The Healthcare Payment Cycle: A Knowledge Imbalance and the AI Solution

The healthcare payment cycle is an intricate and often dysfunctional system. Patients place their trust in payers  to cover a substantial portion of their medical expenses, yet many encounter the frustrating reality of denials. Denials occur when a payer refuses to pay for a particular service, treatment, or pharmaceutical prescribed by a medical practitioner. This raises the question: why does this happen in the first place?

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Healthcare providers prescribe treatments based on their expertise and the specific needs of their patients. These treatments are then translated into standardized codes, which are submitted to payers for payment. In an ideal world, they would process these claims and make payments accordingly. Unfortunately, this is where the system breaks down. According to the American Hospital Association approximately 15% of all claims are denied, even when prior authorization was performed, 54.3% of which are ultimately overturned. But in order to get those denials overturned healthcare systems and hospitals are spending $19.7 billion annually. 

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The Core Issue: A Knowledge Imbalance

Payers rely on complex coding taxonomies to align treatment with payment policies. If a submitted code or code combination doesn’t precisely match the ever-evolving rules, the claim is denied. Insurers have the financial, personnel and technology resources to constantly refine these rules and changes. Providers, on the other hand, are frequently at a disadvantage on all three fronts, leaving them to work with outdated or limited information. It’s nearly impossible for them to stay on top of every payer’s latest requirements. This imbalance of knowledge leaves providers at a disadvantage, leading to inefficiencies, financial losses, and often impacting patient satisfaction and outcomes.

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This knowledge imbalance manifests in several ways:

• Lack of Transparency: Payer rules and regulations are often opaque and difficult for providers to understand creating grey areas that create unnecessary confusion for providers and payers.
• Rapidly Changing Rules: Insurers frequently update their policies and do not always immediately publish the changes, making it challenging for providers to stay informed.
• Coding Complexity: The intricate coding systems require specialized knowledge that many providers lack.

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This knowledge gap leads to a significant number of denied claims, resulting in:

• Delayed payments: Disrupting cash flow and impacting the financial stability of providers.
• Increased administrative burden: Requiring providers or their staff to spend valuable time on claim appeals and denials.
• Frustration for patients: Causing confusion and anxiety for patients who are already facing medical challenges.

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The AI Solution

Artificial intelligence (AI) can help bridge this knowledge gap by:

• Analyzing payer policies: AI can continuously monitor and analyze payer policies, identifying changes and potential risks.
• Automating claim submissions: AI can ensure accurate and timely claim submissions by automating the coding process and identifying potential errors that need human intervention.
• Streamlining the appeals process: When denials occur, AI can analyze the denial reason and suggest appropriate code corrections, accelerating the appeals process.

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By leveraging AI, providers can:

• Gain a deeper understanding of payer rules and payment trends for more informed contracting.
• Reduce the risk of denials and adjustments
• Improve cash flow,financial stability and payment transparency for budgeting.
• Enhance the patient experience by minimizing administrative delays and unexpected costs.

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Balancing the Knowledge Scales

Regardless of how efficient of a process a provider has to overturn denials, it is inefficient and wasteful if the denial could have been prevented before it happened. AI can address the root cause—provider-payer knowledge imbalance—preventing denials and appeals, streamlining payments, and improving patient care.

Disclaimer: This blog post is for informational purposes only and does not constitute medical or financial advice.

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