Delta variant destabilizes healthcare planning:
With the spread of the more contagious delta variant, Covid-19 cases spiked almost 70 percent in the last week (www.washingtonpost.com/…covid-cases-rising/). The public health crisis continues to infect the economy.
Covid uncertainty caused the US stock market to slide over 700 points Monday, the largest one-day decline of 2021 (https://www.washingtonpost.com/business/2021/07/19/markets-stocks-today-delta-variant).
The prospect of a resurgent pandemic has made healthcare finance planning extremely difficult. Hospitals’ chief financial officers are watching their balance sheets nervously as trends in both healthcare and finance decline.
Vaccination rates continue to drop from a high of 3.4 million per day in April to less than a million a day this week. Most of the increased cases are in states where vaccination rates are lowest. Cases are rising in Missouri, Arkansas, Nevada, Utah and Florida at higher rates than in other states.
“There is a clear message that is coming through: This is becoming a pandemic of the unvaccinated,” said Rochelle Walensky, director of the Centers for Disease Control and Prevention.
Despite President Biden signing the $1.9 trillion coronavirus relief bill back on March 11, the financial outlook for hospitals in 2021 is still alarming. COVID-19 had a massive impact on hospitals’ fiscal health in 2020, as well as their ability to provide patient care. Although the American Rescue Plan Act of 2021will be a lifeline for the nation’s healthcare system, hospitals will still have to explore every possible source of revenue in the coming year.
Post-COVID-19 trends highlight the need for improving revenue cycle management
An estimate earlier this year suggested hospital revenues could be down $53-122 billion, according to a study by consulting firm Kaufman Hall. In their most pessimistic scenario, Kaufman Hall forecast American hospitals could lose $64 billion in outpatient revenue, $41 billion in inpatient revenue, and $17 billion in emergency services income. (https://www.aha.org/system/files/media/file/2021/02/KH-2021-COVID-Impact-Report_FINAL.pdf#page=3).
Other healthcare authorities echoed this warning. The American Hospital Association estimated that U.S. health systems would lose $120.5 billion between July and December 2020 due to reductions in patient volumes coming to baseline levels over the next twelve months. “These losses are in addition to the $202.6 billion in financial impact the AHA estimated for hospitals between March and June 2020, bringing total loses for this calendar year to at least $323.1 billion, not including the impact of currently increasing COVID-19 case rates.” (American Hospital Association, 2020)
Although American healthcare spending has increased an average of 4.5 percent annually since 2016, emerging data suggests that fiscal year 2020-2021 will be the first year of a decline in spending since the Centers for Medicare and Medicaid Services began tracking spending in 1960 (retrieved from www.HealthAffairs.org/do/10.1377/).
“December 16, the Centers for Medicare and Medicaid Services (CMS) released its annual update to the National Health Expenditure Accounts (NHEA), the federal government’s official reckoning of US health spending. The update, which covers health expenditures through 2019, indicates that NHEA grew by 4.6 percent in 2019, continuing a relatively stable pattern of average 4.5 percent annual growth since 2016” (Ibid).
In March and April 2020, hospital revenue fell by 35.8 percent, largely due to elimination of non-critical services.
President Trump signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. The CARES Act granted healthcare providers a temporary relief fund of $175 million. But by October only $7O billion of this went to hospitals, according to the American Hospital Association (retrieved from https://www.aha.org/system/files/media/file/2020/06/aha-covid19-financial-impact-short-0620.pdf).
In May, hospital spending rebounded slightly. Nursing home expenditures remain down while home-based healthcare is up. Pediatric services declined, including well-child visits and immunizations. Telehealth increased.
In February 2021, healthcare consulting firm Kaufman Hall released a flash report on healthcare finance that laid out alarming trends.
“Not including the federal aid, Operating Margin fell 46.1% (4.6 percentage points) from January 2020 to January 2021, and Operating EBITDA Margin was down 34.1% (4.2 percentage points). Month-over-month, Operating Margin was down 26.7% (3.1 percentage points) and Operating EBITDA Margin declined 17.4% (2.3 percentage points) without CARES. Operating Margin fell 42.4% (4 percentage points) and Operating EBITDA Margin fell 25.4% (3.8 percentage points) year-over-year (YOY) with the federal aid.” (https://www.kaufmanhall.com/ideas-resources/research-report/national-hospital-flash-report-summary-february-2021?utm_source=agcy&utm_campaign=february-2021-flash-report&utm_medium=pr)
Covid-19 has a big impact on rural hospitals
Among the hardest hit hospitals have been those in rural areas. In the first three financial quarters of 2020, 17 rural hospitals closed (AHA Factsheet).
