Insurance should cover costs, not undercut physician authority.

Ensemble’s 12-month client claims data from more than 200 hospitals shows that 80% of medical necessity denials are fully or partially overturned. There’s wasted expense — for all parties — in denying claims that are ultimately paid out.

The use and abuse of algorithms adds concern.

In a Feb. 6 FAQ, CMS mandated that health insurers using AI and algorithms must comply with existing rules for determining medical necessity, including consideration of individual circumstances, and that denials cannot be based on algorithmic predictions alone.?

This stance — and recent proposed legislation in Congress — follows on the heels of a series of much-reported lawsuits:

• Cigna allegedly used an algorithmic system to deny 300,000+ claims in two months. Another class-action suit alleges that Cigna used the same tool to batch-deny claims.
• UnitedHealthcare allegedly used an AI-powered algorithm to wrongfully deny coverage of medically necessary care.
• Humana faces a class-action lawsuit alleging that it denied rehabilitative care for seniors based on algorithmic targets not tied to an individual patient’s needs.

The playing field is uneven for providers.

Providers spent $19.7 billion collectively on administrative spending to pursue claims delays and denials in 2022, including $10.6 billion on claims that were later paid out. In fact, 78% of hospitals and health systems reported that their experience with commercial insurers is getting worse and 84% said the cost of complying with insurer policies was increasing. To push back against these excessive payer denials, providers either need a strong internal physician advisory team or an experienced partner who can fight on their behalf, or they need capital to deploy technology of their own.?

However, although operating margins are trending up for hospitals and reached nearly 4% in February, half of U.S. rural hospitals still operate at a loss, with hundreds vulnerable to closure. In addition, February’s operating margins do not tell the full story for health systems nationwide, which have been grappling with the Change Healthcare outage that began February 21.

All of these financial impacts hamper access to technology like that deployed by many payers. Among hospitals with less than 50 beds, 87% are unable to afford new or replacement technology because of poor financial health and unavailable resources.

Even for those organizations with positive operating margins, there is a sense of keeping afloat — of surviving, rather than thriving — with minimal opportunity for investments in new technologies or novel treatments.?

Payers aren't feeling the same strain.

Contrast this with payer profits; the average major payer operating margin was 5.2% in 2023. Outside of standard operating activities, eight major insurers also saw their investment portfolio profits collectively increase 53.2% from 2022 — the largest gain in a decade.?

Despite healthy margins and record-breaking profits, payers are up in arms over CMS’ proposed 0.16% decrease in the Medicare Advantage benchmark rate, demonstrating a frustration with lowered profits that hasn’t been extended to providers’ concerns. ?

"When providers went to most payers during contract negotiations over the last two years explaining the impact of inflation and the need for common sense rate increases, it fell on deaf ears. Now those same payers are calling on CMS to consider inflation in their MA rates.”?

— Judson Ivy , Founder, President + CEO, Ensemble Health Partners

The recent Change Healthcare incident has further highlighted the contrast between providers’ needs and the help payers are willing to offer. Of the 17 major payers Ensemble has reached out to requesting leniency on denials directly resulting from the Change outage, only one has agreed to waive limited authorization requirements. None have agreed to any flexibility on eligibility, UM or timely filing denials.?

Media headlines tout the coming resolution of the Change outage — but the work ahead is daunting for most providers who don’t have the scale or resources to continue to weather this storm alone.

To continue to deliver necessary care to their shared communities, hospitals need payers to act as true partners. This means working with providers on leniency from the Change impacts, accepting common sense rate increases and refocusing payment integrity efforts to where they are actually needed — even if doing so shares the benefits more widely.

About Ensemble Health Partners

Ensemble Health Partners is a full-service revenue cycle management company, delivering holistic financial health for more than 250 healthcare providers across the country. Through a combination of more than 9,000 certified revenue cycle operators, data-rich intelligence and AI-infused decisioning, Ensemble helps healthcare organizations sustain best-practice revenue cycle operations and maximize their current technology, so providers can focus on delivering exceptional care in their communities. For more information, visit EnsembleHP.com.