External payer audits quadrupled in volume in 2023, making timely responses more challenging than ever for resource-strapped healthcare organizations. Though patient volumes and surgeries have begun to recover from COVID-19 declines – with a 23% and 27% increase over 2022 – inflation, staffing shortages, reimbursement, and regulatory issues continue to jeopardize the financial health of healthcare organizations nationwide.
These were among the key findings of the 2023 MDaudit Annual Benchmark Report released today by MDaudit, an award-winning provider of technologies and analytic tools that enable the nation’s premier healthcare organizations to minimize billing risk and maximize revenues.
“Increased complexity and reduced resources mean healthcare organizations are operating in an environment that demands flawless optimization for billing compliance, coding, and revenue integrity capabilities,” said Ritesh Ramesh, CEO of MDaudit. “Our analysis reveals the urgency for healthcare systems to stay ahead of the curve by harnessing digital initiatives and advanced technologies, including AI, machine learning, and analytics, to proactively manage compliance and revenue risks.”
Beyond technology, healthcare leaders must break down the silos between teams to create cross-functional/departmental synergies and manage change to stay operationally efficient. This will be imperative for growth and profitability going into 2024.
Shrinking Teams Face Growing Compliance and Revenue Integrity Challenges
Amidst nationwide healthcare staffing shortages, technology, automation, and analytics have emerged as critical catalysts for health system executives to drive change. Leaders are leveraging these tools to boost productivity, generate revenue, and control costs while compensating for reduced staffing levels. Managing denials and ensuring timely payments are important, but even more crucial is understanding and addressing the root causes of issues that start upstream with billing and coding practices in provider operations.
Across the MDaudit customer base, there was an increase in technology-driven productivity. Large auditing teams were able to accomplish 10% more in audit activities compared to 2022 with more or less the same resources.
Medicare Advantage plans were under constant scrutiny from the Federal government for compliance and overpayments. The data shows that these plans rejected 25% more in reimbursement dollars to providers this year versus 2022.
Telehealth remains a substantial contributor to compliance and revenue challenges. According to MDaudit data, telehealth volumes were flat relative to last year and an average of 30% of audits failed for services administered in a patient’s home or office. Proficiently coding and documenting these crucial charges is imperative for ensuring the ongoing success of patient care and favorable outcomes.
In 2023, external payer audits surged fourfold compared to 2022, often involving large audit documentation requests (ADRs). Mounting requests with tight deadlines and appeal timelines posed a significant risk of revenue loss and potential clawbacks, creating challenges for hospitals because of staffing issues.
Mitigating Denials to Protect Revenues
MDaudit’s findings emphasized the crucial role revenue integrity and billing compliance play in supporting the accurate and ethical capture and optimization of revenue for services rendered to patients. These teams are crucial for preserving financial stability, sustainability, and compliance, all while upholding the commitment to delivering high-quality patient care. Billing and coding are not about revenue alone; these cross-functional workflows directly influence patient experience and relationships, as well as a healthcare organization’s ability to grow.
Health systems are burdened by denials and increasing demand, underscoring the vital need for operational efficiency in billing, coding, and clinical documentation to enhance profitability.
The MDaudit analysis also found that:
Commercial payers are taking longer to respond to claims in 2023 vs 2022. Initial response times were 29 days (about six business weeks) for an outpatient claim and 35 days (about seven business weeks) for an inpatient claim.
MDaudit data for 2023 shows the value of commercial payers’ initial denials for professional claims has increased by 30% and by 5% for inpatient claims, as compared to 2022.
Medicare Part A and Part B rejected 16% of the claims initially submitted for outpatient services – the most profitable for healthcare organizations.
More than 60% of professional billing claim denials in 2023 were driven by documentation requests and eligibility concerns from payers.
“As we move into 2024, proactive actions and precision on billing compliance and revenue integrity outcomes are no longer optional. The healthcare landscape is evolving, affecting every facet of this industry,” said Ramesh. “New payer strategies and the integration of AI have intensified denials, payment delays, and claim scrutiny. How organizations and providers adapt and respond to these challenges will shape their long-term success.”
