Small disparities between insurers have big impact on hospital revenue

CHICAGO (Nov. 30, 2017) – Using the Crowe Revenue Cycle Analytics (Crowe RCA) software to gather data, a Crowe Horwath LLP analysis reveals that insurers, or commercial payers, are making it more challenging for healthcare providers to collect payment for clinical services. Although geography and product mix affected some findings, key performance indicators (KPIs) revealed an alarming disparity across five major national commercial managed care payers.  

“Many providers focus their attention on their own revenue cycle processes with the idea that better-performing patient financial services will produce fewer payer issues,” said Brian Sanderson, managing principal of Crowe healthcare services. “While that is true to a degree, our data shows that major commercial payers appear to have underlying inconsistencies when compared to one another that can greatly impact a hospital’s ability to collect revenue.”

The Crowe report, “Everyone Says It’s the Payer’s Fault: Use Managed Care Payer Performance Reporting to Improve Reimbursement Rates,” provides supporting analysis of these findings. Crowe is one of the largest public accounting, consulting and technology firms in the U.S. and the Crowe RCA solution captures every patient financial transaction in more than 800 hospitals.

Two main KPIs used in the report were accounts receivable (AR) and denials.

Crowe RCA software measures true AR days, a measure of gross receivable with contractuals taken at the time of billing added back in. The five payers in the study had the following averages of true AR days: 52.2 days, 59.3 days, 61.1 days, 65.2 days and 67.7 days. Sanderson noted that the 15-day range of averages illustrates the impact the payer has on a provider’s ability to plan for payment.

Denials, when more information is requested by the insurer to determine if the claim can be paid, is another area of increased focus for hospitals, as the differing requirements for national payers complicate the claims submission and resolution processes. While government payers, such as Medicare, tend to have standard submission processes, many nongovernment national payers have unique conditions tied to contract terms, benefit plan designs or clinical documentation support. Not following these specific requirements triggers denials, claim corrections and claims that are unpaid or only partially paid.

Initial denial rates range from 7.5 percent to 11.1 percent of net patient service revenue (NPSR) across the national payers analyzed. This means that approximately one of every 10 dollars of revenue is at risk for nonpayment. Denials marked as “additional medical information needed,” (for example, medical record requests) exhibit the highest disparity of incidence. The payer with the highest denial rate used this description more than three times as often as the payer with the lowest rate. Final denial rates (claims that are written off as uncollectible) also show disparity across the national payer group, ranging from 0.8 percent to 2.4 percent of NPSR written off as uncollectible due to denials.

“Since commercial payers are key to a provider’s success, the provider should actively look for payer-by-payer trends,” added Sanderson. “Ongoing, detailed managed care payer performance reporting, integrated with managed care contracting, will become even more important as hospital reimbursement tightens.” 

To download a copy of the report, please visit www.crowehorwath.com/benchmarking-release.

About the Crowe RCA Benchmarking Analysis 
The Crowe RCA benchmarking analysis includes more than 800 distinct hospitals classified as acute, critical-access, rehabilitation, psychiatric or cardiovascular care facilities.

About Crowe Horwath
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting, consulting and technology firms in the United States. Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in nearly 130 countries around the world.

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