As 2022 draws to a close, many healthcare organizations are dealing with a unique double whammy – both on supply and demand. That’s according to our 2022 MDaudit Annual Benchmark Report, which found that as consumers cut discretionary healthcare spending and postpone medical visits, patient volumes began falling dramatically in physician office visits and hospitals. The 3rd quarter of 2022 saw declines as steep as 33% relative to the first two quarters.
Healthcare organizations are also under tremendous pressure to reduce compliance risk and optimize revenue flow, a feat that will require flawless optimization for billing compliance, coding, revenue cycle, and revenue integrity capabilities. Amidst the challenges, however, our analysis also revealed many opportunities for health systems to accelerate digital initiatives and drive sustainable value with analytics, automation, collaboration, and upskilling people.
Top Trends for 2023
Defending revenue will be as critical to health systems as growing revenue in 2023. Indeed, profitability will depend on it, as Medicare-related audits and other risks ramp up exponentially.
In response, the role of billing compliance will continue to be increasingly data-driven and cross-functional, serving as a business partner to other teams, including coding, revenue integrity, finance, pharmacy, and clinical, to meet changing and more complex risks. This is critical, as resolving accuracy issues in billing and coding operations can help retain 15%-25% of overall revenue.
Our analysis also found that all payers are not equal. As such, provider organizations must closely monitor their payer mix and the unique risks associated with each. The greatest risks are for those organizations that are increasingly dependent on federal payers to carry a larger burden of proof for timely payments, administrative costs, and defending audits. For FY 2023, the Department of Health and Human Services (HHS) requested a budget of nearly $2.5 billion for its Health Care Fraud and Abuse Control (HCFAC) Program and the Medicaid Integrity Program, an increase of $80 million from the previous year.
A final trend for the New Year is the continued uptick in adoption of powerful technologies, including cloud, artificial intelligence (AI), machine learning (ML), and predictive analytics, which will catalyze health systems to proactively monitor and quickly address compliance and revenue risks as they emerge.
The Benchmark Report also yielded insights across categories, including billing compliance and revenue integrity, which are summarized below.
Executive Insights for Billing Compliance
In 2023, revenue retention will be as critical as revenue growth. Medicare-related audits will ramp up exponentially, creating added pressure for healthcare revenue streams. In 2022, risk-based audits increased by 28%, which was the catalyst behind the move by more billing compliance teams to leverage data analytics to proactively identify and mitigate compliance risks – a trend we expect to continue in 2023 due to the dynamic nature of emerging risks. Data-driven, risk-based audits can complement the annual compliance plan to ensure effective audit scope coverage.
Other actions billing compliance can take to counter the surge in audits include:
- Monitor compliance risks. Overcoding remains pertinent in professional office visits. Consider that, in 2022, In 2022, overcoded charges reclaimed 21% of the revenue recovered from undercoded claims. Besides revenue, overcoding is a risk to hospital branding, reputation, and potential for regulatory fines. With upcoming changes in 2023, compliance teams should pay attention to the coding of E&M levels, as it drives reimbursement. In hospital billing, bundling is a major driver of compliance issues, followed by billing and coding errors.
- Collaborate to accelerate outcomes. To solve systemic challenges and drive outcomes with greater impact, billing compliance teams must partner with cross-functional peers from coding, revenue integrity, revenue cycle, clinical documentation integrity (CDI), IT, and others. Deploying cloud-based technologies with integrated workflows and powerful analytics, driven from multiple sources of internal and external data – billing, payment, auditing, market-level costs, and payer data – can enable collaboration and accelerate outcomes.
- Focus on external audits. Compliance teams should be efficient in managing external payer requests to retain at-risk revenues, with close attention paid to the most common areas for overcoding, medical necessity, clinical documentation, and bundling-related issues (see sidebar). The implication of getting paid on time for these often-expensive services can significantly impact an organization’s profitability and financial health.
