Commercial payers frequently delayed paying out providers' claims in Q1, report finds

By Dave Muoio / May 19, 2023

Gummed-up commercial payments to hospitals along with frequent initial claims denials and other roadblocks are delaying providers’ financial recovery following a fraught 2022, accounting, consulting and technology firm Crowe wrote in a recent report.

Across first-quarter 2023 data from more than 1,800 hospitals and 200,000 physicians that use the firm’s Revenue Cycle Analytics platform, 31% of inpatient claims submitted to commercial payers weren’t paid out for more than three months compared to just 12% for those submitted to traditional Medicare, the firm wrote in its report.

Outpatient claims also followed a similar trend, with 32% of commercial claims and 11% of traditional Medicare claims unpaid after 90 days, Crowe found.

“Historically, commercial payers paid claims faster than government plans because there was less red tape, but it is becoming increasingly more difficult for providers to receive payment from these insurers,” Colleen Hall, managing principal of the healthcare group at Crowe, said in a release. “How can we expect hospitals to financially recover when the payers that account for almost half of their business are holding onto a third of their claims payments for more than 90 days?”

About 45% of these hospitals’ patient populations are insured by a commercial payer, Crowe wrote, from which hospitals are typically able to secure higher reimbursement for care than the government due to their ability to negotiate rates. Hospitals generally rely on this portion of higher payments to keep their operations from dipping into the red.

Alongside the general delays, Crowe’s analysis also found that commercial payers threw hospitals more curveballs than traditional Medicare during billing.

The rate of initial prior authorization or precertification denials for inpatient claims submitted by providers to commercial payers was 3.2%, as opposed to 0.2% for Medicare, the firm found.

Commercial payers also denied initial inpatient and outpatient claims for any reason at more than four times the rate of Medicare (15.1% versus 3.9%) and denied requests for information at 12 times the rate of the government (4.8% versus 0.4%).

Beyond the delays, Crowe noted that about eight cents of every dollar billed to commercial payers will either never be received or be taken back upon receipt. Specifically, 1.8% of providers’ gross patient service revenue from commercial payers was bad debt (0.3% for traditional Medicare), 2.8% were final denials (1.6% for traditional Medicare) and 3.2% were takebacks (1% for traditional Medicare).

These lost revenues—as well as the additional administrative legwork caused by payer takebacks—are a significant burden for provider organizations trying to make ends meet, the firm wrote.

“Providers feel that they are being forced to jump through hoops and undergo labor-intensive processes in order to receive payment, especially from commercial payers,” Hall said. “During a time when labor shortages persist and expenses continue to rise, hospitals’ believe that their time and resources should be spent directly on patient care rather than managing increasingly bureaucratic reimbursement issues with insurers.”