While Medicare Advantage claim denials represent 17% of initial claim submissions, including those submitted by nursing home providers, about 57% of these denials are ultimately overturned.

However, MA claim denials result in a 7% net reduction in provider MA revenue, due to the dollar-weighted share of claim denials that were not overturned, according to a study published in Health Affairs this month. Findings highlight the financial burden for nursing home operators dealing with denials, even after some payments are recovered.

The indirect impact of denials could be even greater, researchers said, with such denials playing an important role in MA spending reductions and driving outcome differences between MA and traditional Medicare.

Claim denial rate varied considerably across the care continuum, and based on the type of patient and provider, researchers found. Notably, post-acute care settings including nursing homes, and hospital outpatient settings saw an initial denial date of 21.1%, slightly higher than the average.

Researchers pulled 2019 claims data for 30% of the entire MA market for the study, consisting of 270 million MA medical claim submissions that year. Authors of the study were Boris Vabson, Andrew L. Hicks, and Michael E. Chernew.

Results from provider surveys indicate initial claim denial rates of 8% for traditional Medicare, compared to 16% from a March survey published by Premier Inc., which is referenced in the Health Affairs study.

“Although we were unable to examine traditional Medicare’s claim denial rate in this study, we expect it to be meaningfully lower than MA’s,” researchers said.

Lower overall rates of denials under traditional Medicare could be tied to fewer prior authorization denials, since prior auths are absent under this type of Medicare, researchers noted. Or, lower denial rates could be partly driven by fewer medical necessity-specific denials.

Overall, denials under MA could have favorable effects, including deterrence of wasteful care and an increase in financial savings. Potential downsides include reductions in patient care access and reduced provider revenue.

“Higher denial rates under MA, compared with traditional Medicare, could in principle translate into superior performance of MA along some dimensions and inferior performance on others,” researchers wrote. “CMS consequently needs to weigh these trade-offs when considering potential restrictions on claims denials within MA or when considering potentially expanding the use of denials in traditional Medicare.”

Likewise, Congress needs to be mindful of the trade-offs when considering legislation related to claim denials and MA.

“The net benefits of denials will be greater for some service types and settings than others, arguing in favor of denial policies that are targeted rather than broad based,” researchers said.