Strategies to Address the 4 Causes of Declining Emergency Medicine Reimbursement

by | Aug 19, 2022 | Emergency Medicine

A range of culminating forces places pressure on emergency department revenue: the rise in high deductible health plans, Medicare changes, the No Surprises Act, a reduction in out-of- network reimbursement, and a rise in denials. The impact of these trends is exacerbated by tighter-than-ever margins as reimbursement declines and emergency physician pay rises. As factors influencing emergency medicine revenue cycle management continue to evolve, it is important to proactively evaluate your revenue cycle management strategy. In this post, we delve into the trends causing declining reimbursements in emergency medicine and offer actionable strategies to mitigate the impact on your cash flow.   

Why is Emergency Medicine Reimbursement Declining? 

As the safety net of our healthcare system, emergency departments have one of the most, if not the most, complicated reimbursement processes in our nation’s healthcare system. EMTALA requires that emergency medicine care providers care for patients first and ask for payment second. Unfortunately, new legislation regarding balance billing, changes to Medicare’s reimbursement formula, and shifts in CMS’s MIPS (Merit-based Incentive Payment System) program, among other forces, are not making it simpler. Here is a look at the primary revenue cycle headwinds emergency medicine groups face:  

High Deductible Health Plans

The impact of high deductible health plans on reimbursement is not a new trend. Since the 2010 Affordable Care Act spurred growth in high deductible health plans, out-of-pocket costs for patients increased. With that, emergency medicine groups spend more time and money than ever collecting patient payments—often through manual and time-consuming processes. A 2020 report indicated that 78% of surveyed providers reported being unable to collect bills of more than $1,000 within 30 days, and 66% said that patient receivables are a primary revenue concern. 

What you can do now…  

The time it takes to collect, and the resources expended on paper patient statements and collections coordination are costly. Today, leading revenue cycle management companies lean on technology as an alternative to print mail statements, cutting the cost to collect by 60-80%. Digital statements not only cost less, but they are also more in line with patient desires. Today, patients expect upfront price transparency and digital payment options.  

As a result, it is important that your revenue cycle management strategy includes a solid understanding of patient billing preferences. We suggest starting with:  

  • Educating patients about their coverage and responsibility 
  • Implementing payment plan options for patients who cannot pay upfront  
  • Offering clearly worded digital statements 
  • Investing in communication plans and technology to support patient billing preferences 

These steps will help your group collect more—sooner—and provide a better experience for your patients.   

Medicare Reimbursement Changes  

Medicare reimbursement for the most common emergency medicine services decreased by an average of 29% between 2000 and 2020, after adjusting for inflation. In 2022, a 9.75% reduction in Medicare physician reimbursement was projected. However, an early 2022 Congressional action approved a one-year Medicare fix to curb cuts to 2% vs. 9.75% overall through 2022. Still, that action only offers temporary relief in an overall downward trend. Part of the decline is due to the Medicare Access and CHIP Reauthorization Act (MACRA) quality program’s Merit-based Incentive Payment System (MIPS). MIPS is a complicated layer on top of the traditional Medicare fee-for-service model. It adds financial risk linked to performance based on escalating yearly requirements to earn MIPS Quality and other performance category points. While the Medicare Payment Advisory Committee has recommended the elimination of MIPS to Congress, the fact that Medicare policy is defined by Congressional actions makes it difficult to predict future changes. Though we do not know exactly how Medicare reimbursement will evolve, we know it is declining and that efforts to address that decline will take time.  

What you can do now… 

Ensure your revenue cycle management partner is in-the-know on the latest MIPS/MACRA regulatory updates. Identifying the appropriate MIPS measures requires knowledge of the measure specifications, their scoring methodologies, and your clinical practice. Your revenue cycle management partner’s chart review process should include ensuring every chart has ample documentation to qualify for the appropriate code level. Additionally, their audit process should look at data over time to consistently meet compliance standards. Your revenue cycle management service provider should also suggest third-party vendors that provide qualified registry services to enhance MIPS reporting.  

 The No Surprises Act    

The federal No Surprises Act took effect in January 2022. The goal of the legislation is to protect patients from unanticipated medical expenses after receiving care from an out-of-network healthcare provider. It requires providers to notify patients when care is provided by out-of-network clinicians at in-network facilities and sets rules pertaining to patient consent to receiving out-of-network scheduled care at hospitals or freestanding emergency departments. If proper notice is not given to patients in a timely fashion, providers are paid at in-network rates. The No Surprises Act also obligates providers to provide good faith estimates for scheduled services for self-pay and uninsured patients. Since emergency care is unscheduled care, this aspect does not impact emergency medicine groups.   

Another goal of these requirements is to insulate the patient from negotiations over out-of-network payments to providers. Providers must now negotiate with payers who, in most cases, will insist on paying out-of-network claims at the median in-network rate for their contracted providers. Historically, out-of-network payments were higher than in-network payments. With most payers paying the median in-network rate rather than historically higher out-of-network rates, emergency department reimbursement can be significantly reduced depending on the payer mix.  

Another financial hit of the No Surprises Act to emergency medicine groups are the costs associated with the open negotiations and Independent Dispute Resolution (IDR) processes. Groups must dedicate operational resources to negotiate rates when an out-of-network rate is not set, and the payer and provider have not previously agreed on a rate (regulations related to IDR are different on a state-by-state basis).  

