The most important action a revenue cycle department can make is to implement a well-thought-out process for managing claim denials. Of course, the best way to manage denials is to avoid them in the first place, and this should be a top priority.
CLAIM DENIALS CAN DRAIN YOUR REVENUE
Denials are climbing at an alarming rate for many hospitals. The average claim denial rate across the healthcare industry is five to 10 percent. These claim denials cost each healthcare provider an average of $5 million every year. One problem is that only 35 percent of denied claims get followed up on by hospitals by appealing them or by submitting a corrected claim.
Claim denials represent one of the biggest causes of lost revenue for medical facilities and adopting a set of best practices surrounding claims can help keep denial rates low and make appeals successful more of the time.
DENIALS ARE EITHER PREVENTABLE OR UNPREVENTABLE
According to “The Change Healthcare 2022 Revenue Cycle Denials Index” on Health Leaders Media, registration and eligibility remain the top preventable denials in medical coding. This is mostly due to coordination of benefits, missing or invalid claims data or lack of medical documentation requested. A denial may be triggered if just one field is left blank, including social security number, plan codes, modifiers or address.
There are additional reasons that preventable denials occur:
- Medical documentation requests
- Medical necessity
- Medical coding
- Avoidable care
- Missing or invalid claim data
- Untimely filing
Do you have a general idea of how much you lost to denied claims last quarter? What about which direction that number is trending? Here are some helpful tips to get you on the right track:
1. Know the Main Reasons for Your Claim Denials
A proactive approach is essential to identifying root causes as the basis for denial management and prevention. Getting to the root cause of preventable denials can help a provider improve their revenue cycle and prevent these denials.
2. Addressing Claim Denials
Getting claim denials under control means determining the root causes of your denials. To do this, you must first examine what happens before a claim is created and submitted. This can be hard work, but it can make a positive difference in your revenues if you do. You may notice trends, like claims being filed late or repeated issues with preauthorization. If you identify a trend in claim denials, you can address the cause by reviewing the entire claims submission process end to end. Ensure your scheduling and intake personnel understand how to conduct pre-authorizations and when they are necessary; and, if claims are repeatedly submitted late, examine the workflow process to see where it could be accelerated or automated.
Almost 90 percent of denials are avoidable. The key to avoiding denials is to train your staff to avoid mistakes before they are made.
At least 24 hours before a patient’s scheduled service, the patient’s demographic data should be verified, as well as their insurance coverage and benefits. It is important that you follow up quickly. On a regular basis, distribute denied claims to the billing staff for proper handling. This should happen every day.
All correspondence should be read daily for changes in billing or reimbursement policy from providers. This gives providers the opportunity to amend their policies and procedures to avoid denials. Use denial codes to educate medical billing staff when there is a denial due to incorrect medical coding.
Some denial management processes report and prioritize denials based on claim charges or balances. This may lead to suboptimal prioritization because some payers and some contracts have a lower payment-to-charge ratio than others. A better measure of value for prioritizing denials is the expected reimbursement on the claim. The expected reimbursement is based on the provider’s contract with the payer and is a measure of the true revenue-at-risk.
Segmenting and prioritizing the non-preventable denials based on their expected value, level of effort involved to overturn, and the probability of overturning, can help the organization make the denial management process more efficient, as well as increase and accelerate the cash flows. Identifying the preventable denials can help you improve the revenue cycle.
Denied claims are also either soft or hard denials. A soft denial has a temporary effect on cash and has the potential to be paid in full. The facility will need to follow up, but an appeal is not required. A soft denial can be overturned by submitting a corrected claim or by submitting additional information. A hard denial represents a loss of revenue that must be written off, and therefore, an appeal is required.
3. Making All of This Part of an Overarching Strategy
A clean claims strategy should be a strong priority. Simply putting out metaphorical fires when dealing with claim denials is not a good strategy for achieving and maintaining high clean claims rates. Ultimately, your overarching strategy for keeping denied claims to a minimum should include counting denied claims, identifying why they were denied and tracking claims to measure clean claims performance over time. Doing this effectively requires full understanding of your billing management workflows and medical billing software. Problems leading to denied claims may be found at just about any point in the patient cycle, from when they first schedule an appointment until the insurer pays (or doesn’t pay) the claims.
4. Have a Denial Appeal Process
Naturally, you would like to never have to appeal a denied claim, but that is not realistic for most providers. Develop a process for dealing with denied claims, and make sure your billing staff understands what to do and what documentation is required. It is also important to know how different insurers deal with appeals. For some, a phone call may suffice. For others, you may have to submit more forms or documentation to get them to even consider your appeal. Having a streamlined claims process helps because it can eliminate the problem of claims being denied due to late filing.
5. Set Goals and Monitor Progress Toward Them
As with any type of business improvement measure, setting goals and then tracking your progress toward them is essential to minimizing claims denials. Goals should be shared with all affected staff members, as should the mechanisms for how progress will be tracked. Every quarter, you should find out what the numbers tell you compared to the previous quarter.
When you reach your goals for minimizing claims denials, let your team know. Achieving goals can be terrific for morale, and it is okay to celebrate the big successes.
Jim Yarsinsky, CRCE-1, is president of Zinserv Healthcare. Zinserv employs over 100 elite professional medical billing experts and revenue cycle consultants. The company’s services range from interim revenue cycle staffing, A/R legacy cleanup and extended business office to coding and consulting engagements. Mr. Yarsinsky is a specialist at creating process efficiency and partnering with our customers to provide industry-leading revenue cycle solutions. He earned the designation of Certified Revenue Cycle Executive (CRCE-1) in 1995 from the American Association of Healthcare Administrative Management. Yarsinsky also earned his BA in Business Administration from Rutgers University. He can be reached at 877.266.6691 or at jyarsinsky@zinserv.com.