A study that looked at physician billing estimates $11B-$54B in challenged revenue each year

A graphic highlighting the word insurance.
Physician practices spend a lot of time and money fighting claim denials. (Getty/NicoElNino)

Physician offices spend a lot of money on billing costs, and a new study finds they deal with $11 billion in challenged revenue annually from insurers.

However, that number could be as high as $54 billion, according to a Health Affairs study that examined the complexity of billing and paying for physician care.

The study looked at administrative costs when it comes to billing for physician visits, examining interactions between a group of physician practices and both government and private insurers. The analysis consisted of claims in five specialties: cardiology, internal and family medicine, obstetrics and gynecology, orthopedics and pediatrics.

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The study found dramatic variation across different types of insurance. The study authors were Joshua D. Gottlieb, Ph.D., associate professor in the Vancouver School of Economics at the University of British Columbia, and a faculty research fellow at the National Bureau of Economic Research in Cambridge, Massachusetts; Adam Hale Shapiro, a research adviser at the Federal Reserve Bank of San Francisco; and Abe Dunn, an assistant chief economist in the Office of the Chief Economist, Bureau of Economic Analysis, Department of Commerce in Washington, D.C.

RELATED: 4 ways to reduce medical billing errors and claims denials

Based on data from the IQVIA Real-World Data Adjudicated Claims, which detailed interactions between 68,000 physicians and the insurers they billed, the researchers examined information on 37.2 million physician visits in 2015, for which 44.5 million claims were submitted. The data allowed the researchers to observe physicians’ requests for payment, insurers’ responses to those requests, any resubmissions needed and the ultimate settlement of claims.

RELATED: Physician practice strategies to prevent insurance denials

For each patient visit, the researchers computed how much of the physician’s fee was never paid during the billing process. Some of the conclusions included the following:

  • Fee-for-service Medicaid is the most challenging type of insurer to bill, with a claim denial rate that is 17.8 percentage points higher than that for fee-for-service Medicare.
  • The denial rate for Medicaid managed care was 6 percentage points higher than that for fee-for-service Medicare, while the rate for private insurance appeared similar to that of Medicare Advantage.

Based on the estimates of share challenged—in other words the share of authorized revenue for a visit that was never paid by insurers—researchers said that the contested amount nationally was $54 billion.

Payer denials are a frustration for physician practices, but there are steps to take to address the problem. For instance, practices can use technology to automatically and proactively flag claims that payers are likely to deny and fix problems before the practice submits them. 

Many healthcare organizations see claims come back with an initial denial, which means they have to rework or appeal those claims. Indeed, a 5% denial rate is average for practices, and there should be concern if their rate is above that level.

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