Payers Are Putting Profit Over Patients with Denials and Prior Auth Policies, Hospitals Say - MedCity News (2024)

Hospitals have never had a warm and fuzzy relationship with insurers — and it doesn’t seem like their bond will be getting stronger any time soon, according to a recent report from the American Hospital Association.

The AHA’s report stated that hospitals are facing increasingly burdensome policies from commercial insurers. This is causing major problems for hospitals, most notably in the areas of cash flow and patient safety.

The effects of rising costs for labor, drugs and supplies in the healthcare world have been well-documented through various studies and reports, but there hasn’t been as much attention drawn to the skyrocketing expenses associated with excessive payer requirements, argued Aaron Wesolowski, the AHA’s vice president of research strategy and policy communications.

In his view, the healthcare industry needs to pay more attention to this and do a better job of curbing payer’s burdensome policies.

For instance, commercial payers are requiring prior authorization for an increasing lineup of services, the report noted. It also said that health plans are ramping up their denial rates and increasingly using step therapy — a practice in which the insurer requires certain steps before it pays for a member’s medication. Most often, this means that a patient will have to try an insurer-preferred medication and prove that it failed before their health plan will cover the medication that their doctor prescribed for them, which could be more expensive, Wesolowski said.

Being forced to jump through hoops in order to get paid means that hospitals must dedicate their staff and clinical resources to appealing and overturning inappropriate denials. The costs associated with this are incredibly expensive — experts estimate that U.S. hospitals spend at least $40 billion each year on the billing and collection process, the AHA’s report noted.

For example, hospitals need to hire dedicated billing and claims processing staff, as well as establish specialized teams to manage the nuances of each payer’s policies. The appeals process usually requires staff with clinical expertise, and the cost of their labor is high.

Additionally, many hospitals are investing in upgraded revenue cycle management software. It’s also worth noting that some hospitals take out short-term loans or rely on lines of credit to cover their operational expenses when they are dealing with delayed payments, and this results in added interest and fees, Wesolowski explained.

To alleviate the burden, hospital executives think federal regulators need to enact stricter policies that require payers to operate on faster timelines and provide more transparency into their reasons for denying claims.

MedCity News reached out to the five of the country’s largest payers — UnitedHealthcare, Aetna, Cigna, Humana and Blue Cross Blue Shield Association — for comment. All of them — except Blue Cross Blue Shield Association — failed to respond.

Same old story — but it’s getting worse

The problem of healthcare insurers having complex and bothersome policies isn’t a new one. But it is one that is getting worse with each passing day, Wesolowski pointed out.

“What we’ve seen in the last few years — particularly since the pandemic — is a really drastic increase in the rate of denials, as well as the broad application of prior authorization requests. This has had an impact on hospitals’ ability to provide care, and it has certainly impacted hospitals’ cash flows, which have compounded other financial pressures in the last few years,” he remarked.

Care denials grew by 20% and 56% for commercial and Medicare Advantage claims, respectively, between 2022 and 2023.

Payers’ increasing use of AI models is contributing to this problem — poor applications of these tools can result in automatic denials without considering a patient’s individual clinical circumstances, Wesolowski said.

“AI presents great opportunities for efficiency. But what we’ve seen on the payer side is broadly using these to automatically deny claims in a lot of cases — that’s very concerning,” he declared.

One reason this is concerning is because busy clinicians don’t have time to fix these wrongful denials, he said.

Physicians, nurses and other practitioners shouldn’t have to spend hours per week away from their patients appealing and overturning claims that have never been denied in the first place, Wesolowski noted.

“We’ve heard horror stories from clinicians who spent a good chunk of their day on the phone with insurers trying to work through these issues to get care. Oftentimes, physicians are speaking to physicians on the insurer side that have no background in the specialty of care being requested. So there are really tremendous roadblocks,” he charged.

Michael Abrams, managing partner of , pointed out another frustrating problem for providers: denials are increasing more than twice as fast for Medicare Advantage plans than they are for regular commercial plans.

Medicare Advantage enrollment is soaring — the percentage of eligible Medicare beneficiaries enrolled in Medicare Advantage plans jumped from 19% in 2007 to 54% in 2024. This trend means that hospitals are dealing with a lot more Medicare Advantage patients — and therefore a lot more denials.

“I don’t really understand how we can rationalize the fact that denials are higher with Medicare Advantage than with some other form of coverage. I thought I was on solid ground to assume that denials have to do with medical necessity — so the form of coverage shouldn’t really make a difference,” he remarked.

As a result, hospitals are increasingly dropping their MA contracts, arguing that they result in dangerous patient care delays. Some examples of these hospitals include Memorial Hermann Health System in Houston, WellSpan Health in Pennsylvania and Scripps Health in San Diego.

