How Predictive Editing Can Boost Revenue Cycle Performance

Numerous threats, including chronic staff shortages, rising expenses, and an inflationary economic environment, hold the potential to further impact many hospitals and health systems’ already narrow operating margins. More than ever, provider organizations need to maximize reimbursement opportunities. Unfortunately, denied claims—and the associated adjudication process—remain among the leading causes of revenue shortfalls in provider organizations of all sizes.

A recent analysis found an increase in initial denial rates from 11.2 percent in 2022 to 11.99 percent in the first three quarters of 2023. Another study found that it costs about $25 to rework a claim. This situation negatively impacts revenue cycle performance, adds to the volatility of health systems’ accounts receivable, and depletes cash reserves. Furthermore, denied claims delay reimbursement and add workload to the appeals team, causing adverse effects on care delivery and patient experience.

However, the value of the unpaid claim and the time it takes to rework it are only part of the overall impact on a health system’s bottom line. Historically, denied claims require provider organizations to invest heavily in reactive solutions—point technologies, staffing surges, and complex appeal processes. These tools may help “manage” denials, but true cost savings lie in prevention.

Work smarter with an AI-powered prediction engine that analyzes claims for errors before routing them to the payer

Reducing avoidable claim denials is a top priority in optimizing revenue cycle management for hospitals and health systems. Many systems offer packaged or custom edits to claims before submission, but these are often built retrospectively, requiring costly analysis to determine the root cause of the denials and ongoing maintenance as payers’ adjudication rules shift in response to external forces. Implementing artificial intelligence technology as a method for streamlining and improving the denial management process is a better approach for identifying and preventing denied claims that could help reduce administrative rework and lost revenue for a health system’s facilities. 

Predictive editing, a new approach to denial management leveraging artificial intelligence (AI), uses an algorithm that focuses on the subset of denials likely to be avoidable and correctable. The algorithm’s predictive capabilities lie in its ability to analyze claims data across a broad network of provider organizations, as well as policies specific to individual health plans, to predict the probability of denials. If the likelihood of denials is 98 percent or higher, the predictive editing solution returns the predicted denial reason and code.

Applying AI to the constantly changing stream of data removes the manual writing and maintenance of edits and allows health systems to react to changes more quickly – before the claims are submitted and a new batch of denials has to be analyzed. Furthermore, not only can AI streamline the denial management process and prevent denied claims, but it can also help providers submit claims correctly the first time. This is achieved through insights and analytics that help organizations identify and address areas for payer-specific data-driven adjudication improvement, allowing the health system to further reduce avoidable and actionable denials for reimbursement.

Through the application of responsible predictive editing technology, providers can reduce administrative costs of reworking claims, increase edit coverage by capturing complex, payer-specific edit scenarios that are beyond the scope of traditional front-end edit engines, reduce the administrative effort of maintaining manual rules, and save on implementation because predictive editing can be used within the provider’s existing edit/error management tools, especially if they use Availity Essentials Pro.

Conclusion

The path toward a sustainable and healthy revenue cycle requires tools, insights, and analytics to help providers submit claims right the first time. The potential impact of artificial intelligence on the $43 billion spent each year on healthcare’s revenue cycle could be transformative. By leveraging the power of automation and AI in denial prevention, providers can streamline administrative tasks, boost efficiency, and ultimately improve the patient experience.

Linda Perryclear is Senior Director, Product Management, at Availity. To learn more about Predictive Editing and other revenue cycle services, please contact her at [email protected] or visit www.availity.com.