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Reimbursement denial and reversal by health plans at a university hospital
Jeffrey D Greenberg1, Donald R Hoover, Ranita Sharma
1Division of Rheumatology, Department of Medicine, New York University School of Medicine, New York, USA.
Insights
Health plans frequently deny or downgrade hospital reimbursement, with more profitable plans exhibiting higher rates. This practice impacts hospital finances and patient care, necessitating evidence-based standards for fair reimbursement.
Area of Science:
- Health economics
- Hospital administration
- Health services research
Background:
- Health plans use denial and downgrading of hospital reimbursement to control costs and maintain profitability.
- Understanding patterns of discounted reimbursement is crucial for hospital financial health and patient care.
Purpose of the Study:
- To describe the patterns of discounted reimbursement for hospital days at a university hospital.
- To analyze the variation in denial and downgrade rates across different health plans.
Main Methods:
- Retrospective cohort study of per diem hospitalizations in 1999.
- Defined discounted days (denied/downgraded) and reversal days (reversed after appeal).
- Used logistic regression to analyze outcomes by plan and specialty, adjusting for patient and admission factors.
Main Results:
- 10.2% of 59,265 hospital days were initially denied or downgraded.
- 28.9% of these discounted days were reversed upon appeal.
- Discounted day rates varied significantly by health plan (1.2%–18.8%), as did reversal rates (23.2%–85.3%).
- Higher denial/discount rates correlated strongly with higher health plan net profit margins and lower medical loss ratios.
Conclusions:
- Denials and downgrades of hospital reimbursement are common and vary significantly among health plans.
- More profitable health plans tend to have higher rates of denial and downgrading.
- Development of evidence-based standards for reimbursement decisions is essential for patient care and financial stability.
Purpose:
Denial and downgrading of reimbursement for hospital days are two strategies utilized by health plans to maintain profitability. The goal of this study was to describe patterns of discounted reimbursement at a university hospital.
Methods:
We performed a retrospective cohort study of consecutive per diem patients hospitalized in 1999. We defined a discounted day as a day fully denied or downgraded and a reversal day as a day reimbursed at a higher level after appeal. The study outcomes included the probability of a discounted day and the probability of a discounted day to be later reversed. Covariance logistic regression was used to compare these outcomes by plan and physician specialty after adjusting for age, sex, race, length of stay, and diagnosis. Correlations with plan characteristics were analyzed.
Results:
Of 59,265 hospital days, 6074 days (10.2%) were initially denied or downgraded. On appeal, 1755 discounted days (28.9%) were reversed. The percentage of days discounted per plan ranged from 1.2% to 18.8% (P <0.001), whereas the percentage of discounted days that were later reversed ranged from 23.2% to 85.3% (P <0.001). The qualitative magnitude of these associations and statistical significance were unchanged in adjusted models. Strong correlations were found between the adjusted odds ratio for a discounted day and net profit margin (R = 0.81) and medical loss ratio (R = -0.77).
Conclusion:
Denials and downgrades are frequent, with marked variation by health plan. More profitable plans had higher denial and discount rates. Evidence-based standards for denials and downgrades are needed to maintain optimal patient care and the fiscal health of hospitals and health plans.
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