Finally, Medicaid managed care plans with commercial payers are under constant scrutiny as OIG and CMS have ongoing concerns about managed care plans’ efforts to combat fraud, including concerns about a lack of fraud referrals.
Executive Insights for Revenue Integrity
Develop a revenue-risk view based on each payer’s denial response. The staggeringly disproportionate number of denials associated with Medicare – 82% of denials in 2022 were from Medicare Part A and Part B, according to an analysis of MDaudit data for the top 20 payers across all customers – indicates that revenue integrity leaders should pay special attention to federal payers-related denials and audit requests.
Other actions revenue integrity should take to protect revenues and reduce compliance risk include:
- Avoid billing and coding errors. Maximizing revenue retention may be complex, but something as simple as correctly coding and billing professional and hospital claims can make a significant difference. Our analysis found that 15%-25% of overall revenue can be retained by resolving accuracy issues in billing and coding operations.
- Move beyond the charge master. To drive action that impacts denials and costs, adopt complementary workflow and analytics-oriented solutions outside of operational revenue cycle management and charge master systems. Operational systems are good at executing transactional tasks and actions, while analytical systems are beneficial for combing through large volumes of data and providing strategic insights. Thus, investing in a hybrid architecture of operational and analytical systems will drive tangible outcomes.
- Audit with predictive intelligence. Use predictive analytics and insights to take targeted action on errors before they impact revenue by deploying prospective audits – which our analysis found increased by 31% in 2022 – on providers, coders, and facilities. Historical data integrated with real-time 3rd party market data can provide powerful predictive capabilities.
- Handle COVID-19 claims with care. COVID-19 claims are a significant opportunity for health systems to prevent denials. Approximately $80 million in COVID-19 charges failed audits across the MDaudit cohort, representing about 30% of the $260 million total charges audited in professional and hospital billing. Thus, avoiding denials for COVID-19 claims will save $50 million in revenue impact for a mid-large sized health system.
- Collaborate with cross-functional teams. Revenue integrity teams must work cross-functionally across the enterprise with compliance, HIM/coding, pharmacy, revenue cycle, and CDI counterparts to drive value. One way to do this is by leveraging common data sources, technology platforms, and insight-sharing mechanisms to break down silos.
Adopting these trends can help stave off some of the negative impacts we are seeing on revenues, including most costly denials. Despite falling volumes of more than 33% in Q3 as compared to Q1 and Q2 of 2022, the average denial dollar value per claim increased across professional, outpatient hospital, and inpatient hospital billing by 2%, 6%, and 9.5%, respectively. We are also seeing slower payments, with the average lag days measured from billing to initial payer response rising across professional, outpatient hospital, and inpatient hospital billing by three, four, and 6.5 days, respectively.
Call to Action
You can learn from payers’ strategy and look to technology combat audits and other associated risks, which lets healthcare organizations more effectively and efficiently monitor and address compliance and revenue risks as they emerge – before they can negatively impact the bottom line.
To achieve better outcomes, deploy a hybrid auditing strategy where you learn from your retrospective audits and apply those insights to your prospective audits. This allows compliance and revenue integrity teams to drive cross-functional initiatives that mitigate compliance and revenue risks even when health systems are financially stretched.
Finally, understand your macro environment and make smart investments in data analytics and technology to drive impactful outcomes. Upskill your workforce with emerging skills and manage change leadership.
Based on the analysis of MDaudit denials data and HHS/OIG updates, key external audit scope areas that drive substantial costs and resources out of the healthcare system include:
- For outpatient billing
- Surgeries that involve multiple services performed by the same surgeon and must be billed together
- Surgeries – orthopedic, spine, neurosurgery
- Specialty drugs and clinical justification for units administered for treatment
- Hospital observation care services Implants/medical devices
- Laboratory – chemistry, general classification, hematology, immunology, bacterial
- For inpatient billing
- Short stay inpatient Rehabilitation facilities DRGs that drive higher healthcare costs
- Sepsis Cardiology Digestive system