Prior Authorization

Health systems plagued by payer-takeback schemes, 110,000 denials

Andis Robeznieks , Senior News Writer

Even as labor and supply expenses soar, health insurance company takeback schemes are costing physicians and hospitals more than $1.6 billion a month, while average-size health systems were socked with 110,000 claim denials due to prior authorization and other factors last year. 

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These figures can be found in “Hospital double whammy: Less cash in, more cash out,” a report from Crowe LLP, a global public accounting, consulting and technology firm. The report is based on data gathered by the Crowe Revenue Cycle Analytics platform, which monitors daily patient transactions at 1,700 hospitals and 200,000 physicians to track payer behavior.

According to Crowe, payer takebacks cost the physicians and hospitals using their platform more than $1.6 billion each month and involve the retraction of previous payments.

Between July and August last year, payer takebacks averaged 1.8% of monthly debit-account receivables. That was up 29% from the 1.4% recorded during the period between January 2021 and June 2022, according to the Crowe report.

“Striking data points indicate changes in payer behaviors are driving negative revenue cycle performance,” the report says, adding that hospitals were only collecting 94% of their expected revenue within six months last summer, down from 97% in the summer of 2021.

Denials—when a claim is processed, but not paid—rose to 11% of all claims last year, up nearly 8% from 2021. That 11% rate translates into 110,000 unpaid claims for an average-sized health system, according to the report.

Fixing prior authorization is a critical component of the AMA Recovery Plan for America’s Physicians.

It is overused, and existing processes present significant administrative and clinical concerns. Find out how the AMA is tackling prior authorization with research, practice resources and reform resources.

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“Prior-authorization denials on inpatient accounts are a key driver behind the dollar value of denials increasing to 2.5% of gross revenue in August 2022 from 1.5% of gross revenue in January 2021,” the report says. “That’s an increase of 67%.”

The report adds that denials imply that the care provided was not warranted and that, although denials can be appealed, the process can take months to resolve.

"Even if a medical claim isn't denied by payors, hospitals are struggling to collect expected revenue months after a service is provided," Colleen Hall, managing principal of the health care services group at Crowe, said in a news release. "Between increasing pressures and mounting expenses, including rising employee costs brought about by inflation and staffing shortages, hospitals' finances are taking a hit."

The report cites research that found the health worker shortage has forced hospitals to rely more on contract labor, leading to a 37% rise in per patient labor costs between 2019 and March 2022.

“This is the landscape that health care providers are facing in 2022—expenses greater than the rate of inflation, less cash for the services performed, and higher administrative burdens to receive payment,” the report says. 

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Focus turns to Senate action to cut physicians’ prior auth strain

Five years ago, health insurance representatives agreed to the measures listed in a consensus statement on improving prior authorization that was developed by the AMA, other provider groups, and insurer organizations, but few reforms have been implemented.

The AMA has successfully fought for reform at the state level and has helped get legislation passed in several states, including Georgia, Illinois, Kentucky and Michigan.

Physicians and patients can visit for additional information on the AMA’s efforts to reform prior authorization. The Centers for Medicare & Medicaid Services released multiple proposed regulations at the end of 2022 addressing prior-authorization reform, which the AMA is reviewing and will submit comments on.