Patient harm

Roadblocks from insurers slow down a patient’s care journey, pointed out Kurt Barwis, CEO of Connecticut-based health system Bristol Health.

Patients who are newly diagnosed with cancer are dealing with enough stress — they shouldn’t be faced with the added anxiety of wondering when their health plan will finally approve their care, Barwis declared.

“Say you have pancreatic cancer. You feel like you’re a little bit sick, and then they discover it and tell you it’s really aggressive. It used to take about 12 days from the point at which you were diagnosed to get you into treatment. Now it’s 30 or 31 days to get to that first treatment — because the radiation oncologist is not going to do a thing to you until they get the approvals,” he explained.

Sticking with the cancer patient example, Barwis noted that hospitals render a wide variety of services during the cancer treatment process, including biopsies, scans, chemotherapy and counseling. Now, “every one of those” requires a prior authorization — and the hospital usually has to wait days to hear back about it [from insurers], he said.

These delays often result in patients visiting the emergency department and having to be hospitalized, which creates more costs for patients and the overall healthcare system, Barwis added.

“I have two oncologists who work inside my hospital. In one month, they submit 360 prior authorizations to take care of their cancer patients. The harm to the patients is absolutely ridiculous, and it’s all for profit. [Insurers] will say this is because we might do something that the patient doesn’t need. We don’t want to waste money — we’re trying to deliver evidence-based medicine,” he remarked.

In a statement sent to MedCity News, a spokesperson for Blue Cross Blue Shield Association defended prior authorization.

“Everyone deserves access to safe, high-quality, affordable healthcare. Studies show that a significant portion of care delivered in the United States is unnecessary, harmful or of low-value to patients — adding up to nearly $1 trillion in waste. Prior authorization is a proven tool to ensure that patients get safe, effective, evidence-based care — and avoid unnecessary tests and treatments that drive up patient costs,” the statement read.

Barwis said he can think of many instances in which a patient’s care journey suffered as a result of their health plan’s denials.

He recalled one example from last year — a patient with very little oxygen supply was admitted to the ICU. Clinicians quickly determined that the patient needed to go to an intensive outpatient rehabilitation facility that could provide them with better ventilator support, but their health plan denied the move repeatedly.

Due to the excessive denials, the patient had to remain in the ICU for seven and a half months, racking up $2.2 million in charges, Barwis said.

After the patient finally was able to transition to an appropriate care setting, Bristol Health billed the patient’s health plan for the stay. It was denied multiple times, Barwise noted.

“I actually had to write to our congressman. We didn’t get paid on that bill for over a year — and on a $2.2 million bill, we got paid $600,000. And here we are a small, independent community hospital,” he declared.

This puts hospitals in a position where they have to “fight like crazy” to protect their cash flow, Barwis added.

“I have a team of physicians, and that’s all they do — fight on the front end. They fight the authorizations, to get patients approved to be in the hospital, to get them approved to go to a post-acute facility, or to get home care. It’s a nonstop battle, and it’s hugely expensive,” he said.

What needs to change?

The AHA has requested that both Congress and the Biden administration address these issues by instating policies that do a better job of streamlining the prior authorization process.

“There’s been some regulatory action, but we’d like to see more. We’d also just generally like to see more oversight from the Centers for Medicare and Medicaid Services over MA plans specifically to make sure that they’re tracking some of these activities,” Wesolowski said.

In January, CMS finalized a prior authorization reform rule seeking to make the process more efficient. It applies to Medicare Advantage plans, Medicaid and the Children’s Health Insurance Program (CHIP) fee-for-service programs, Medicaid managed care plans, CHIP managed care entities, and issuers of qualified health plans offered on federally-facilitated exchanges.

Starting primarily in 2026, these payers will be required to send prior authorization decisions within 72 hours for urgent requests and seven days for non-urgent requests. Health plans will also have to specifically state the reason why they denied any prior authorization request.

Abrams, managing partner of Numerof & Associates, argued that this rule is “not a very satisfying solution to the problem.”

“The parameters that they set — three days for urgent requests and seven days for standard requests — are far too liberal,” he remarked.

In the future, he hopes to see timelines that are shorter, given how quickly a patient’s state can deteriorate when they’re in the wrong care setting.

Abrams added that he would like to see CMS establish regulations that make insurers take their role in value-based care more seriously.

“CMS could push value-based care more robustly and make insurers own their part of the experience that’s being provided to the patient — as in printed matter, saying, for example, these are the healthcare services being provided to you by XYZ healthcare system and ABC insurance. Because inpatient treatment has to be regarded as a joint product of what the hospital is doing and what their insurance company is doing,” he explained.

When a patient leaves a hospital and the patient hanging for days or weeks, it is not only unpleasant but also a “degradation of the quality of the experience,” Abrams said. To him, federal regulators must make sure that payers are held more accountable for this.

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