According to the Healthy Hospital Revenue Cycle Index, $262 billion in healthcare claims are initially denied. It’s no secret that denials management has become one of the top issues experienced by healthcare financial executives. Many organizations have focused more intently on creating solutions that address denials head-on, along with their root causes. Executives understand that to truly avoid denials, claims need to be managed properly upfront…. to eliminate the need to be reactive later. In this article, we’ll cover the most common types of denials, a few ways to manage them, medical necessity, and how to break the cycle. Imagine the stability and financial strength your organization can gain when you take this step forward.
Denials Come in Many Forms
A recent Medical Economics article identifies the top 13 reasons for claim denials; some of which include:
- Lack of medical necessity for a specific service (s)
- Duplicate claim submission
- Patient ineligibility for services related to insurance plan changes
- Errors on claim forms (missing modifiers, inconsistent place of service, incorrect codes or data)
- Missed filing date deadline
The astounding truth is that 90% of these types of claim issues are preventable! It’s critical to start creating proactive strategies to ensure claims are submitted correctly and reimbursed, avoiding denials. If you are tired of correcting and re-submitting claims, it’s time to look upstream to identify the process that triggers these denials.
Have You Ever Wondered Why We “Manage” Denials?
Denials are managed to ensure that claims can be submitted and that compensation can be received for patient services. However, the better option should be to prevent denials, not manage them.
When a formal denials prevention process doesn’t exist or isn’t followed, the number of denials inevitably increases. This potentially places your organization at risk. Over time, the denials volume and process non-compliance can force healthcare organizations to take on the daunting task of reviewing what’s happening and optimize.
- Poor processes and lack of appropriate follow-up remain a huge problem… As I collaborate with organizations nationwide, I am continuously surprised by the limited focus on the little things. These minor issues can add up to millions of dollars in real bottom-line improvement! With organizations being forced to do more with less, it’s easy to let the “little things” slip. It’s important to face the problem head-on, remembering that the appeals process incurs recovery costs, requires more resources to rework a claim, and wastes resource time. As we learn to work smarter, we must become more efficient with our process, and eliminate as many touches as possible.
- Here’s an example… Many organizations do very little to address Advance Beneficiary Notices (ABN’s) in a meaningful way. These notices inform a patient that a specific service may not be covered by Medicare, leaving the responsibility of payment to the patient. Ideally, a provider should issue this form if a potential denial is anticipated.
There are a few factors unique to managing ABN’s. Though a patient may be responsible for payment related to services, the goal of a well-established ABN process is to work with the providers to justify the procedure and/ or tests. Inferring that the patient should be the responsible payer for the service should be the last resort.
- Organizations can add millions to their bottom line by implementing denial prevention and management best practices.
“One Rural NY hospital focused efforts on their ABN process by making an investment of $30,000 to establish and follow best practices, resulting in an immediate return of $10,000 within the first month, in reduction of medical necessity denials. After a year of maintaining their revamped ABN process, the return increased substantially to $120,000.”
With a focus on assessing your current processes and attention to department workflow, you can move away from managing denials and work to eliminate their causes.
Medical Necessity: One of the Top Denial Reasons
Over the years, medical necessity has been listed as one of the top five denial reasons. The more organizations use a reactive approach to correct denials after the claim has been submitted, the longer the issue will exist.
If the average provider only performs procedures and tests that are necessary, then the problem stems from a lack of appropriate explanation of the need for the procedure. Registration staff must be educated to request clarification and additional documentation if needed. Thorough clinical documentation should support correct coding, resulting in claim forms that are error-free and have a clear explanation description, prior to submittal for payment.
How Can You Break the Cycle?
Use a comprehensive denials prevention strategy to identify where your processes are misaligned with industry best practices.
Also, expand your understanding of revenue cycle improvement as an opportunity to show a significant and immediate ROI. Here is a list of six solutions as a guide to help you achieve optimal revenue cycle practices.
- Start with an operational efficiency review
- Use an interdisciplinary approach to fine-tuning your denials prevention process.
- Scrub outgoing claims to ensure that there is accuracy upfront.
- Dedicate specific resources to follow up on claims.
- Automate as much of the denials management process as possible.
- Invest in revenue cycle technology and leverage embedded analytics tools.
If Others Have Done It, You Can Too… with the right support
“After a revenue cycle assessment identified the admissions process as not meeting best practice expectations, one Southern California medical center engaged a project team to restructure their process -- the project cost was $40,000. In the first 3 months, denials decreased significantly, they achieved a $60,000 return on investment, with an annualized return of $240,000.”
The residual year-over-year improvement goes directly to the bottom line and provides additional capital that can be invested in the many needed improvements and enhancements for the organization.
While you contemplate your denials prevention strategy, also check out the blog entitled, “You Are Not Alone - The DNFB Challenge” to understand the common reasons that accounts are held in DNFB status, 6 steps to reduce DNFB’s, and how your back office can help as you streamline your process.
Engage ROI to Help You Get Started
ROI’s Best in KLAS team of certified revenue cycle experts are available to offer insights and answer your burning questions. With extensive knowledge in leading practice consulting, revenue cycle roadmaps, and system optimization, ROI has the team and approach to help you to drive revenue cycle excellence within your organization.
Schedule a call with ROI at https://roihs.com/contact-us