What you can do now…  

Align your group, hospital, and revenue cycle management partner  

The evolving No Surprises Act requirements present an opportunity for hospitals and provider groups to align with their revenue cycle and registration teams. You all want to achieve positive patient outcomes and make a profit. Together, you can develop strategies for data analysis and operational process improvements that will mitigate the fiscal impact of the No Surprises Act.  

Review your Contracting Process  

The ideal antidote to alerting patients of out-of-network service is to negotiate in-network contracts with all major payers. Negotiating positive managed care contracts requires actionable data to understand your current metrics and revenue so that you are prepared with facts when you negotiate with insurance plans. For example, what percentage of self-pay patients are likely to pay? Insights like that will help you assess your actual reimbursement levels. Overall, when you align your group, hospital, and payer around improved care outcomes and efficient cash flow, you have a better chance of negotiating higher allowable amounts and more favorable payer contracts.  

Increased Denials  

Unaddressed claims denials are a significant source of revenue leakage at hospitals across the country, and they are on the rise. According to recent research by The Advisory Board, 1 in 10 submitted claims are denied by both commercial and public payers, resulting in a loss of up to 2% revenue. Additionally, a 2020 survey found that the healthcare industry saw a 20% increase in claim denial rates over the previous 5 years. COVID made matters worse as 40% of COVID-related claims wound up as denials in 2021. More generally, about 34% of hospital charges and 15% of professional charges were denied in 2021 (up from between 6-13% overall average claim denial rates). The primary culprits for professional billing denials? “Claim submission and billing errors,” “lack of documentation,” “duplicate claims,” “bundling,” “non-covered services,” and “precertification/authorization.” Unfortunately, more than half of denied claims are never resubmitted, meaning most providers leave money on the table. 

Several factors drive the increase in denials, including:  
  • Documentation errors due to the increase in multiple disparate technology systems (such as EHRs and revenue cycle management software) 
  • Increasingly automated claims reviews that allow payers to quickly flag DRG downgrades and medical necessity issues  
  • Increasingly complex claim submission criteria   
  • Lack of visibility into data trends illustrating trends in reasons for denials 

What you can do now…  

Make sure Data Powers your Denial Management and Resolution Process 

Optimizing your denial management and resolution processes is more valuable than ever. Now is the time to ensure your revenue cycle management partner has a robust denial follow-up process and data tracking system so you can identify the root causes of your denials and address them efficiently. Denials fall into two categories—controllable denials (e.g., things that can be fixed and resubmitted like incomplete information) and uncontrollable denials (e.g., an uncovered service that the patient must be billed for). Your revenue cycle management service provider should have a process for sorting those denial types and a dashboard to manage each denial on a case-by-case basis.  

Focus on Documentation Improvement  

Increasingly, payers want to understand the whole story of a patient visit to verify whether they are responsible for reimbursing the claim or if a third party is responsible. Adjusting to this requires a focus on clinical documentation improvement. Your revenue cycle management partner should have coding experts who are able to meet with providers to discuss trending documentation issues and educate providers to meet the appropriate documentation levels. 

Improve your Credentialing Process  

Many claims are denied due to credentialing issues, and a significant amount of money is written off in this process. Many revenue cycle management companies have no way to recoup that loss. Ensure your revenue cycle management partner has a streamlined credentialing process and a record of accomplishment of complete, timely, and compliant credentialing. Tightening up your credentialing process alone could lead to a 1-5% revenue lift tied to reduced denials.  

Optimizing your RCM Strategy to Address Declining Reimbursements  

As margins grow tighter than ever, a strong revenue cycle management partner is crucial to mitigate the impact of shifting legislation and payer criteria. Common themes among addressing emergency department billing headwinds include dialing in revenue cycle management fundamentals and leveraging data and technology. As you are asked to do more with less, data will enable you to manage reimbursement loss and uncover opportunities to improve operations and impact revenue. Mitigate loss and optimize revenue by discussing these forces with your revenue cycle management partner and ensuring they have the data engine and operational processes needed to address each one.  

Resolv Healthcare – Your Partner in Overcoming Declining Reimbursements  

Resolv Healthcare, a Harris Revenue Cycle Business, is a leading provider of technology-driven solutions that transform patient experience and financial performance for healthcare organizations. Resolv provides revenue cycle management solutions for hospitals and hospital-based provider groups, ambulatory practices, laboratory practices, dental practices, and worker’s compensation and personal injury providers. Learn more about how Resolv’s powerful data and technology can help your group overcome declining reimbursements and thrive. Book your free consultation with Resolv today.  

About the Author  

Ron Decker, CHBME Executive Vice President, Resolv Healthcare / Innovative Healthcare Systems 

As the EVP of Resolv Healthcare, Ron manages hospital and hospital-based provider revenue cycle management solutions. Prior to being acquired by Resolv and Harris in 2021, Ron was the Founder and CEO of Innovative Healthcare Systems, Inc. (IHSI), a healthcare RCM and coding services company designed to meet the ever-changing needs of modern medical practice. Ron has more than 30 years of experience serving hospitals in the RCM/Health IT industry. He has strong business development, operations management, strategic partnerships, team building, public speaking, and revenue cycle expertise.