Medicare Advantage Claim Denials Continue to Challenge Providers + Limit Access to Care

Material challenges have occurred.  Another study of 1,300 hospitals and healthcare systems found a nearly 56% increase in Medicare Advantage denials between January 2022 and July 2023. During that same period, the study showed, Medicare Advantage plans saw a more than 63% increase in denials related to net patient service revenue for the median hospital. In 2021, only 11% of the more than 2 million denied claims were appealed. Of those 11%, however, 82% were overturned, raising questions about whether a greater number of initial determinations should have been approved.

This blog explores trends related to Medicare Advantage denials; how the Centers for Medicare & Medicaid Services (CMS) is attempting to streamline processes and improve transparency; and what hospitals, healthcare systems and physician practices can do to reduce denials, get paid and deliver the level of care they desire.

How is Medicare Advantage different from Medicare?

Medicare Advantage was introduced in the late 1990s as Medicare+Choice, a way to help control ever-increasing Medicare costs, provide more plan options for Medicare beneficiaries, allow free-market competition for private insurers, and expand access to supplemental benefits.

Unlike Medicare, which is managed by the federal government, Medicare Advantage plans are offered by private insurance companies approved by Medicare.

Growth has been solid. By 2023, more than half (51%) of those eligible for Medicare were enrolled in a Medicare Advantage plan. The plans are appealing to enrollees due to lower premiums; convenience; integrated and coordinated care; and additional benefits. As a result, Medicare Advantage is expected to keep expanding, reaching 62 percent of eligible Medicare recipients by 2033. As recently as 2007, only 19 percent of eligible Medicare recipients chose Medicare Advantage.

Though Medicare Advantage brings many positives, these plans tend to have more rules and restrictions, including requiring prior authorization for some medical services and medications. This is especially the case for expensive services like skilled nursing home stays, inpatient hospital stays and Part B drugs. The more than 2 million prior authorization requests that were denied in 2021 represented 6% of the 35 million-plus prior authorization determinations made overall by Medicare Advantage insurers.

What are the trends in Medicare Advantage denials?

As Medicare Advantage has continued to expand, so have the challenges with Medicare Advantage claim denials. Because prior authorization is typically required for non-emergency hospital care, out-of-network care and other services, there is both an additional administrative burden as well as increased chances of error in submitted claims. To further complicate matters, each Medicare Advantage plan is unique. Costs and rules can vary.

In some cases, the challenges have become significant enough that hospitals and healthcare systems have cut ties with Medicare Advantage, terminating contracts. Healthcare leaders admit that the situation isn’t ideal, but the losses from prior authorization denial rates, slow payments from insurers and other factors aren’t sustainable.

Denial rates have been on an upward trajectory for more than a decade. A variety of factors are at play. Services needing prior authorization continue to increase. The transition of records to electronic health record (EHR) systems might cause gaps in documentation. And providers are consolidating, often bringing together different systems, procedures, financial priorities and workflows. This clash of methods and culture provides prime opportunity for things to fall between the cracks.

It’s no secret that healthcare systems, hospitals and physician practices have been navigating staffing challenges due to the aging workforce, employee burnout, high turnover, and resignations and retirements related to the pandemic. Less staff means fewer resources to manage insurance denials.

The large majority of denied Medicare Advantage claims are not resubmitted.

All too often, if denied Medicare Advantage claims are resubmitted, they are resubmitted without any changes. Finding and fixing errors can be time-consuming, and there may not be staff on hand to do it. In addition, there may be a lack of training or knowledge of successful form submission; there may be a lack of time to gather all necessary documentation before a submission deadline; or there may be hope that there was error somewhere down the line that will be revealed this time.

Faced with these challenges, healthcare systems, hospitals and physician practices are increasingly turning to Clinically Driven Revenue Cycle processes and denial management technology to streamline operations, uncover efficiencies and root out the source of errors.

What is the CMS Interoperability and Prior Authorization final rule?

In January 2024, the Centers for Medicare & Medicaid Services (CMS) issued the CMS Interoperability and Prior Authorization final rule. The rule requires certain payors to send prior authorization decisions within 72 hours for expedited requests and seven calendar days for standard requests. In addition, beginning in 2026, impacted payors will have to name a specific reason for a denied prior authorization decision. The intended result, according to the CMS rule fact sheet, is to “both facilitate better communication and transparency between payors, providers, and patients, as well as improve providers’ ability to resubmit the prior authorization request, if necessary. Some impacted payors are also subject to existing requirements to provide information about denials to providers, patients, or both through notices. These existing notices are often required in writing, but nothing in this final rule changes these existing requirements.” Impacted payors will also be required to publicly report certain prior authorization metrics annually by posting them on their website.