Beyond providing healthcare to isolated rural communities, hospitals also provide a solid financial anchor in areas under demographic and fiscal decline. More than 6 million Americans work for hospitals. Every dollar spent by hospitals has a flow on effect of $2.30 of additional business to the local economy, resulting in 17 million jobs, or one out of nine, nationally, in 2018.
Healthcare providers play an irreplaceable role in our communities. Whether they serve as general practitioners, surgeons, internists, radiographers, nurses, ambulance professionals, or billing department administrators and accountants, their investment in training and education is among the highest of any occupation. They take care of the most vulnerable members of society: the sick, elderly, critical-care patients or those with chronic, protracted illnesses like cancer or dementia.
Healthcare professionals have also been among the most vulnerable members of the community during the pandemic, as they have been exposed to the virus on the front lines. President Trump’s statements on the pandemic, masks, and government funding made healthcare workers’ jobs even more difficult. Trump created a hostile work environment for healthcare staff by claiming that doctors were inflating COVID-19 death tolls to make more money. But this is absolutely false, as research published in the Journal of the American Medical Association and CDC reports indicate the US had dramatically excessive deaths over the previous year.
After the winter pandemic peak started to flatten out, some patients could no longer put off long-term health problems and sought medical attention. Physicians are now dealing with sicker patients.
One often overlooked problem is the pandemic’s psychological impact on patients as well as healthcare workers.
“The healthcare system in 2021 also faces a tremendous challenge in responding to the nation’s mental health crisis, as 32 percent of U.S. consumers surveyed by the Health Research Institute said they had experienced anxiety or depression as a result of the pandemic,” reported consulting firm PricewaterhouseCoopers.
PwC predicts that the industry will have to adapt if it wants to develop resiliency. Key to bouncing back in the post-pandemic world is for hospitals to improve data analytics (retrieved from www.BeckerHospitalReview.com/top-health-industry-issues-of-2021/will-a-shocked-system-emerge-stronger…)
This is where ERISA Recovery can help. We can examine your hospital claims and payment data and help recover insurance underpayments going back decades. This will help reinstate better financial health to your medical institution, which will allow you to better serve patients. After our initial meetings with your billing department and uploading your data, we do all the work. Because we work on a contingency basis, there are no upfront costs for you to worry about justifying to your Chief Financial Officer.
Causes of lost hospital revenue: COVID-19 and underpaid insurance claims
Despite federal subsidies, hospitals are still hemorrhaging revenue. Chief financial officers and billing managers realize revenue cycle management is essential. It begins with understanding where their institutions are losing money.
1. Hospitals and their patients have been postponing elective procedures, such as cosmetic or elective surgery, which are highly profitable. One reason is to limit contagious encounters at health institutions.
2. But the other reason is many workers have lost income or insurance and can’t afford to seek medical care. Up to 35 percent of Americans polled said they would forego COVID-19 treatment due to economic stress of additional medical bills. Despite the consumers’ hardship, hospitals must still replace this lost revenue.
4. Many hospitals initially had to pay for their own personal protective equipment out of their own operational budgets. Testing and social distancing also create additional costs for hospitals.
5. The biggest loss of revenue for hospitals, however, predated the pandemic. Commercial insurance companies for years have consistently underpaid hospital claims by up to 40 percent. The incomes of many healthcare workers are also down, due to budget cuts. So at a time when only billionaires are getting richer, insurance companies have increased profits.
Why do insurance companies underpay hospital insurance claims?
By one estimate, commercial insurance companies consistently underpay hospital claims by 38 percent. A Harvard/RAND study of 500,000 patients revealed that 40 percent of the time, insurance companies incorrectly denied coverage. These underpayments costs hospitals $262 billion each year, according to one industry analyst (https://www.healthcarefinancenews.com/news/change-healthcare-analysis-shows-262-million-medical-claims-initially-denied-meaning-billions).
Health insurance lobbyists and political action committees contributed over $120 million to politicians during 2019-2020, according to campaign finance watchdog Open Secrets. Since 1992, these campaign contributions have consistently favored Republicans over Democrats.
(https://www.opensecrets.org/industries/indus.php?ind=f09d).
During the early days of the pandemic, because so many consumers with health insurance continued to pay premiums but avoided going to hospital for elective procedures, to avoid infection, insurance company profits soared. The New York Times reported on Aug. 6, 2020 that, “Major US Health Insurers Report Big Profits, Benefitting from the Pandemic,” and that “consumers are probably entitled to millions of dollars in rebates under Obamacare rules that cap companies’ profits.” Under Obamacare rules, insurance companies must spend 80 cents on every dollar collected from consumers and small businesses on actual healthcare costs.
