Reimbursement delays and denials hurt hospital finances

Reimbursement delays and denials, along with rising costs, mean hospitals and health systems are spending down their cash reservices.

A new report by the American Hospital Association (AHA) and industry analyst Syntellis Performance Solutions said the health systems “are caught in a vice of declining cash reserves and rising reimbursement delays and denials from health care payers, including commercial and Medicare Advantage plans."

“Hospitals and health systems are left increasingly financially strapped as a result,” said the report, “Hospital Vitals: Financial and Operational Trends,” covering the first half of this year.

Cash reserves, measures as days cash on hand, dropped 28%, from a median 173 in January 2022 to a median 124 in June 2023.

When payers deny claims, hospitals are not reimbursed for medically necessary care for patients, the report said. Those add up – an AHA survey found 50% of hospitals and health systems have more than $100 million in unpaid claims at least six months old.

“As cash reserves decline, hospitals have little cushion to absorb such volatility, resulting in cash flow constraints that can jeopardize hospitals’ ability to maintain access to care,” the report said.

Meanwhile, maintenance expenses have skyrocketed 89.8% from January 2022 to July this year. Costs of just about everything went up, including utilities (35%), professional fees (33%), drugs (29.8%), benefits (27.4%), total labor expenses (24%), supplies (17.2%), and lease and rental expenses (14.6%).

Accounts receivable, or money hospitals are owed for services provided and billed, but not yet paid, have had wide fluctuations from January 2022 to June this year.

The report gave a nod to physicians, citing data from AHA and the American Medical Association that health insurance prior authorization burdens are time-consuming and interfere doctors’ abilities to practice medicine.