Hospitals see increased costs due to delayed reimbursement for services rendered, but a more collaborative approach with payers may help decrease administrative expenses, suggests a Crowe Horwath report.
For the report, Crowe used its revenue cycle analytics software to examine data for 503 hospitals within Medicaid expansion states and 365 in states that had not expanded Medicaid as of last year.
The report found commercial payers are slower to reimburse hospitals than traditional Medicare. For instance, the average payment delay on request-for-information denials was 29.6 days for traditional Medicare compared to 72.2 days for commercial payers. These are considered "instances where the payer requests medical record information or asks the patient to provide some clarifications on services." For medical necessity denials, the difference in average days to payment was 33.5 for traditional Medicare compared to 43.9 for commercial payers.
The report found commercial payers overall take 28.3 more days to pay than traditional Medicare, across both administrative denials, such as membership not on file and coordination of benefits, and across clinical denials, such as medical necessity and prior authorization required.
Additionally, the report looked at five major commercial payers and found differences in days-to-pay among them. Crowe said these differences also take time to resolve and increase hospital's "cost to collect."
"[The cost to collect] and cash flow implications of payments secured 16 days later than usual generally are equivalent to at least 1 percent of a provider's cost structure — and that 1 percent may be the difference between a negative and a positive operating margin or may equal a significant number of nursing positions," the company's report states.
Based on the findings, Brian Sanderson, managing principal of Crowe healthcare services, concluded: "With the increasing emphasis on controlling healthcare costs, it appears as though a focused collaboration between providers and payers may decrease the administrative expenses related to securing payment for appropriate clinical services."
Access the full report here.