Healthcare Providers See Drastic Increase in Medicare Advantage Denials

A recent report published by the Syntellis Performance Solutions and the American Hospital Association demonstrated a shocking 56% increase in Medicare Advantage (MA) claim denials from January 2022 to July 2023. The report was based on an analysis of data from over 1,300 health systems and hospitals, and further showed a 20% increase in commercial payor denials. The findings are especially concerning given that healthcare systems across the U.S. experienced drastic increased in operating expenses over the period, with a nearly 90% increase in maintenance costs, 33% increase in professional fees costs, 24% increase in labor costs, and a 35% increase in utility costs.

The substantial decrease in payments and significant increase in costs has put several health systems in the precarious position of being less equipped to navigate unforeseen market shifts. The serious physician and nursing labor shortage currently seen in the United States compounds the problem even further. Beneficiaries have also seen an increase in MA denials, which has led to increased congressional and regulatory scrutiny.

The increase of MA claim denials has led to increased scrutiny over the use of AI by insurance companies to evaluate claims for denial. A recent class action lawsuit was filed against UnitedHealth Group by MA beneficiaries, who claim the company’s AI algorithm systematically denies elderly patient’s claims. UnitedHealth began using an AI algorithm developed by its subsidiary NaviHealth, known as nH Predict, which the lawsuit alleges is used to “prematurely and in bad faith discontinue payment for healthcare services.”

MA denials, especially in relation to prior authorizations, have also gotten the attention of CMS. On November 6, 2023, CMS issued a proposed Rule which would require the MA utilization management (UM) committee to have a member with an expertise in health equity, conduct an annual health equity analysis of prior authorization policies and procedures, and to make the results of the analysis publicly available on their website.

Congress has also taken an interest in MA reform, with one senator proposing an amendment which would require CMS to collect and publish MA plan prior authorization data, including the number of prior authorization requests, denials, and appeals by type of medical care. There is evidence of ample bipartisan support for MA reform, allowing for potential future legislative changes.

Providers should be aware of regulatory and legislative changes related to MA plans, as such changes are sure to impact the delivery of services. Furthermore, the use of AI in claim processing is an issue ripe for regulation and should be watched closely.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to fraud and abuse or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.