Healthcare organizations are engulfed in an intensifying storm of audits and denials exacerbated by heightened regulatory and payer scrutiny. Individually, any of these trends can endanger a hospital’s or health system’s financial stability. Combined, they represent a crisis calling for immediate action.
Healthcare finance leaders who wish to successfully guide their organizations across this increasingly complex and challenging landscape must transform their revenue cycle management (RCM) strategies. Central to this transformation is proactive risk monitoring and the implementation of AI-driven compliance strategies.
Mounting Pressure
According to the 2024 MDaudit Annual Benchmark Report, audit volumes more than doubled over 2023 rates while total at-risk dollars increased fivefold to $11.2 million, straining provider organization cash flows. That analysis, encompassing more than $8 billion in audited professional and hospital claims and over $150 billion in denials collected from more than 650,000 providers and more than 2,200 facilities, also found that payer scrutiny is at an all-time high.
Medicare Advantage (MA) plans are a favorite target, with HCC and RADV audits—which help ensure health plans and providers are paid appropriately based on the actual health of their members—rising by 72% and total MA denials by 51%. Denials related to how providers code their claims increased by 126%, representing one of the most significant increases in the last three years. Denials surged across care settings; hospital inpatient-related denials were up nearly 220% to $10,000 per claim, hospital outpatient by 32.5% to $825, and professional by 24% to $140.
While the data clearly demonstrates that coding integrity is one of the biggest revenue optimization opportunities in healthcare, documentation around the medical necessity of care provided also urgently needs improvement. The MDaudit analysis revealed a 140% increase in total denial amounts for inpatients and a 75% increase in outpatient amounts related to the “Medical Necessity and Information Needed” category. Overall, more claims dollars were denied in 2024 by Medicare and commercial payers due to a lack of information submitted for the service and medical necessity, driving an increase in final denial dollars across professional (34%), hospital outpatient (84%), and hospital inpatient (148%).
Behind these increases was a doubling of external audit volumes, which included a sizable jump in pre-payment audits. These audits can interfere with cash flow and increase overall denial rates.
Fraud prevention is adding to the complexity of today’s healthcare financial landscape. According to the US Department of Health and Human Services (HHS) Office of the Inspector General (OIG) Health Care Fraud and Abuse Control Program Report for Fiscal Year (FY) 2023, released in December 2024, federal recovery efforts targeted $4.7 billion in projected overpayments within MA alone, a figure expected to rise as the Centers for Medicare and Medicaid Services (CMS) ramps up fraud prevention.
Fiscal year 2023 saw civil healthcare fraud settlements and judgments under the False Claims Act exceed $1.8 billion, bringing the total amount returned to the federal government or paid to private individuals to more than $3.4 billion. This figure includes $974 million returned to the Medicare Trust Funds and $257.2 million in federal Medicaid funds transferred separately to the CMS.
Transforming RCM Strategies
The shift toward more aggressive pre-payment audits, a greater focus on fraud, and tactics to prolong reimbursement delays underscore the need for a revenue strategy that prioritizes revenue optimization and risk mitigation. Built upon a foundation of AI, automation, and other technology tools that enable continuous monitoring of real-time financial risk based on payer trends and denial management, this transformative revenue cycle strategy delivers a significant return on investment (ROI). It also introduces automated workflows that drive operating margins.
Streamlining and improving audit response is essential for enhancing providers’ revenue capture, particularly as payer organizations increasingly rely on pre-payment audits to delay reimbursements and increase denial rates. Investing in AI, machine learning (ML), and automation tools that deliver intelligent functionality to automate and accelerate the management of external payer audits ensures the timely processing of additional documentation requests (ADRs), thereby improving audit defense outcomes and revenue retention.
Generative AI and natural language processing (NLP) solutions further optimize audit outcomes by unlocking insights and patterns from historical data while also increasing accessibility and democratizing information across the revenue cycle. For example, generative AI tools that take natural language questions and instantly compute complex formulas to return clear, concise, and actionable responses boost human productivity and deliver speed-to-value. They eliminate information silos between revenue integrity and executive teams, transforming how they interact with data to make more innovative and strategic decisions.
Transforming the Revenue Cycle
Strong internal compliance programs and a cross-functional operating model that connect the dots between billing, coding, CDI, and revenue integrity will advance a unified revenue retention and growth agenda. Leveraging data and insights as a storytelling mechanism enhances program value by removing bias and injecting objectivity into discussions and decision-making while establishing success metrics introduces accountability for tangible outcomes.
