An estimated $262 billion, or 9 percent, of the estimated $3 trillion in claims submitted by hospitals last year were initially denied, according to a new analysis by Change Healthcare.
The Change Healthcare Healthy Hospital Revenue Cycle Index looked at data from more than 3.3 billion hospital transactions valued at $1.8 trillion. The analysis is based on 724 hospitals' inpatient and outpatient claims processed by Change Healthcare in 2016. Researchers took the sample data and extrapolated the total claimed charges and denied amounts for 5,683 U.S. hospitals. To determine the amount denied researchers used Change Healthcare's internal appeal success rate of 63 percent and average reimbursement rate of 29 percent.
Here are four other takeaways from the analysis.
1. Change Healthcare found a typical health system stood to lose as much as 3.3 percent of net patient revenue, an average of $4.9 million per hospital, due to denials.
2. A vast majority (63 percent) of denied claims are recoverable on average, but providers spend roughly $118 per claim on appeals, or as much as $8.6 billion in administrative costs nationwide.
3. Change Healthcare found the Pacific — Alaska, California, Hawaii, Oregon and Washington state — had the highest denial rate among regions at 10.89 percent. That's followed by the Midwest (10.32 percent) and South Central (10.5 percent).
4. There are many reasons for denials. However, the analysis found "registration/eligibility" as the leading cause (23.9 percent), followed by "missing or invalid claim data" (14.6 percent).
Read more about the analysis and its methodology here.