About the Report
The MDaudit Annual Benchmark Report equips compliance, HIM/coding, revenue integrity, and finance executives with industry insights, emerging trends, and data-driven information to help them take informed action and enhance outcomes for their organizations. The analysis in this report includes a comprehensive examination of data 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. This report encompasses insights from more than $5 billion in audited professional and hospital claims and denials by both commercial and government payers exceeding $150 billion.
Healthcare organizations are in a precarious financial position. With operating margins still hovering near zero, revenues are at heightened risk because of a surge in third-party audits following the expiration of the public health emergency as well as increased scrutiny by federal and commercial payers alike to identify – and recover – billions in improper payments and penalties.
This sharp uptick in audit activity has many healthcare organizations – even those that have already adopted revenue cycle management (RCM) technologies to streamline workflows – struggling to comply with both the volume of incoming documentation requests (ADRs) and the timeframes within which they must reply.
The appearance of artificial intelligence (AI), specifically conversational AI, is promising to change that, making it possible to convert the highly unstructured data populating the audit process into information that can be both analyzed and automated.
The Audit Environment
Ferreting out fraud and abuse remains high on the federal government’s priority list. In fiscal year 2022, the U.S. Department of Justice (DOJ) collected more than $1.7 billion in improper payments, while the Office of the Inspector General (OIG) reported identifying more than $200 million in expected audit recoveries and over $277 million in questioned costs in its 2023 Semi-Annual Report to Congress.
Meanwhile, the Centers for Medicare & Medicaid Services (CMS) is expected to claw back $4.7 billion from Medicare Advantage plans over the next decade thanks to recent adjustments to its risk adjustment data validation (RADV) program. Add to all that the influx of demand letters in the wake of the expiration of the federal PHE – along with many of the waivers that kept external audits in check – as well as claim changes and heightened regulatory and billing practice scrutiny by federal contractors and commercial payers.
All this comes at a time when hospital margins remain “well below historical norms,” per Kaufman Hall, and revenue cycle leaders are facing severe labor shortages, with more than 41% reporting that up between 51% and 75% of RCM and billing department roles are currently vacant.
Healthcare organizations undoubtedly felt a sense of relief as 2022 faded in the distance, taking with it a devastating financial performance that resulted in negative profit margins for more than half of U.S. hospitals – the worst year hospitals have faced since the start of the pandemic, according to Kaufman Hall. Not only were operating margins down for most of 2022, but hospitals also struggled with higher labor costs in a more competitive market plagued by chronic clinical and administrative skill shortages.
Physician practices fared no better, with 90% saying that soaring expenses outpaced revenues last year, according to a survey by the Medical Group Management Association. Staffing and labor costs were cited most often as the source of rising costs. Other common culprits were lower reimbursement rates, significant increases in lab supply and drug costs, higher utility costs, lower patient volumes, and rising malpractice premiums.
The new year does not mean healthcare organizations are out of the financial woods, however. A plethora of new challenges to the bottom line have emerged, led by a sharp uptick in third-party audits. Supported by a $2.5 billion budget for the Healthcare Fraud and Abuse Control and Medicaid Integrity programs, federal payers are stepping up both pre-payment and retrospective claim audits – and private payers are following suit. This not only increases the risk of penalties and claw backs, but it also slows claims processing and, subsequently, reimbursements and puts greater pressure on providers to submit clean claims the first time.
Five Revenue Integrity Trends
To avoid a repeat of 2022’s dismal financial performance, revenue integrity leaders surveyed by MDaudit are placing a priority on revenue opportunities (34%), compliance pressures (29%), revenue risks (29%), and staffing issues (9%). For 37% of respondents, all these issues are top of mind for 2023.
These concerns align closely with the focus on growth, revenue, and profitability that dominate most organizational planning – and is evident in the following key revenue integrity trends identified in the 2022 Annual Benchmark Report.
