With 82% of 2022 claims denials associated with Medicare, and third-party audit volume rapidly climbing, hospitals and health systems are under intense pressure to protect and grow revenues. These were among the key findings of the 2022 MDaudit Annual Benchmark Report released by MDaudit, the healthcare technology company that harnesses the power of analytics and its proven track record to allow the nation’s premier healthcare organizations to retain revenue and reduce risk.
“Our analysis suggests that the post-pandemic era has given rise to a new phenomenon for healthcare. Medical spending is more discretionary for consumers impacted by inflation, driving dramatic reductions in revenues generated by physician office and hospital visits for the third quarter of 2022,” said Peter Butler, President and CEO, MDaudit. “Exacerbating this situation is the need to successfully defend against more third-party audits amidst chronic personnel and resource shortages.”
Driving Smarter Audits
Payers are investing in predictive modeling and artificial intelligence (AI) tools to scrutinize claims more closely before adjudication to reduce improper payments. The 2023 Department of Health and Human Services budget requests $2.5 billion in total investments for the Healthcare Fraud and Abuse Control and Medicaid Integrity Programs, $900 million of which is allocated for discretionary spending to advance technologies to scrutinize payment accuracy – up $26 million from 2022.
This should be a concern for healthcare organizations – and the push compliance leaders need to find more efficient ways to retain at-risk revenues. Per the MDaudit analysis:
• Billing compliance leaders must leverage data and analytics as catalysts to proactively detect risks and perform audits for corrective action. Data-driven, risk-based audits (up 28% in 2022) can complement the annual compliance plan to ensure effective audit scope coverage.
• By deploying prospective (up 31% in 2022) and retrospective auditing methods, compliance teams can drive cross-functional initiatives that mitigate compliance and revenue risks.
A key element of a successful revenue defense is to help compliance teams become more efficient in managing external payer audit requests to retain at-risk revenues. The role of billing compliance needs to be increasingly data-driven and cross-functional, as well as serving as a business partner to other teams including coding, revenue integrity, finance, pharmacy, and clinical, to meet changing and more complex risks. The MDaudit analysis also found that:
• Correctly coding and billing professional and hospital claims can retain 15%-25% of overall revenue.
• Significant revenue opportunities are available for healthcare organizations ensuring proper billing and coding of procedures, drug utilization, and modifiers on professional outpatient claims. Out of 1 million claims with an average 77% accuracy, 230,000 undercoded claims with the wrong CPT/HCPCS codes ($24 per claim) would result in $5.5 million in additional revenue.
• Errors made in the billing and coding of hospital claims are more costly and offer a significant opportunity for organizations to get diagnoses, DRG, drug units, and procedures correct. For example, out of 100,000 claims with an average 90% accuracy, 10,000 claims with missed or wrong DRG codes ($2,900 per claim) would result in $29 million in additional revenue.
• Compliance teams should have a consistent playbook for auditing overcoded E&M claims, appealing denials to payers, and educating providers on mistakes, as commercial and federal payers are activating external audits to recover erroneous payments.
“We see the greatest risks for organizations increasingly dependent on federal payers to carry a larger burden of proof for timely payments, administrative costs, and defending audits. Healthcare organizations need to take a page from payers’ books and look to technology to combat audits and other associated risks,” said MDaudit COO Ritesh Ramesh, adding that these include cloud, AI, machine learning (ML), and predictive analytics, all of which should catalyze health systems to proactively monitor and rapidly address compliance and revenue risks as they emerge.
“Healthcare organizations are under tremendous pressure to reduce compliance risk while optimizing revenue flow. This will require flawless optimization for billing compliance, coding, revenue cycle, and revenue integrity capabilities,” said Butler. “Amidst the challenges, we find many opportunities for health systems to accelerate digital initiatives and drive sustainable value with analytics, automation, collaboration, and upskilling people.”