With the core strategy in place, finance executives can look to other targets for RCM transformation to enable healthy operating margins, such as high-value outpatient services like elective surgeries and some inpatient services. Along with scrutinizing complex services, other opportunities to improve revenue retention include implementing clinical documentation improvement (CDI) programs that drive outcomes tied to RCM and denial management metrics.
CDI, billing, coding, and RCM programs can also be tightly coupled to implement a closed feedback loop from the backend to the mid-cycle, driving efficiencies. Finally, automate coding operations and increase the utilization of AI-powered systems that amplify errors at scale while keeping humans in the loop.
Deploying technologies that bridge mid-cycle and back-end functions will drive more substantial margins and cash flow while mitigating risks tied to payer-driven policies and denials. An aggressive AI-enabled, data-driven, and people-led approach to the revenue cycle allows forward-looking finance leaders to position their organizations for financial survival in today’s high-risk landscape.
Various forms of automation have long been present within healthcare revenue cycle management (RCM). However, advances in artificial intelligence (AI) have brought the industry to a significant inflection point, where the use cases for AI tools are expanding as rapidly as their capabilities.
We sat down with Thomas Thatapudi, chief information officer of AGS Health, to discuss the current and future state of AI in RCM and what healthcare organizations need to know about effectively integrating it into workflows.
EHR: How are automation and AI reshaping healthcare’s approach to revenue cycle management?
Thatapudi: Healthcare finance leaders have long recognized the power of simple automation, like simple rules-based workflows or analytics dashboards, to improve billing processes and error rates. Now, advanced AI tools like ChatGPT, large language models, and generative AI – or GenAI – have brought RCM to an inflection point with a variety of viable new AI-driven RCM use cases that could have significant financial impacts. AI and automation can reduce manual labor costs and increase net revenue through a seamless process that follows the entire patient journey, from preventing authorization denials upfront and reducing coding errors to implementing more proactive and efficient accounts receivable follow-up processes.
With front-end revenue cycle tasks such as insurance verification and prior authorization, we have an opportunity to create a completely seamless and interactive process for patients while ensuring the presence of appropriate controls to mitigate revenue leakage. For mid-cycle coding, certain specialties lend themselves to autonomous coding that eliminates the need for human intervention, freeing staff to focus on more complex work. On the back end, the focus can shift to denial management and collection rates, particularly for claims that, due to capacity constraints, were left unworked in the past. This can be particularly beneficial in cases where payer requirements have become more stringent.
These examples are just the tip of the iceberg in terms of potential RCM use cases over the next two years.
EHR: What are some examples of areas where AI tools are being used to improve RCM?
Thatapudi: AI is being used in clinical documentation, patient communication and payments, scheduling, prior authorization, and medical coding. In fact, coding has been utilizing true AI and machine learning in the form of NLP-based computer-assisted coding (CAC) for about a decade. With existing CAC applications reaching a plateau in coding accuracies of approximately 70-75 percent, new autonomous solutions are entering the market that leverage deep learning models and Gen AI to truly increase fully automated coding rates. I expect that coding will be one of the RCM areas that will be most heavily impacted by true AI, machine learning, and deep learning.
EHR: How can finance leaders make use of advanced data analytics and business intelligence (BI) tools to inform RCM decisions and measure their impact?
Thatapudi: BI tools can measure a wide range of metrics, from the number of system users to interactions and accounts, all of which can inform the key performance indicators (KPIs) that are crucial for monitoring financial performance. The problem is that the sheer volume of metrics can easily be overwhelming, which can lead to analysis paralysis. To prevent this, it’s important to take a step back and home in on KPIs such as financial indicators like collection rates per day or per month and the time it takes to collect payments—performance indicators that tell how much in time and money is being spent to recover a dollar so it can be reduced or better managed.
It’s important that senior leadership avoid being overly impressed by the wealth of intelligence that can be collected and displayed on a dashboard. The focus should instead be on determining the KPIs that drive day-to-day operational decisions. For example, predictive analytics services help healthcare organizations better predict denials, anticipate underpayments, forecast payments, and more. This allows for proactive claim correction prior to submission, which improves clean claim rates and cash flow. Creating simulations and projections for customized “what-if” scenarios provide an understanding of the impacts associated with interdependent metrics.
AGS Health, a revenue cycle management (RCM) solutions provider and partner to some of the largest healthcare systems in the U.S., launched its AGS AI Platform, a connected solution that blends artificial intelligence (AI) and automation with award-winning human-in-the-loop services and expert support to maximize revenue cycle performance.
Industry-wide, health systems are being stretched as they face chronic and worsening labor shortages while attempting to address higher denial rates and an onslaught of audits. Shrinking margins limit organizations’ ability to reinvest in care delivery. In this time of high turnover, the AGS AI Platform helps to reduce stress, prevent burnout, and improve job satisfaction by offering the ability to automate high-volume repetitive tasks, allowing skilled staff to focus on more complex tasks.