The rule requires Medicare Advantage organizations, among others, to implement and maintain standardized application programming interfaces (APIs), improving the electronic exchange of healthcare data and streamlining prior authorization processes. Payors, providers and patients would all have access.

How will these changes improve Prior Authorization?

CMS has stated that these policies will “improve prior authorization processes and reduce burden on patients, providers, and payors, resulting in approximately $15 billion of estimated savings over ten years.”

Though CMS is hopeful, it’s too early to determine direct impact. The CMS ruling is a step toward streamlining processes. At the same time, it is not expected to solve all issues related to Medicare Advantage denials. Healthcare systems, hospitals and physician practices must still do whatever possible to reduce the chances of claims being denied.

In the meantime, some are calling for broader change. In November 2023, the American Hospital Association urged the Medicare Payment Advisory Commission to “collect and examine additional data points regarding prior authorization denials, appeals and response time, as well as monitor MA (Medicare Advantage) plan adherence with the prior authorization policies in the contract year (CY) 2024 MA final rule.” The AHA continues to be “concerned about the troubling effects of certain prior authorization procedures on timely access to medically necessary care.”

“Although initially designed to help ensure patients receive optimal care based on well-established evidence of efficacy and safety, many MA plans apply prior authorization requirements in ways that create dangerous delays in care, contribute to clinician burnout and drive-up costs for the health care system,” the letter stated. “These problematic practices include inappropriate denial of medically necessary services that would be covered by Traditional Medicare and requirements for unreasonable levels of documentation to demonstrate clinical appropriateness. Of greatest concern, however, is that certain MA plans have an established history of inappropriately utilizing prior authorization to deny medically necessary treatment for patients. Data shows that more than 35 million prior authorization requests were submitted to MA plans on behalf of MA enrollees in the same year. As both MA enrollment and plan usage of prior authorization continue to grow, improper prior authorization programs increasingly impose bureaucratic obstacles to necessary treatment, often jeopardizing patient health in the process.”

In the letter, the AHA referenced a 2022 report by the Department of Health and Human Services (HHS) Office of Inspector General showing that Medicare Advantage organizations denied 13 percent of prior authorization requests that met Medicare coverage rules, “thereby denying Medicare beneficiaries of the necessary treatment prescribed by their physician and eligible for coverage under federal regulations.” Further, the AHA shared, a 2018 HHS OIG report found Medicare Advantage organizations overturned 75% of prior authorization denials that were appealed between 2014 and 2016. “This suggests that inappropriate denial of necessary care is widespread and that MA plan prior authorization practices are routinely leading to improper barriers to care.” The system, AHA states, “is highly susceptible to abuse if MA organizations are able to deny large volumes of care up front only to routinely overturn them if a provider spends significant time and resources to appeal.”

What can healthcare providers do to avoid frequent denials?

While the challenges play out across the broader landscape, individual healthcare systems, hospitals and physician practices are increasingly looking for ways to control what they can. A solid and effective denial management process is crucial for those wanting to maintain a healthy and profitable revenue cycle and bottom line. At the same time, many of these providers don’t know where to start.

A consistent denial management process can help identify and resolve problems that lead to medical claim denials, including those from Medicare Advantage insurers. This can help mitigate the risk of future denials, making a direct impact on healthy cash flow.

JTS Health Partners’ nCREAS™ Analytics as a Service offering helps healthcare systems, hospitals and physician practices identify trends, gaps and potential recovery opportunities in denied claims. The JTS nCREAS™ Analytics platform provides analysis of denial rates by location and payor with both predictive and prescriptive analytics. Healthcare systems, hospitals and physician practices can drill down to the level of a single account number, bringing transparency and efficiency to the process. In addition, the platform categorizes denials by department to help determine volume, dollars and rate. This process can reveal areas needing additional focus and oversight, mitigating the risk of future denials. JTS works with each facility individually to categorize denials based on code, recognizing that facilities can have unique processes and procedures.

Reducing claim denials requires a variety of steps. These include, for example: code diagnosis to the highest level of specificity; ensuring insurance coverage and eligibility; filing claims on time; staying current with payor requirements; and tracking the claim throughout the entire process. This is a significant burden for already stretched healthcare staff.

In many cases, denials occur due to missing or lacking information; the service not being covered by the payor; the presence of duplicate claims or services; expired limits for filing; and “not medically necessary” determinations. But these denials can often be prevented with appropriate training and attention to detail. JTS’ nCREAS™ Analytics platform can help healthcare staff streamline processes, reduce the administrative burden, increase the chances of claims being approved, receive revenue for services provided, and ensure patients are receiving timely, appropriate care.

JTS Health Partners can help you gain greater consistency, accuracy, clarity and profitability. Why not schedule a consultation today?