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.

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