Kyle Sherseth | Vice President - Revenue Cycle Solutions
In 2021, denials rose to an average 11% of all claims, with the cost of denials increasing 67% year over year1. This translates to 110,000 unpaid claims for an average-sized health system. It’s no secret that healthcare organizations are struggling to improve their bottom line. The rise in labor and supply costs, coupled with an influx of payer takebacks, have spurred cost-saving initiatives across the U.S., driving providers to “do more with less”. Providers can support this initiative with proactive management of their denials.
Denials are defined as the refusal of an insurance company or carrier to honor a request by an individual, or provider, to pay for healthcare services. A denial is also an intentional reduction of payment resulting from failure to provide medically necessary services in an appropriate setting, failure to follow the payers’ technical guidelines, or failure to consistently document for the services provided.
Denials are classified as technical or clinical in nature. Technical denials are administrative or technical errors in the claim submission process such as incorrect patient information, incorrect billing codes or missing or incomplete documentation.
Clinical denials are based on the determination that the service or treatment provided was not medically necessary or appropriate for the patient's condition, or when there is a lack of sufficient documentation to support the medical necessity or appropriateness of the service provided. Unlike technical denials, clinical denials require more detailed review of the patient's medical records and often requires consulting with clinical experts to determine the medical necessity of the service provided.
Excessive claim denials can cause a backlog that is difficult to resolve, therefore providers often choose to write-off collectable amounts simply because they don’t have the resources to address them. Additionally, the cost of staff time to research, reprocess, and other associated expenses can add up quickly and increase the overall cost-to-collect. This all leads to cash flow issues and affects the provider's ability to meet financial obligations. Not to mention, it can cause a delay in treatment or an unexpected financial burden for the patient that more than likely will affect their satisfaction with care.
Approximately 90% of denials are avoidable2
Proactive denials management identifies and addresses the root cause of your denials to reduce denial volume and backlogs, decrease the time and resources required to manage them, speed up payment processing and improve cash flow—all crucial for the financial health of your organization.
Here are seven practices you can implement now to help prevent denials:
1. Verify accurate patient information, insurance eligibility and benefits prior to services:
Confirmation of accurate patient/guarantor information and insurance coverage helps to ensure a proper billing and payment process, verifies coverage for services prior to treatment and prevents nonpayment due to rejected claims and responsible parties not receiving invoices. Registration and eligibility has remained the top denials cause since 2016, approaching 27% of denials3, and is usually preventable.
2. Ensure accurate patient documentation and coding:
Ensuring your patient documentation is complete, accurate, and up-to-date provides payers with an irrefutable depiction of the patient's condition and treatment. This allows providers to obtain appropriate and optimal reimbursement for the services provided. Insurance companies and government programs such as Medicare and Medicaid rely on accurate coding to determine the amount of payment due to the provider.
3. Track and analyze denial trends:
By tracking and analyzing denial trends, providers can identify patterns or commonalities among denials, such as specific codes, services, or payers. This helps providers to understand the root causes of their denials and implement targeted interventions to address them. Additionally, providers can proactively identify areas of the revenue cycle that may be prone to denials and implement prevention strategies. This can include improving documentation practices, updating coding guidelines, or negotiating with payers to address common denial issues.
Denials have a significant financial impact on providers, both in terms of lost revenue and the costs associated with appealing them. By tracking denial trends and analyzing their impact, providers can better understand their financial implications and prioritize efforts to address them. Tracking denial trends over time, providers can evaluate the effectiveness of their denials management strategies and adjust as needed. This drives continuous improvement in revenue cycle performance and reduces the incidence of denials over time.
4. Educate staff or seek outside expertise:
A lack of expertise in handling the overall claim denials process and requirements for accurate documentation is often a major contributor to increased denials. When your resources are experts in denials management, they can help prevent them from occurring in the first place. They can identify common reasons for denials and work with clinicians and other staff members to address these issues before claims are submitted. They are also more likely to be aware of compliance issues and take appropriate steps to ensure that claims are submitted in accordance with applicable regulations and guidelines.
When denials do occur, knowledgeable resources can quickly identify the cause and take appropriate action to resolve it. They can work with payers to appeal denials and provide additional information or clarification as needed, resulting in faster resolution and more timely reimbursement.
Bringing on an experienced partner can help you regain control of your denials process without spreading existing resources too thin. They can also help improve revenue by identifying opportunities for revenue enhancement, such as identifying underpayments or unbilled services.
5. Establish a denial management team:
A dedicated denials management team should be established to manage and monitor claim denials. This team focuses exclusively on denials, allowing them to develop specialized knowledge and expertise in this area. The team should consist of individuals from various departments, including coding, billing, and clinical staff, working collaboratively to identify and address the root causes of denials. The improved communication and collaboration between these departments helps prevent denials due to information gaps.
A dedicated denials management team takes ownership of the process and is held accountable for reducing the volume of denials and increasing reimbursement rates. They can also provide training to other staff members on best practices for denials management, such as coding and documentation requirements. This ensures that the denials management process is given the attention it deserves, is effectively managed, and delivers on the goal of prevention.
6. Conduct regular audits:
Proactively revenue cycle audits can identify and address issues before they lead to denials. Audits help identify errors in coding, documentation gaps, and billing practices that may be leading to denials or underpayments. They also ensure claims are being submitted in compliance with applicable laws and regulations, preventing costly fines and penalties associated with non-compliance.
Revenue cycle audits can also help identify areas of the revenue cycle that are inefficient or ineffective, such as such as manual processes or outdated technology. By identifying these areas and implementing improvements, providers can improve operational efficiency and reduce costs.
7. Monitor performance and Key Performance Indicators (KPIs):
By monitoring KPIs, providers can evaluate the performance of their denials team, identify areas of the process that are working well and areas that need improvement. KPIs can help providers set realistic and achievable goals for their denials team and determine whether they have the adequate resources to meet those goals and objectives. This ensures that the denials team is effective, can identify and prioritize areas for improvement and take corrective actions before denials occur.
Additionally, KPIs can help providers track the financial impact of denials and denials management efforts. Providers will understand the financial implications of denials and can make informed decisions.
In summary, denials can have a far-reaching impact on a healthcare organization, affecting everything from finances to resources to patient experience. Preventing denials requires a proactive and collaborative approach that includes steps to increase efficiencies, provide accurate documentation, educate or augment staff, and track the performance of your denials management process.