Report notes disparities among commercial managed care payers

A recent analysis of patient financial transactions from more than 800 hospitals noted performance disparities among managed care payers for revenue cycle key performance indicators (KPI) where accounts receivable (AR) and denials are concerned.

A November 2017 report by Crowe Horwath LLP uncovered these disparities using software that analyzes revenue cycle metrics and as a result sought to determine how hospitals should adjust annual commercial payer billing processes given the inconsistencies across payers. The report notes that while some inconsistencies may be related to differences in geographic location and product mix, the overall findings indicate disparities across five major national commercial managed care payers.

With regard to AR performance, the report revealed the following:

• A 15-day difference between the highest and lowest number of AR days with an average of 39.2 days in AR.
• AR greater than 90 days shows a 13.9% difference between the highest- and lowest-performing payers, which is above the 12.8% best practice in the commercial/managed care payer mix. The lowest-performing payer has more than one-third of outstanding claims in AR for more than 90 days past the date of service.
• For inpatient claims, there is a significant disparity between the highest- and lowest-performing payers. The lowest-performing payer has an average account age of 81.9 days, although this may be associated with difficulties in paying high-dollar claims. Of note, this lowest-performing payer’s average account age is 22.9 days longer than one of its competitors.

Where denials are concerned, the report found the following:

• Initial denial rates ranged from 7.5% to 11.1% of net patient service revenue, which translates to one in every $10 of revenue being at risk of nonpayment.
• Denials cited as additional medical information needed represented the highest disparity with one payer using this denial reasoning three times more than another.
• Rates of final denials written off as uncollectable were also disparate, ranging from 0.8% to 2.4%.

Disparities such as those listed can hinder revenue cycle operations. For this reason, the report urges hospitals to continue tracking and reporting managed care payer performance.