Does your denial management plan provide you the necessary data to work through the root cause?

Author: Amber Civitarese & Stacie Bon

It’s a common problem seen in practices nationwide: the billing department sees an uptick in denials. The billing manager expresses concern to the clinic manager, who provides what he or she feels is the root cause for these denials. The billing manager chases down what they believe is the solution, only to realize months later that what they “thought” was causing the bulk of denials is in fact only a minor issue and not the driving reason at all. Their “root cause” was based on guesswork, and the reason for the high denials remains a mystery.

Claim denials are one of the largest areas of lost revenue for healthcare organizations. Nationally, U.S. hospitals lost approximately $42.8 billion in uncompensated care – care provided for which no payment is received – in 2014, according to Health Forum, AHA Annual Survey Data, 1990-2014, January 2016 update.

Implementing a denial management process

The first step in implementing a denial management process is to assess the causes and evaluate trends in denials. For example, perhaps claims sent to a specific insurer are frequently denied, or a particular diagnosis code is causing a high denial rate.

To get to the root cause of denial issues, practices need to implement a denial management process that leverages comparative data to reveal the true reasons for denials. Key points to consider include:

  • Managing high-cost claims associated with high dollar procedures
  • Evaluating time spent on high-volume denials, including reworked claims that per claim are not expensive, but drain resources while working to resolve
  • Identify hidden cost denials – billing for procedures that the practice expects to be denied and will never appeal the denial, and as a result, consistently inflate their A/R
  • The ability to identify trends in payer denials, including implementing a simple method for tracking and monitoring payer denials
  • Implementing a simple process for sharing payer denial trends data with your payer provider rep to resolve denials that may be occurring due to incorrect processing on the payer side

Leveraging healthcare comparative data can help you establish benchmarks and baseline standards needed to create a denial management plan. Comparative analytics can track denial trends to identify problem areas and develop corrective actions. For example: are claims being submitted with the correct code? Is the front office staff billing properly? Without good data, any potential resolutions are based solely on guesswork.

Here is a step-by-step guide that can be useful in implementing a denial management plan:

Step 1:  Identify claims that are taking longer to be paid due to an increase in denials.

Step 2:  Compare the denial rate year over year.

Step 3:  Trend denials by reason code and specialty compared to state and national averages. For example, if top denials are all related to eligibility, work with staff to determine what part of the process is breaking down.  Confirm employees are checking eligibility during patient registration or prior to. Depending on your process, your practice might benefit from purchasing a tool to assist in automated eligibility checks.

Step 4:  Evaluate high volume or high dollar procedures, evaluating key areas such as length of time to process a claim, whether or not that time is increasing, and how it compares to state and national averages.  After evaluating the data, if you find delays in getting claims posted in the PM system, look at other business processes to determine reasons for the delays.

Step 5:  Check the average time it takes for payers to process your claims.  If the average time is increasing, review your data against state and national averages to determine if others are experiencing the same spike. 

Step 6:  Prioritize issues based on the greatest ROI and review workflow to ensure best practices are implemented and followed. 

And, on an ongoing basis:

  • Make denials management a team effort between your billing departments, front desk and coders/physicians.
  • Ensure your team is communicating clearly, and work with the front line staff to help them manage denials by providing them with relevant data to help manage denials.
  • Be sure your billing department is approaching the front desk and coders with an action plan that contains relevant data and identifies next steps.
  • Schedule a meeting, create a joint solution and monitor the outcome as a cohesive team.

While the reasons for claim denials can vary, being proactive in implementing a claim denials management process that leverages actual data instead of guesswork can save your practice millions of dollars in otherwise lost revenue.

This Article was first published in Billing, the Journal of the Healthcare Billing and Management Association, Vol. 21, May 2016.