Denials—no matter their cause—place a massive administrative and financial burden on healthcare practices. Out of the most important revenue cycle tasks, revenue cycle and finance leaders overwhelmingly voted denial management as the most demanding and time-consuming. Denials are also remarkably costly averaging about $118 per denied claim, causing a loss of up to 2% of revenue.
To make matters more difficult…
…claims denials are on the rise. In fact, rates have been increasing for years. Between 2016 and 2020 alone, average denials skyrocketed by 23%—and nearly 90% of hospitals reported an increase in payment denials within that same time. Some reasons stem from internal operations challenges, including:
- Insufficient training and education yield documentation issues and coding errors
- Lack of automation in claims submission leaves room for human error
- Outdated technology complicates processes and misses the mark on quality control
- Staffing shortages and operational inefficiencies create holes in workflows and gaps in critical expertise
Other reasons for denial rate increases lie outside providers’ sphere of control:
- Payors changing reimbursement criteria leads to confusion and inconsistency
- Payors are incentivized to hold money as long as contractually possible, which incentivizes them to delay claims payments—especially in a high interest rate environment
- Automated reviews can overlook important patient nuances and raise unnecessary flags
- Contract discrepancies can spur disagreement between payors and providers
- Confusing or inexplicable payer decisions – such as these examples
On the plus side, a sizable percentage of denials truly are preventable. On the minus side, it can be an overwhelming administrative burden to take proactive action to prevent denials. However, with the right partners and processes in place, it is achievable and well worth the effort.
To help change that reality, this blog post shares a step-by-step breakdown of handling a denial, offers insights into denial prevention, and delivers five proven strategies to transform your practice’s denial management strategy. Perfect timing, as HealthLeaders are calling 2023 the “year of reducing denials.”
6 steps of the denials management process
To make progress in denial management, healthcare practices must thoroughly understand and focus on each separate step of the denial management process.
- Identify denial: Gather information about the claim, including the source (e.g., payer notification, claim status report), denial code, and reason for denial. These details are critical to initiating the denial management workflow.
- Analyze root cause: Carefully review claim documentation, billing processes, and payer policies to understand how the denial happened. Keep note of trends and patterns identified during root cause analysis.
- Determine preventability: Using the information gathered, decide whether the denial was preventable or not. If it was, assess what could have been done differently in the claims process to avoid this outcome.
- Assign priority: Apply limited resources thoughtfully by prioritizing denial management according to financial impact and likelihood of successful rework or appeal.
- Attempt rework: Collaborate across departments (e.g., clinical, coding, billing) to resolve the identified issues and resubmit the claim. Work required often includes correcting coding errors, obtaining missing documentation, or clarifying clinical information.
- Initiate appeal: If a rework and resubmit is not successful, you may choose to initiate an appeal. Many insurers have several appeal levels, each with specific deadlines and requirements, so be as detail-oriented and efficient as possible.
Denial prevention: Putting in work now to avoid hassle later
Recall steps 1-3 where we are figuring out the how, why, and where of the denial. The information gathered in these steps is clearly important to the immediate rework or appeal process, but it is also critical to a longer-term strategy: denial prevention.
Most denials are preventable—and nearly half of preventable denials cannot be recovered—so it is imperative for hospitals and practices to prioritize their revenue cycle operations. Fortunately, claims denials most often stem from issues that can be addressed in a simple, straightforward manner. Some of the most common, potentially avoidable root causes are:
- Registration/eligibility: Front-end issues with patient information entry, coordination of benefits, plan coverage, and benefit maximums
- Missing/invalid claim data: Back-end issues with missing or invalid EOB and billing issues
- Authorization/pre-certification: Front-end issues with invalid authorization or services exceeding authorization
- Medical coding: Mid-cycle issues with level of care provided, inconsistent procedure codes, and overlapping services
Reviewing and adapting the processes associated with the root causes allows hospitals practices to save money (costs associated with inefficiency, extra work, and delayed payment), preserve time (by doing it right the first time), and improve overall claim success rate (remember: not all preventable denials are recoverable).
5 proven strategies to improve your denials management
So far, we’ve discussed that denials are difficult, costly, and on the rise—but there are actions we can take to prevent them. Let’s explore how.
- Build a foundation of data: Real-time data and analytics can transform an organization’s ability to submit successful claims and efficiently handle denials. Develop a structured, data-driven denial management process with clearly assigned responsibilities to empower teams with the information and framework necessary to perform their best.
- Dial into documentation: There is almost always room to do better with documentation, and improvement initiatives should be ongoing. Conduct regular audits to identify and address issues or misunderstandings and provide (and require completion of) continuing education on the latest coding guidelines. To boost engagement among staff and clinicians, use visible data, offer valuable incentives, and identify ways to smoothly incorporate documentation changes into daily workflows.
- Follow in-network provider contracting and enrollment best practices: Refined processes are key to protecting practice revenue and avoiding denials. We recommend these best practices:
- Establish in-network status and cultivate strong relationships with the right payors for your region
- When completing initial contracting, start early and ensure that each plan’s specific requirements are fulfilled (Dot EVERY “i” and cross EVERY “t”)
- Know your payors. Payors have different rules for provider contracting that can affect payments and denials. Start by understanding what kind of application is needed for the contract or enrollment that you are trying to complete (e.g. group vs. Individual and hospital-based vs. non-hospital based). Then, determine whether the payor back dates claims or goes by date of submission. Ask if there is a time lapse between provider approval and provide load. (Be sure to follow up as this is often a manual process that can be delayed depending on the processor)
- Maintain providers’ in-network status by carefully following the data validation and re-credentialing directions in each unique network contract
- Ensure credentialing/provider enrollment and billing teams work closely together to keep claims processing and to quickly identify provider enrollment-related denials.
- Be proactive: Don’t wait for a denial to start making positive changes in your processes and operations. Set your organization up for success rather than scrambling when things go wrong. Ensure leaders stay updated on regulatory changes and communicate related effects to their teams. Invest wisely in technology that automates pre-submission claim review to cut down on errors. Conduct regular pre-submission audits to assess quality and identify issues.
- Set, share, and monitor KPIs: Set thoughtful targets with your billing, coding, and clinical teams. Encourage interdepartmental collaboration by establishing KPIs that rely on teamwork to accomplish. Share goals and KPIs in a manner that ensures understanding by all team members. Monitor progress toward KPIs closely—quickly acting on improvement areas and celebrating big wins.
Pro tip: Get more tips from the pros
Taking on denial management is a big task; we get it! With 30 years in the business and our dedication to optimizing the revenue cycle, the Resolv team is well-equipped to deliver custom solutions for your unique situation. Let’s do this together.
Chandy Hanna, CHBME, CHCO, Vice President of Operations, Resolv Healthcare
Chandy Hanna is a senior executive with more than 20 years in the finance and healthcare industries. Since 2004, Chandy has worked in hospital and hospital-based provider revenue cycle management operations. She oversees proper operational controls, administrative and reporting procedures, and people in place to effectively grow the organization and to safeguard financial strength and operational efficiencies. She is a Certified Healthcare Business & Management Executive (CHBME) through the Healthcare Business Management Association. In addition, Chandy is a distinguished Certified HIPAA Compliance Officer (CHCO) through the American Institute of Healthcare Compliance, Inc.