It’s no secret that hospitals and health systems have been facing severe financial woes in the past couple years. These money problems have forced many providers to make what they likely felt were tough but necessary choices — such as shuttering underperforming service lines, laying off staff and using debt collection agencies to obtain payment from patients.

Some of these tactics have even invited negative scrutiny. However, a new report argued that commercial payers should shoulder some of the blame when it comes to how hospitals are managing their dire financial circumstances. 

Compared to government payers, commercial payers take significantly longer to pay hospitals and deny claims at a higher frequency — often without a justifiable reason to do so — according to the report published by consulting firm Crowe. These delays mean that hospitals are waiting longer than they need to receive commercial payments — during a time when they need cash flow to be expedited, not needlessly delayed, the report said.

Crowe analyzed data from the more than 1,800 hospitals that use its revenue cycle analytics platform and found that about 45% of a typical hospital’s patient population is covered by a commercial health insurance carrier.

Commercially insured patients have conventionally been thought of as hospitals’ preferred population. This is because hospitals can negotiate prices with commercial payers, and these payers usually pay higher rates than government payers like Medicare and Medicaid. For the average net revenue per inpatient case, commercial plans pay $18,156.50 compared to $14,887.10 from Medicare. For outpatients, commercial plans pay $1,606.86 for the average patient case, compared to $707.30 paid by Medicare.

Reimbursement rates may be higher among commercial payers, but getting them to pay in a timely manner is an entirely different story, per the report. During the first quarter of this year, commercial payers initially denied 15.1% of inpatient and outpatient claims compared to 3.9% for Medicare over the same period, according to the report.

Crowe analyzed the claim denial category of prior authorization and precertification denials. These occur when a payer denies a claim based on their decision that a provider did not get prior approval for care before it was delivered or that the care rendered wasn’t necessary based on the patient’s medical diagnosis.

Last year, the prior authorization/precertification denial rate for inpatient claims among commercial payers was 2.8%, up from 2.4% in 2021. This rate increased to 3% during the first three months of 2023, but the denial rate for traditional Medicare was just 0.2% during the same period.

Another claim denial category that the report examined is the request for information (RFI). RFI denials happen when a payer decides not to process a claim because it is missing some type of required documentation, such as a signature or copy of the medical record. In this category, commercial payers’ denial rate is 12 times higher than Medicare, the report found.

Most of the claims that commercial payers deny eventually get paid. However, the administrative effort required for hospitals to turn an initially-denied claim into a payment costs a good deal of time and money — two things in short supply at hospitals 

To obtain payment from a denied claim, a provider must investigate the claim, determine what they have to do to rectify the problem and resubmit the claim — a process that can take weeks — said Colleen Hall, the managing principal for Crowe’s healthcare consulting group, in a recent interview. This process creates “an aging accounts receivable situation” for the provider and delays them from receiving much-needed cash.

“There certainly are several for-profit insurers out there. I won’t name names, but I think that those for-profit entities are in direct conflict with the nonprofit hospitals. I don’t know what goes on in the for-profit payer side of things, but could there be actions that they’re deploying to delay payments? Potentially. There have certainly been denials that our clients, as providers, have to manage only to find were denied for no reason,” Hall declared.

In the first quarter of this year, about a third of the claims that providers submitted to commercial payers took more than three months to get paid, the report found. 

It’s difficult for hospitals to gain steady financial footing when the payers that have the best reimbursement rates are holding onto a third of their claims payments for more than 90 days, Hall pointed out.

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Oshi Health — a virtual care provider for patients with digestive disorders — announced its first contract with a commercial insurer on Thursday. The New York-based company has entered into a value-based contract that provides Aetna members with in-network access to its specialized treatment.

The partnership comes nearly two years after CVS Health, Aetna’s parent company, invested in Oshi as part of the startup’s Series A fundraising.

Founded in 2019, Oshi built a virtual-first care platform designed to help patients achieve lasting control over chronic digestive conditions. The company hires gastroenterologists, nurse practitioners, dieticians and GI-specialized behavioral healthcare providers to quickly reach a diagnosis and guide individualized treatment. Patients are also assigned a care coordinator, who can help them find in-network providers if they need services like a colonoscopy or endoscopy.

