Increasing Administrative Costs, Burdensome Commercial Insurer Practices Create Patient Care Challenges

There will always be administrative costs associated with operating a hospital. But the lion’s share of a hospital’s resources should be devoted to doing what hospitals do best: provide safe, accessible and exceptional patient care to anyone who needs it.

That may seem self-evident, but as documented in a new AHA report released this month, that mission is coming under increasing strain because of skyrocketing administrative costs and burdensome commercial insurer practices that often delay and deny patient care.

For example, many commercial insurers now demand prior authorization for a growing array of services and the use of step therapy or “fail-first policies” that delay patients from getting the most appropriate care. Between 2022 and 2023, care denials increased an average of 20.2% for commercial claims and 55.7% for Medicare Advantage claims, according to the report.

These burdensome commercial insurer practices force hospitals and health systems to dedicate precious staff and clinical resources to appeal and overturn inappropriate denials — which alone can cost billions every year. In fact, recent data from Strata Decision Technology show that administrative costs now account for more than 40% of total expenses hospitals incur in delivering care to patients.

Speaking for many in the field, one health system noted in our report that “the growing number of prior authorization requirements, claim audits, denials, level of care downgrades and payer policies is staggering . . . affecting our health system’s ability to reinvest in its infrastructure, service lines, and physician retention and recruitment.”

The goal of hospitals and care teams is to care for patients and bring them back to health, without being hobbled with excessive regulatory and insurer requirements that stand in the way of their critical work.

The AHA is leading the fight to push back against onerous and often inappropriate insurance tactics that burden already overwhelmed health care professionals and decrease patient access to care.

We have made commercial insurer accountability a top priority, working with Congress and the federal agencies to increase oversight of Medicare Advantage plans and crack down on abuses that undermine their effectiveness for patients. And we are making some progress. For example, earlier this year we worked closely with the Centers for Medicare & Medicaid Services to shape a final regulation requiring MA, Medicaid, Children's Health Insurance Program and federally facilitated Marketplace plans to streamline their prior authorization processes to improve timely access to care for patients and alleviate provider administrative burden.

At the same time, the Coalition to Strengthen America’s Healthcare, of which the AHA is a founding member, has launched a multiplatform media blitz in September, including debuting a new ad called “Every Second Counts.”

The ad, which is running on national cable including Fox, CNN and MSNBC, draws the distinction between hospitals and health systems providing 24/7 care to patients and corporate health insurers that often delay needed care while increasing their profits.

We will continue speak out that clinicians and care teams in consultation with their patients should be the ones making critical care decisions … not insurers, regulators and bureaucrats.

Caregivers will never be deterred from their mission of providing quality and safe patient care. We will continue to collaborate with partners — both in and out of government — to address and remove any impediments to a hospital’s ability to do what they do best: treat patients, save lives and advance health for all.