Anthem, Humana and United Health Group all reported second-quarter earnings that were double that of the second quarter of the previous year. Anthem’s income soared from $1.1 billion in 2019 to $2.3 billion in the second quarter of 2020, while United Health reported net earnings of $6.7 billion, compared to $3.4 billion the previous year. Humana’s income went from $940 million to $1.8 billion in the second quarter of 2020.
Fourth quarter figures for 2020, however, resulted in declining gains for insurance companies
While some commercial insurance underpayments to hospitals are a conscious strategy, others are due to mistakes and miscommunication between healthcare providers and payers.
Two of the healthcare industry’s most common forms often confuse the hospital revenue cycle management process. The 837 is a hospital’s electronic form submitted to a commercial insurance company for reimbursement. An 835 is the insurance company’s explanation to the hospital for payment. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 created these forms as part of federal law to improve the efficiency of the American healthcare system. The law originally required Health and Human Services to adopt national standards for electronic forms. Congress later enacted the law to protect consumer privacy.
If an 835 doesn’t match an 837, this causes problems. Reimbursements from insurance companies become so complex it’s hard to keep track of payments. Some of this is intentional, as insurance companies design policies to obscure their contractual obligations.
Other common reasons for commercial insurers underpaying hospital claims include:
- Contract issues
- Misinterpretation
- Payer miscalculations
- Billing errors
- Missing paperwork
- Billed for incorrect amount
What is the hospital’s recourse for commercial insurance underpayment?
- State-level appeals
- Federal law allows hospitals and clinics to collect underpayments
Congress first passed the Employee Retirement Income Security Act in 1974 to regulate pensions and the healthcare component of retirement plans from mismanagement. By 2013, ERISA covered 684,000 retirement plans, 24 million healthcare plans, and another 2.4 million welfare benefit plans. These plans covered 141 million workers and beneficiaries and included $7.6 trillion in assets. ERISA applies to 59 percent of worker retirement beneficiaries and 59 percent of health care plans.
Healthcare revenue solutions
Hospitals need comprehensive data strategies. Lack of data isn’t the problem. Lack of actionable data analysis is. That’s where Erisa Recovery can help.
Using proprietary technology, we upload your health care company’s insurance contracts and insurance payment records. Then we audit claim and payment trends.
We have a staff seasoned from the insurance industry who can analyze payment adjustment codes, including case review, to appeal denied or underpaid claims. This staff includes medical professionals skilled in revenue cycle management.
Proactive hospital claims recovery strategies
1. Hospital billing departments must compile a comprehensive list of rates for different insurance companies and sort the data according to price and volume.
2. Each attempt to communicate with commercial insurance companies should be documented, as well as each point of contact. Always make requests for payment in writing, even if you initiate or follow up with phone calls.
3. Use a data-management system that can store your hospital or clinic’s insurance claims. Cross check every itemized claim against your insurance contract. Initiate recovery of underpaid claims immediately and document the process in writing. Employ an automated system that keeps track of amounts requested, contacts with insurance companies, and their response or the lack of it. This comparison of the Explanation of Benefits (or EOB) will reveal any discrepancy between your healthcare institution’s request for payment and the actual amount your insurance company pays.
4. Create a review process your staff or consultants actively manage. This means employing an Artificial Intelligence, or Machine Learning, system. You also need a staff that curates this platform, and they must have a background in the commercial insurance industry. Here at Erisa Recovery, we use a proprietary technology of data analysis curated by healthcare-industry professionals who understand how insurance companies try to deny claims and obscure their reasons for underpayment.
5. Fine tune your organization’s claims recovery and billing unit’s management. This means establishing key performance indicators, or KPI, such as the number of days it takes to get payment and insurance company, percentage of claims paid in full, or the number or percentage of your hospital’s underpaid claims that you formally dispute and resolve.
Bibliography
Kaufman Hall. (February 2021). COVID-19 in 2021: The Potential Effect on Hospital Revenue. (retrieved from https://www.aha.org/guidesreports/2021-02-23-covid-19-2021-potential-effect-hospital-revenues).
PricewaterhouseCoopers. (Updated Tuesday, January 5th, 2021).
Top health industry issues of 2021: Will a shocked system emerge stronger? (https://www.pwc.com/us/tophealthissues?WT.mc_id=CT7-PL900-DM1-TR1-LS4-ND8-PR2-CN_HI.HS.TL.FFG.STRATEGY.12FY21.EMAIL.TOP.ISSUES.2021-)
https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.02022