The startup prides itself on providing whole-person care, which includes often-neglected dietary and psychosocial interventions, Oshi CEO Sam Holliday said in a recent interview.

“Over the past decade, there’s been a recognition that many gastrointestinal disorders are actually triggered by the signaling between your gut and your brain. A whole class of GI conditions has actually been renamed as disorders of the gut-brain interaction, or DGBIs,” he explained. “Things like gut-directed cognitive behavioral therapy can really reframe patients’ thought patterns and dampen the brain signaling that causes their symptoms, making symptoms feel less severe.”

Dietary interventions and behavioral therapy are proven methods to alleviate GI patients’ symptoms, and they’re often more effective than medication, Holliday pointed out. But these services are rarely available to GI patients because they haven’t been reimbursed historically, he added.

That’s why these interventions are a core part of the care patients receive under Oshi’s new contract with Aetna.

“One of the challenges in GI is that there aren’t very good quality measures. Really, the main things we focus on as a country is getting people screened for colorectal cancer, But we don’t really have measures for what matters to patients, who are the people suffering. What we think is the best measure to use is symptom control,” Holliday explained.

The root cause of GI symptoms usually stems from dietary or behavioral health reasons, and traditional, medication-centric GI care does not address those underlying causes, he declared. Patients end up continually seeking care — and driving costs up — because their symptoms are still bothering them. Through Oshi’s value-based contract with Aetna, “the value aspect being measured is Oshi’s ability to reduce that utilization downstream,” Holliday said. 

Oshi will measure its care teams’ ability to sustainably control patients’ symptoms through a mix of medication, dietary adjustments and gut-brain psychology interventions. The company will track metrics such as reductions in emergency department visits and patients’ reported symptoms. 

“We get paid a certain amount as we’re providing the care. Then, if we’ve gotten to a good level of patient satisfaction, symptom control and reduced utilization at the end of the measurement period, we have a bonus opportunity. And if we don’t achieve certain levels, there is a downside,” Holliday explained.

Aetna shares in the upside if Oshi hits its goals, but the payer is protected against potential downside. If Oshi doesn’t achieve as good outcomes as the partners had hoped, Aetna won’t have to pay the startup the full amount for care, Holliday declared.

The partnership is in its first phase, meaning Aetna members can access Oshi’s services in the following six states: Florida, Maine, Massachusetts, Ohio, Pennsylvania and Texas.

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Paragonix Technologies — a company that launched in 2010 as a response to the lack of innovation in the donor organ preservation and transport process — closed a Series B funding round on Tuesday. The $24 million round was led by Signet Healthcare Partners.

The Cambridge, Massachusetts-based company provides transplant centers and organ procurement organizations (OPOs) with medical devices designed for the preservation and transportation of donor organs. 

The traditional method of preservation requires the organ to be transported in a cooler of crushed ice. Due to unstable temperatures, many facilities that receive organs preserved in this manner report that they arrive frozen and damaged, said Paragonix CEO Lisa Anderson.

“Paragonix determined there was an opportunity for a more scientifically reproducible, measurable and reliable solution to transporting an organ from a donor to recipient,” she said. “We set out to create a new standard for organ preservation and transport that would provide the care and quality of handling commensurate with transporting such a valuable gift and improve patient outcomes worldwide.”

Paragonix’s devices are made from a series of interconnected systems that work together to provide a cool and sterile environment within a consistent range of 4-8° Celsius. The company sells three devices, each designed for a different organ (heart, lung and liver). All have been cleared by the Food and Drug Administration.

Each device works slightly differently based on specific user needs related to the organ type, Anderson said. For example, the heart preservation device has pouches filled with proprietary cooling solutions that keep the organ at optimal temperatures during transport. The heart is contained within a nested canister and is then housed in a wheeled shipper container that works to protect and insulate the inner contents.

All of Paragonix’s devices display the organ’s temperature while it is being transported. They also use bluetooth monitoring and tracking technology to allow surgeons to track the organ’s exact location throughout its journey, even in flight, Anderson pointed out.

