Electronic Health Reporter

External audit volume more than doubled in 2024 over 2023-including higher rates of pre-payment audits-and total at-risk dollars increased fivefold to $11.2 million per MDaudit customer, impacting healthcare provider organizations’ cash flow and exposing them to higher potential denial rates.

Additionally, improvements in revenues and operating margins throughout 2024 were tempered by higher denial rates, including an increase in coding-related denials of more than 125% and in medical necessity-related denials of 75% for outpatient claims and 140% for inpatient claims. These trends highlight the pressing need to overhaul revenue cycle management (RCM) strategies in the coming year.

These were among the key findings of the 2024 MDaudit Annual Benchmark Report released today by MDaudit, an award-winning cloud-based continuous risk monitoring platform for RCM that enables the nation’s premier healthcare organizations to minimize billing risks and maximize revenues. Last year’s report forecast strong volumes for healthcare organizations, the impact of which was constrained by challenges related to controlling costs, improving margins, and seizing opportunities to generate new revenue streams-predictions that held true as operating margins improved by more than 4% against a surge in audits and denials.

“Looking ahead to 2025, those same headwinds, along with new risks around timely reimbursement and cybersecurity costs, will impede continued progress toward financial stability,” said Ritesh Ramesh, CEO, MDaudit. “This backdrop of challenges elevates RCM transformation to a strategic imperative for health systems in 2025, with an emphasis on continuous monitoring of financial risk to enable proactive mitigation of issues before they impact operations.”

Payer Behavioral Shifts Send Audits Surging

An increase in external audit volume, coupled with an increase in the average denied amount per claim across professional (~4%), outpatient (~3%) and inpatient (7%) settings, exerted additional financial pressures on healthcare providers. This year also saw a trend in more pre-payment audits. Unlike traditional post-payment audits that can result in clawbacks, pre-payment audits increase denial risks and cause cash flow issues.

Payers also stepped up clinical documentation scrutiny, sending audits surging by 100% over 2023 levels and contributing to a 3-year increase in clinical denials of 51%. To counter this trend, providers must focus on high-value services and ensure that clinical documentation improvement (CDI), billing, coding, and RCM programs are tightly coupled to implement a closed feedback loop from the backend to the mid-cycle to drive efficiencies.

Additionally, the Centers for Medicare and Medicaid Services (CMS) has put Medicare Advantage (MA) plans under the microscope as it continues ferreting out fraud and abuse-efforts that led to a 72% rise in hierarchical condition category (HCC) and Risk Adjustment audits and a 51% increase in total denial amounts for MA plans.

This heightened scrutiny, coupled with more strident authorization requirements and higher denial rates, have many providers rethinking participation in MA plans. At minimum, billing compliance and coding teams should be focused on eliminating improper practices that will lead to heavy fines and penalties. This is particularly critical considering MDaudit findings that more than 25% of providers on average failed audits across both professional (33%) and hospital (23%) care settings.

AI, Analytics and Billing Compliance

The MDaudit report also found that using technology and analytics to proactively address billing issues drives substantial productivity gains and healthier margins. In 2024:

• Auditor productivity increased 35% with no increase or a slight decrease in teams.
• Retrospective audits increased by 10% and prospective audits by 275%.

“The story told by this year’s data is that the winners in the healthcare margin race will be those that invest in technology, data, and analytics to enable real-time monitoring of billing risks,” said Ramesh. “Further, deploying a hybrid auditing strategy encompassing retrospective and prospective audits will catch and correct more errors and drive cleaner claims and higher first pass payment rates, translating into higher cash flows and stronger margins.”

He adds: “Leveraging real-time data, AI and analytics, and automation to detect, assess, and fix risks as they arise and implementing RCM strategies that prioritize revenue optimization and risk mitigation while coordinating resources across the mid-cycle and back-end functions with continuous risk monitoring capabilities will help ensure a more resilient and adaptive organizational strategy.”

About the Report

The MDaudit Annual Benchmark Report includes a comprehensive examination of real-world data representing the first three quarters of 2024 collected from a network of over 650,000 providers and more than 2,200 facilities that provide data to MDaudit for auditing, charge analysis, and denial assessment. It encompasses insights from more than $8 billion in audited professional and hospital claims and more than $150 billion in denials by commercial and government payers. Over 5 billion claims and remits were used for benchmarking.

Download the 2024 MDaudit Annual Benchmark Report.