hospital claim and $64 for a professional claim. Also tagged by the analysis was telehealth reimbursement, with 13 percent of claims denied because of a lack of information provided (14 percent) and non-covered charges (10 percent). Other top reasons for telehealth-related denials were duplicate claims (7 percent), incorrect modifier/required modifier missing (5 percent), procedure code/bill type/place of service code missing (2 percent), missing documentation (4 percent), and pre-certification/authorization (4 percent).

The Hayes analysis also found the average denied amount of $900 for hospital outpatient claims, $690 for inpatient claims, and $170 for professional claims because of missing modifiers. Additionally, 33 percent of hierarchical condition category (HCC) codes were initially denied by payers, spotlighting the increased scrutiny of complex inpatient stays and higher financial risk exposure for hospitals.

COVID-19

The financial damage of the COVID-19 pandemic runs deep, and its effects will be felt for years to come. For example, the Hayes analysis found that 40 percent of COVID-19-related charges were denied. Meanwhile, 40 percent of professional outpatient audits and 20 percent of hospital inpatient audits failed.

Further, while the volume of inpatient COVID-19 cases remained lower than outpatient cases in the 2020 year-end surge, case volumes were still two to three times higher in the first quarter of 2021 than what was experienced in late spring and early summer. As a result, total denial dollars associated with inpatient admissions increased linearly to 2-3 times higher than the lowest levels in July 2021.

Finally, the one bright spot related to the pandemic was found in average lag days. During the height of the pandemic, when case volumes were high, and billing submission and coding rules were fluid, claims processing averaged more than 30 days for inpatient claims and 20 days for outpatient claims. In 2021, that dropped to under 20 days for hospital billing and 15 days for outpatient claims. Each additional surge will impact revenue cycles times to some degree. However, this downward trend will likely be affected by new surges, particularly given the complex nature of inpatient COVID-19 cases, which typically require multi-day stays, services, and charges.

Mitigating Risk and Optimizing Revenues

Based on the findings, it is clear that healthcare organizations need to address revenue and compliance risk through a unified revenue integrity-based approach that leverages denial insights to focus auditing efforts better while also incorporating prospective audits to minimize denials. Doing so allows healthcare organizations to increase the impact of existing compliance programs by more rapidly identifying and addressing risk, resulting in improved revenue flow and reduced risk of takebacks.

Use of an auditing platform that also integrates robust analytics dashboards can streamline the process to help focus improvement efforts and provide an at-a-glance understanding of performance by enabling prospective and retrospective audits performed and tracked. There is also a solid business case for investing in the right platform for its ability to mitigate compliance risk, optimize reimbursements and improve revenue retention – outcomes that can bypass budget arguments by converting what is traditionally viewed as a cost center into a source of recovered revenues.

All healthcare organizations must take immediate steps to address revenue and compliance risk and staunch the losses associated with claims denials, over-coding, and under-coding. A unified and technology-enabled revenue integrity-based approach streamlines auditing efforts. It allows for an expansion of audit scope to optimize revenue flow, reduce the risk of penalty, and eliminate revenue leakage.