Paragonix markets and sells its devices to transplant centers and OPOs across the U.S. and Europe. Last year, over one in five thoracic donor organs transplanted in the U.S. were preserved using a Paragonix device, Anderson declared. She also said that 19 out of the 30 largest U.S. heart transplant programs rely on Paragonix devices to safely preserve, track and transport organs to their intended recipients.

There are a few other companies that make devices to preserve donor organs, such as Organ Recovery Systems and Bridge to Life. But Anderson contended Paragonix’s devices are easier to use.

“Most other organ preservation devices are extremely complicated, labor intensive and require special personal or extensive training, while Paragonix’s devices are lightweight, user friendly, and a user can be trained in less than an hour,” she declared.

Anderson explained that her company’s main competition is the legacy way of transporting organs, as many organizations still receive damaged organs that were transported using the over-ice method. The medical industry needs to move away from this method of organ preservation because devices like the ones that Paragonix sells are clinically proven to improve patient outcomes and reduce the risk of post-surgical complications, she declared.

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The rift between hospitals and commercial insurers is age old. But a new survey shows the relationship isn’t going to improve any time soon.

The American Hospital Association (AHA) survey, released Wednesday, found that 78% of hospitals and health systems said their relationship with commercial insurers is getting worse. Less than 1% said their relationship is improving and the rest said it has stayed the same.

The survey included 304 respondents representing 772 hospitals. All of the respondents are members of AHA.

One of the main culprits behind the worsening relationship appears to be certain practices of commercial insurers, such as prior authorization. The report found that 95% of hospitals and health systems said staff time spent seeking prior authorization approval is increasing. Meanwhile, 62% of prior authorization denials are eventually overturned, the report found.

Aside from time spent on administrative procedures, costs may also be a factor in the relationship souring. A whopping 84% said the cost of complying with insurer policies is also increasing.

“Misuse of utilization management tools like prior authorization has several negative implications for patients and the health care system,” AHA said in the report. “Prior authorization denials can result in delays of necessary treatment for patients and ultimately lead to unexpected medical bills. The extensive approval process that doctors and nurses must go through adds wasted dollars to the health care system through overuse of prior authorization, inefficient submission processes, excessive requests for unnecessary documentation and the need to reprocess inappropriate payment and coverage denials.”

AHA also takes issue with claims denials, stating that commercial health insurers are “increasingly delaying and denying coverage of medically necessary care.” However, 50% of claims denials that are appealed are overturned, AHA said.

There are financial consequences to these delays and denials, AHA stated. The survey found that 50% of hospitals have more than $100 million in accounts receivable for claims that are older than six months, totaling $6.4 billion in delayed or potentially unpaid claims among the 772 hospitals in the survey. Another 35% of respondents said they’ve lost $50 million or more in revenue because of denied claims.

“These payment delays and denials for medically necessary care have serious implications for the financial stability of health care providers and compound fiscal challenges plaguing our health care system,” AHA said.

The report also provided several policy recommendations, including streamlining the prior authorization process and increasing oversight on insurers. Additionally, the organization sent a letter to the Department of Health and Human Services and the Department of Labor, calling for action against commercial payers.

“Health care coverage must work better for patients and the providers who care for them. We urge you to take additional steps to ensure adequate oversight of commercial health plans, including those offering Medicare Advantage plans, this open enrollment season,” the letter stated. “Individuals and families should feel assured that the plan they choose during open enrollment will actually be there for them when they need care.”

America’s Health Insurance Plans (AHIP) declined to comment publicly on AHA’s survey, but previously told MedCity News that commercial insurers’ practices are needed to reduce expenses for patients.

“Health insurance providers advocate for the people they serve by ensuring that the right care is delivered at the right time in the right setting — and covered at a cost that patients can afford. Prior authorization prevents waste and improves affordability for patients, consumers, and employers,” Kristine Grow, AHIP spokesperson, previously said. “Health insurance providers have a comprehensive view of the health care system and each patient’s medical claims history and work to ensure that medications or treatments prescribed by clinicians are safe, effective, and affordable for patients. This results in better outcomes and lower costs for patients.”

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