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Change Healthcare analysis shows $262 billion in medical claims initially denied, meaning billions in administrative costs

Recovery effort came with a price tag of roughly $118 per claim, or as much as $8.6 billion in appeals-related administrative costs, Change said.

Beth Jones Sanborn, Managing Editor

A new analysis by Change Healthcare released at the 2017 Healthcare Financial Management Association's ANI revealed compelling statistics about claims denials and their financial impact on hospitals. The finding showed that out of roughly $3 trillion in medical claims submitted by hospitals in the United States last year, around nine percent of charges were initially denied. That comes out to about $262 billion.

"For the typical health system, as much as 3.3% of net patient revenue, an average of $4.9 million per hospital, was put at risk due to denials," Change Healthcare said.

Even though an average 63% of those claims were recoverable, that effort came with a price tag of roughly $118 per claim, or as much as $8.6 billion in appeals-related administrative costs.

[Also: McKesson got $1.25 billion in the just-closed Change Healthcare deal]

The findings were published in the Change Healthcare Healthy Hospital Revenue Cycle Index Monday by Change Healthcare at the HFMA ANI 2017 conference. The Index, available at MyHealthyHospital.com, also details denial trends by geographic region and causes.

The Index data, which came from a sample of more than 3.3 billion transactions from 724 hospitals valued at $1.8 trillion, and is based on inpatient and outpatient claims processed by Change Healthcare in 2016, the average charged amount and first denied amount. They then figured out the total claimed charges and denied amounts for the nation's 5,683 hospitals.

[Also: Communication, training, education should lead revenue cycle operations, HFMA policy expert says]

An appeal success rate of 63% for hospital customers and average reimbursement rate of 29% were used to calculate the amount denied. With modern revenue cycle analytics, zeroing in on process gaps that enable denials is more difficult. Claims management tools also help guarantee accurate and complete claims, which benefits revenue cycle function across the board and reduces the hefty costs that pile up when claims go wrong.

"The insights reinforce the tremendous opportunity hospitals have to accelerate cash flow and reduce administrative costs by using advanced analytics to better manage the revenue cycle," Change said.

Twitter: @BethJSanborn

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