Children’s hospitals face a distinct set of challenges when it comes to claims denials and revenue cycle management (RCM). The unique nature of pediatric care, combined with a specific payer mix and specialized treatments, creates a complex landscape that requires tailored strategies and solutions.
The Children’s Hospital Payer Mix
Children’s hospitals face a unique payer mix challenge. Unlike adult hospitals with more balanced payer distributions, pediatric facilities often serve a much higher proportion of Medicaid patients. This skewed payer mix can significantly impact their financial operations and reimbursement strategies.
Terry Closson, Director of Revenue Cycle at Children’s Hospital of Orange County (CHOC), details her experience in this on-demand Aspirion webinar, “Navigating the Unique Denials Landscape of Children’s Hospitals.”
“Our CCS (California Children’s Services) Medi-Cal population is 65 percent,” she said. “So that’s substantially higher than adult hospitals, which I believe is about 50 percent here.”
This high concentration of Medicaid patients creates specific eligibility and authorization challenges. Children’s hospitals must be proactive in helping uninsured patients quickly enroll in Medicaid programs. Implementing processes to screen patients for eligibility at the point of care, particularly in emergency department settings, is vital.
Some states offer presumptive eligibility programs that allow hospitals to temporarily enroll patients in Medicaid, ensuring coverage for immediate care needs. However, maintaining long-term eligibility for patients, especially those with extended hospital stays, remains an ongoing challenge. Many children’s hospitals rely on dedicated vendor partners to assist with this process and ensure continuous coverage.
Authorization and Documentation Hurdles
Children’s hospitals often find that their top denial reasons differ from those of adult hospitals. While authorization-related denials are common across the healthcare industry, children’s hospitals frequently cite “requests for additional documentation” as their leading denial category. This can account for up to a quarter of all denials, both preventable and non-preventable.
Barry Rosen, Sr. Director Denial Prevention at Children’s Health System of Texas, highlighted that documentation requests are their top denial reason.
“Our highest denial category on pure denial reasons is additional documentation. And it is a little bit different. And we take, you know, it’s probably a quarter of our denials preventable and non-preventable in additional documentation.”
Industry experts suggest that these documentation requests are often used as a dilatory tactic by payers. While some of these claims are ultimately paid, the process creates a significant administrative burden for hospital staff. It requires dedicating resources to gathering and submitting additional information, often for claims that should have been straightforward.
Authorization processes present another set of challenges, particularly when payers utilize external vendors for this function. Children’s hospitals report instances where they receive authorization from a payer’s vendor, only to have the claim denied by the payer due to “lack of authorization.” This disconnect between vendor and payer systems leads to inappropriate denials that must then be appealed, creating further administrative work and delayed payments.
High-Cost Drugs and Specialized Treatments
Children’s hospitals deal with a high volume of expensive, specialized medications and treatments. These can include drugs for rare pediatric conditions, advanced therapies for premature infants, and cutting-edge treatments for pediatric cancers. Securing appropriate authorization for these high-cost items is a constant challenge.
Payer policies for specialized treatments can be extremely strict, often with narrow criteria for approval. For example, treatments for premature infants may have specific gestational age requirements and limited approved durations. Navigating these complex authorization requirements demands specialized knowledge and dedicated resources.
To address this, some children’s hospitals have implemented dedicated high-cost drug authorization processes. This involves creating a centralized team responsible for verifying benefits, obtaining authorizations, and ensuring the approved site of service matches where the treatment will be administered. By taking a proactive, specialized approach to these high-cost items, hospitals can significantly reduce related denials and improve reimbursement rates.
Leveraging Data Analytics and Technology
In the face of these challenges, children’s hospitals are increasingly turning to advanced data analytics and technology solutions to understand and address their denial trends. Some are relying on internal analytics capabilities to analyze claims data, denial categories, and remit codes, hoping it will allow time to drill down into specific CPT codes, supply items, and diagnoses to identify patterns and root causes of denials.
Other hospitals and healthcare systems are partnering with third-party vendors to gain in-depth insights. These platforms can integrate directly with hospital information systems, providing near real-time data on claim statuses, denials trends, and other key metrics. The goal is to move beyond surface-level denials reasons provided by payers and understand the true root causes of claim rejections.
Armed with this data, hospitals can take a more strategic approach to denials prevention and management. For example, if analysis reveals a high rate of eligibility-related denials, a hospital might implement automated eligibility verification processes. Some children’s hospitals are now using bots to check eligibility in near real-time as appointments are scheduled, allowing them to address potential issues before care is delivered.
Automation and Artificial Intelligence
Beyond data analytics, children’s hospitals are exploring various automation and artificial intelligence (AI) tools to streamline processes and prevent denials. This includes:
- Automated eligibility verification: Using bots to check and update patient insurance information in real-time
- Intelligent work queues: AI-powered systems that prioritize and route denial cases to the most appropriate staff members for resolution
- Predictive analytics: Using historical data to identify claims at high risk of denial before submission, allowing for preemptive intervention
- Natural language processing: AI tools that can analyze clinical documentation to ensure it meets payer requirements for medical necessity
- Automated appeal letter generation: Systems that can draft initial appeal letters based on denial reasons and relevant clinical data
While many of these technologies are still in early adoption phases, they show significant promise in reducing the administrative burden associated with denials management.
Collaboration Is Key
Successful denials management in children’s hospitals requires cross-functional collaboration. This includes coordination between clinical and revenue cycle teams and engagement with payers through joint operating committees.
Having clinical expertise within the revenue cycle team is particularly valuable for children’s hospitals. Given the complex and specialized nature of pediatric care, having staff who can interpret clinical documentation and understand medical necessity criteria is crucial for effective appeals and denials prevention.
Engagement with payers is equally important. Children’s hospitals are finding that regular meetings with their major payers, facilitated through joint operating committees, can help address systematic issues leading to inappropriate denials. These forums allow hospitals to present data on denials trends, discuss policy interpretations, and work collaboratively on solutions.
Looking Ahead for Children’s Hospitals: The AI Arms Race
As payers increasingly leverage technology and AI in their claims adjudication processes, children’s hospitals must keep pace. Some major payers are reportedly using AI to automatically deny up to 50% of incoming claims, which are then subject to appeal processes, Closson said.
“The payers have been using it for a long time,” she explained. “There’s one big healthcare company that is denying in their protocols. Fifty percent of the claims that come to it are automatically denied and they are using AI to do that. So, we’ve got to beat them at their own game.”
To combat this, children’s hospitals are exploring their own AI and machine learning (ML) solutions. This includes finding a vendor partner like Aspirion with the staff and tools to analyze large quantities of data, verify the accuracy of claims before submission, and automate appeals processes. The goal is to level the playing field and ensure fair reimbursement for the vital care provided.
The denials landscape for children’s hospitals is uniquely challenging, shaped by high Medicaid utilization, complex authorization requirements for specialized treatments, and the need for extensive documentation; however, by leveraging AI and advanced analytics, automation technologies, and strategic payer engagement, children’s hospitals can navigate these challenges effectively.
Are you a children’s hospital RCM leader ready to finally level the playing field with payers who have a financial and technological head start on providers? Let Aspirion’s vast and seasoned RCM team of technical, legal, and clinical professionals help. Reach out to us here!