MDaudit, an award-winning provider of technologies and analytics tools that enable premier healthcare organizations to retain revenue and reduce risk, announced today the retirement of its long-time president and CEO, Peter J. Butler, effective Mar. 31, 2023. Stepping into the CEO role will be the company’s current COO, Ritesh Ramesh.
Butler will continue serving on MDaudit’s Board of Directors and as an investor, advising on future investments and growth opportunities for the company. He has been with MDaudit for 30 years, including the past 16 as president and CEO.
“My tenure with MDaudit has been truly rewarding, but it is time for me to pursue my personal goals,” said Butler, who was the visionary behind the company’s successful transition from consulting to technology. “By remaining on the board, I get the best of both worlds; the opportunity to start the next chapter of my life while supporting Ritesh as he guides MDaudit’s continued innovation and strengthens its position at the leading edge of the revenue integrity marketplace.”
Ramesh joined MDaudit in 2019 as CTO and played an integral role in the company’s conversion to a technology organization focused on supporting the healthcare industry’s evolution toward revenue integrity. In 2021, he was recognized by the Globee Awards as Chief Technology Officer of the Year in the 16th Annual IT World Awards and in 2020 won Silver in the 8th Annual CEO World Awards, Executive Achievement of the Year for Information Technology Services category. Ramesh was promoted to COO in 2021 and has been leading MDaudit’s customer and technology teams to fuel the company’s growth and ongoing innovation in the revenue integrity marketplace.
“It is an honor to take the helm of MDaudit and build upon our mission of delivering innovation through technology-enabled healthcare revenue integrity,” said Ramesh. “We have a great culture, growing customer base, and a market leading platform. We will continue to focus on delivering the next-generation tools and innovative partnerships that transform revenue cycle management and compliance strategies and empower our customers to strengthen revenues and stay ahead of regulatory risks.”
Maintaining an organization’s revenue integrity should be a constant activity for compliance and auditing staff. Consider that, despite falling claim volumes in Q3 compared to the first two quarters of 2022, the average denial per claim increased by as much as 9.6%, according to the 2022 MDaudit Annual Benchmark Report. Lag days between claims submission and initial payer response also rose by as many as 6.5 days during the same period.
For health information management (HIM) professionals, this should serve as a wakeup call to make every claim count. Increasingly, organizations are using “risk intelligent” auditing to continuously monitor risk, detect anomalies, and automate workflows to bring efficiencies to formerly manual processes. Organizations that make resolving accuracy issues in billing and coding operations a priority can help retain between 15% and 25% of overall revenue. Revenue retention is going to be as critical as revenue growth for healthcare organizations going into 2023.
Read on to learn how to help your organization keep more of its hard-earned dollars.
Leveraging data to drive outcomes
Not long ago, coding, billing, claims, and auditing processes often operated independently of one another and employed tedious and manual workflows. These processes slowed claims submissions, payments, and auditing functions that help organizations maintain compliance and monitor revenues.
These time-consuming and cumbersome processes became more problematic during the pandemic, when the very foundations of the traditional care experience were upended by a novel disease and the rise of the virtual patient visit. While providers continue to recover from these shocks to their organizations, federal payers have ramped up their efforts to ensure the accuracy of claims.
During FY 2023, the federal Health Care Fraud and Abuse Control (HCFAC) Program and the Medicaid Integrity Program will receive nearly $2.5 billion, an increase of $80 million from the previous year. Inclusive of medical review, Medicare program integrity activities had a return on investment (ROI) of $8 for each $1 spent. With such an attractive return, don’t be surprised that the breadth and depth of these activities continues to increase.
Organizations can support risk-based compliance and revenue integrity by utilizing risk intelligent auditing to mine their billing and remit data to identify billing compliance and revenue risks. The same tools can unearth key metrics focused on current risk areas to monitor provider billing patterns and even benchmark them against peers. Risk intelligent auditing helps prioritize efforts to develop corrective action plans, educate stakeholders, mitigate the need for audits, and prevent future revenue losses.
As payers step up efforts to identify and recoup improper payments, hospitals and health systems require innovative solutions to mitigate the potential threat these reviews pose to the bottom line. To meet this need, Hayes, a leading healthcare technology provider that partners with the nation’s premier healthcare organizations to improve revenue, mitigate risk and reduce operating costs, has launched External Audit Workflow to streamline management of external audit responses.