“AGS Health is excited to deliver this platform as a lifeline to provider organizations in challenging times,” says Patrice Wolfe, CEO of AGS Health. “With our industry expertise, AI-enhanced technology, and specialized services, AGS Health is helping healthcare organizations achieve the financial freedom necessary to invest in the latest healthcare innovations and deliver high-quality care to their communities.”
The platform allows healthcare organizations to gain enhanced visibility into day-to-day operations and the overall performance of the revenue cycle, including intelligent worklists, productivity reports, customizable dashboards, root cause analyses, and executive reporting. Performance trends and predictive analytics help to prevent bottlenecks, reduce denials, and mitigate revenue leakage.
Revenue cycle management solutions leader, AGS Health, announces the opening of a new office location in Jaipur, India. The new facility will support the organization’s ongoing expansion and dedication to cultivating workforce talent.
AGS Health opened in 2011 with offices in Chennai, India, and New York City. As the company celebrates its 11th anniversary, it now employs a 100% graduate workforce of approximately 10,000 employees, serving more than 100 major healthcare providers across the U.S. As the company continues to grow, AGS Health is diversifying its global operating locations.
Jaipur was selected as the newest office location, in part for its skilled talent pool. By partnering with local universities, AGS Health is able to recruit and train recent graduates on medical coding and revenue cycle management in the AGS Health Training Academy. “We believe the quality of talent in this region will allow us to continue delivering world-class service as we grow,” said Patrice R. Wolfe, chief executive officer of AGS Health. The company has already begun hiring for the Jaipur location and expects to be staffed at approximately 350 team members by August, with a goal of scaling up to 3,000 as operations are established.
By Vasilios Nassiopoulos, vice president of platform strategy and innovation, Hayes.
2020 will undoubtably be a year that the healthcare industry will want to forget. The COVID-19 pandemic not only introduced unprecedented care delivery challenges—at least in modern times—but has also left devastating financial consequences in its wake for today’s providers.
Razor-thin pre-pandemic margins of just 3.5% are now met with the reality that 97% of health systems will lose an average of $2,500 per coronavirus case despite incentives. Further exacerbating the situation is an expected increase in denials as healthcare organizations learn how to interpret new guidance around coding and billing for COVID-19 related care.
While many in the C-suite may be tempted to put their head in the sand and wait for the industry to round the corner into 2021, there is an opportunity to change current dynamics in the last lap of 2020. Amid many lessons learned from the pandemic, healthcare organizations must consider the role of sound revenue integrity practices for future preparedness and sustainability.
Progressive revenue integrity models are designed to integrate systems and processes for the purpose of eliminating revenue cycle complexities arising from issues like COVID-19 that can fast become liabilities for providers. Within these models, healthcare organizations are increasingly finding that strong partnerships between revenue integrity, revenue cycle and billing compliance teams are essential. While these functions have, more frequently than not, operated in siloes, embracing shared monitoring and auditing processes can streamline budgets and improve revenue recoupment and generate long lasting collaboration and communication.
To get ahead of the evolving revenue storm, hospitals and health systems can take four steps to get their billing and compliance house in order:
Implementation of electronic health records is considered a national priority in this era of healthcare reform. However if EHRs are not implemented correctly they can be painful.
EHRs that are not implemented effectively can affect productivity and revenue. The extra documentation requirements and intricate workflows create distance between physicians and their patients. Physicians have reported that they spend too much time on EHRs and that they don’t get enough time to interact with their patients. But physicians often communicate that spending time on EHRs is crucial to creating a trusted set of structured data that can guide their business. Every click that providers make creates important data points that can be used to inform the efficient delivery of their practice.
Every EHR saves a large amount of data inside it regarding patient health, effectiveness of treatments, system efficiency and provider tendencies. Despite the extra time and effort that is dedicated to electronic documentation, many practices and physicians do not make full use of this precious data set that they have produced.
If a practice can get its EHR adoption right they can make a number of positive results, some of which are mentioned below:
Revenue Gains
By overcoming the difficulties providers can see more patients and will be able to generate more billed revenue using its existing staff. Furthermore, if a provider is using its EHR efficiently then the improved documentation produces billing at higher rates, combined with increased patient flow. This represents significant potential revenue.
Quick Cash Flow
Many of the practices work on revenue cycle management, but few make it flawless. With increased charge accuracy and reduced time for denials, there will be an increase in the yield with timely reimbursements by the payers.
AGS Health
