Gaining a Competitive Edge: Leveraging AI to Mitigate Financial Risk and Reimagine Revenue Integrity

Advancements in artificial intelligence (AI) and automation are a driving force behind a massive transformation in healthcare revenue cycle management (RCM). Their analytical capabilities coupled with their ability to enhance efficiency and security have made AI tools indispensable for high-performing revenue cycle teams, while advanced cloud-based solutions have brought them within the reach of provider organizations of all sizes.

By boosting investments into AI, healthcare organizations can position themselves ahead of the trends impacting revenue integrity and mitigate rising financial risk levels. However, optimizing their AI investments requires organizations to first undertake a careful evaluation of their options to ensure they invest in the right tools for their needs, objectives, and workflows.

An Environment of Elevated Financial Risk

To fully understand the potential impact of advanced AI and automation on RCM, it is necessary to have a clear picture of the current healthcare compliance and revenue integrity environment—a rocky terrain of heightened financial risk that requires an unwavering focus on operational execution to successfully navigate toward improved productivity and bottom lines.

While the news is not all negative—patient volumes and surgeries are rebounding from pandemic-era lows, with MDaudit data showing a growth of about 20%—positives are offset by increased financial risks elsewhere. For example, while patient volumes are up, so too are external payer audit volumes, which have increased exponentially with healthcare organizations receiving four times more demand letters during the first quarter of 2024 compared 2023. Further, the dollars at risk from these external audits doubled in the first quarter of 2024 compared to the same quarter in 2023, driven primarily by hospital billing (~98.8%) in terms of risky dollars (~$85.7 million).

MDaudit data shows that the RCM environment is also being shaped—and financial risk raised—by three additional trends:

• Average denied dollars per claim continued climbing in 2024. Medicare is driving the increase that MDaudit data shows is hitting hospitals hardest. The average denied dollars for Medicare inpatient claims is up more than 19% to $7,480 and by 7% to $365 for per professional claim.
• Initial response times to claim submissions continued rising in 2024, led by Medicare’s substantial increase of nine days for professional claims and four days for hospital outpatient and four days for inpatient claims. 
• Initial denial rates remain above 20% across hospital inpatient (27%) and outpatient (21%) segments, while professional denial rates were up 7%. Thus far in 2024, hospital observation has been the most often denied HCPCS code (26.45%), resulting in a loss of more than $802 million, while septicemia was the most-often denied DRG code (~50%), at a cost of more than $2.3 billion.

The septicemia denial rate is likely to be exacerbated by the expansion of the Office of Inspector General (OIG) 2024 Work Plan to include closer scrutiny of sepsis-related billing. OIG is concerned that hospitals may be financially incentivized to take advantage of the broader definition of sepsis for reimbursement purposes. Therefore, it will analyze Medicare claims to assess patterns in the inpatient hospital billing of sepsis in 2023 and describe how the billing of sepsis varied among hospitals—a move that means healthcare providers must ensure their billing practices for sepsis cases are both compliant and optimized for revenue generation. 

Other claims that will be more heavily monitored by OIG include utilization of peripheral vascular procedures; lower extremity peripheral vascular procedures; Medicare Advantage fraud; and medical equipment, prosthetics, orthotics, and supplies (DMEPOS) during inpatient stays.

Finally, payers are continuing to invest in AI-driven technologies for adjudication and payment integrity capabilities—exacerbating providers’ third-party audit risks and forcing them to increase their own investments.

The Role of AI in Mitigating Financial Risks 

AI and automation tools can play a central role in keeping provider organizations ahead of the trends impacting financial risk and revenue integrity. However, decisions on what to deploy must be based on the opportunity for a quantifiable return on investment (ROI). 

Their ability to rapidly aggregate, analyze, and transform large volumes of data into actionable insights makes AI and automation tools invaluable for identifying patterns and anomalies in billing, coding, and denial management. Key applications include identifying compliance issues that can lead to under- and overcoding, predicting claim denials, and providing a clear understanding of risks around external audits.

AI solutions can apply natural language processing for accurate clinical and payer documentation, and quickly respond to external audits to retain revenue. They can also paint a clearer picture of payer trends and help pinpoint problematic coders and providers who would benefit from targeted and/or ongoing education. 

Other ROI-generating applications include:

• Advanced AI-enabled denial management technology can play a crucial role in billing compliance by enabling a hybrid auditing approach and providing RCM tools to support a comprehensive risk-based strategy.
• Cloud-based AI platforms can democratize data insights, break down communication silos, and eliminate denial-related revenue leakage, driving informed decision-making and regulatory compliance. 
• AI-powered storytelling data presents trends and predictions, supporting decision-making, uncovering the root causes of issues, and paving the way for an optimized revenue cycle.
• AI enabled continuous risk monitoring helps detect and mitigate financial risks before they can impact revenue by continuously analyzing data to detect anomalies, potential compliance issues, and areas of financial leakage to allow problems to be addressed before they impact revenues.

Revenue Integrity Reimagined

With financial margins already razor thin and revenues under continuous threat from financial risks ranging from billing errors and payment denials to regulatory non-compliance and fraud, provider organizations cannot afford to sit on the sidelines of AI and automation. CFO’s must operate with a mindset of “It’s now or never” to deploy investments to drive efficiency and value.

By strategically expanding investments into these advanced technology tools and empowering their people, they can reimagine their approach to revenue integrity and stay ahead of the industry trends that are driving an exponential increase in financial risks. Doing so protects revenues, compliance, and long-term financial health—and creates a competitive advantage along the way.