“The volume of external audits is rising exponentially as the Centers for Medicare and Medicaid Services and other payers search for every dollar they can recover from over-coded or otherwise improperly filed claims,” said Peter Butler, president and CEO, Hayes. “To protect their hard-earned revenues and reputations, healthcare organizations need a strong first line of defense – an external audit management process that is collaborative, efficient, and comprehensive. That is Hayes’ goal with the launch of MDaudit Enterprise External Audit Workflow.”
MDaudit Enterprise External Audit Workflow simplifies and automates time-consuming and inefficient manual processes for tracking third-party audit requests, including commercial payers, Recovery Audit Contractors (RAC), Targeted Probe and Educate (TPE), and Comprehensive Error Rate Testing (CERT). Its flexible process templates and reporting tools deliver operational efficiencies and insights on potential risks and provide a consistent and repeatable audit response process.
With External Audit Workflow, hospitals and health systems gain access to tools that bring together all their external audit management activities into a secure HIPAA-compliant SaaS-based platform.
As we face the third year of the global pandemic, hospitals and health systems are desperate to shore up bottom lines that have been battered by ongoing financial losses projected to exceed $100 billion in 2021. The key to undoing some of the financial damage is optimizing revenue flow and reducing compliance risk, which requires an understanding of the exact driving forces behind the devastating losses.
For many healthcare organizations, the primary problem can be traced to bundling errors, COVID-19 claim denials, and a range of coding issues.
That’s according to Hayes’ inaugural auditing and revenue integrity report, Healthcare Auditing and Revenue Integrity: 2021 Benchmarking and Trends Report, which analyzed more than $100 billion worth of denials and $2.5 billion in audited claims. It found that bundling errors were the top culprit behind the 34% of inpatient hospital charge initially denied in 2021, each with an average value of $5,300. Internal auditors also identified a significant number of concerns centered around disagreements between procedure codes and diagnoses, contributing to 33% of all internal audits containing “disagree” findings.
Understanding the Drivers
The report is based on a review of professional and hospital claims, including current charge and remit data sent to all payer types, audited in the company’s revenue integrity platform, MDaudit Enterprise, during the first 10 months of 2021. It includes 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.
In terms of denial trends, the report identified bundling as the top category for both inpatient and outpatient hospital charge denials – the latter of which had an average value of $585 for each denied 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%, led by claim submission/billing errors and carrying an average value of $283 each.
Under- and over-coding were also identified as problematic. In terms of revenue risk, audits indicate that under-coding created underpayments averaging $3,200 for a hospital claim and $64 for a professional claim. In terms of over-coding, Medicare Advantage plans and payers in particular are under heightened scrutiny for expensive inpatient medical necessity claims, drug charges, and clinical documentation to justify the final reimbursement.
Hayes, makers of integrated compliance and revenue integrity platform for the nation’s premier healthcare organizations, announced that it has entered a strategic partnership with ThoughtSpot, the leader in search and AI-driven analytics, to develop solutions that empower healthcare organizations to proactively manage and mitigate revenue and compliance risks.
Hayes’ flagship revenue integrity software platform, MDaudit Enterprise, is a powerful, cloud-based risk monitoring solution used by the nation’s foremost academic medical centers, hospitals and physician groups.
MDaudit is an enterprise-class platform that enables organizations to efficiently monitor medical claims for billing and coding accuracy, ensuring compliance with government and commercial payer requirements and maximizing the attainable level of revenue.
The platform accelerates productivity for revenue cycle and compliance professionals by providing workflow automation, risk monitoring, built-in analytics and benchmarking capabilities – all in a single, integrated platform. In the market since 2003, MDaudit is currently used to audit one in eight providers in the U.S.
The partnership will focus on integrating healthcare billing, compliance and revenue integrity domain expertise from Hayes and ThoughtSpot’s search and AI-powered platform into a single, comprehensive enterprise solution.