Hospitals and health systems have been managing shrinking profit margins for more than a decade. This past year, adding COVID-19 and the financial and operational impacts that come with it have made it more critical than ever for providers to focus on effective revenue cycle management. Yet, denials and denial write-offs continue to increase – from both government and commercial payers alike.
In 2017 alone, an estimated $262 billion, or nine percent of claims submitted by hospitals were denied the first time around. While many are reversed upon appeal, that rework comes at a high price tag too – some experts estimate approximately $118 per claim. In many cases, these inefficiencies in the revenue cycle can be prevented. But, in order to prevent denials, you need to know why they’re happening.
Top Reasons for Denials
Many of today’s payers are using technology-enabled solutions to automate the denial process, which puts the burden on the healthcare providers to frequently fight back with an appeal. According to research conducted by The Advisory Group, some of the most common reasons for automated denials include: incorrect discharge status (44%), outpatient billing error (16%), outpatient coding error (10%), duplicate payment (5%), inpatient coding error (MSDRG, 2%).
While every health system will have to deal with denials, reducing the sheer volume can have a significant impact on the bottom line. Not only does less denials mean less denial write-offs, but it also means far less administrative headaches that come with chasing down and appealing each denial. Here are our top strategies for preventing and addressing denials.
- Know the coverage criteria. Because each payer has its own criteria for determining what’s covered, providers are left to balance numerous lists of complicated criteria. From CMS National and Local Coverage Determinations (NCDs and LCDs) to Milliman-Care Guidelines (MCG), navigating various payer policies is critical to keeping denials down.
- Identify and mitigate. Getting to the root cause of your denials is an important step toward identifying areas of opportunity. Whether it’s a problem with obtaining proper pre-certification or prior authorizations, untimely filing, lack of medical necessity, incorrect patient information, or duplicate claims – identifying why most of your denials are occurring can help you develop a plan to mitigate future denials. To do this, partner with case management, patient access or whichever area can help improve future performance.
- Get providers involved. We all know many providers are already overburdened and on the brink of burnout. The last thing they need is someone who doesn’t understand the challenges of practicing medicine lecturing them about payer policies and clinical documentation. That’s where having physician advisors can help bridge the gap between revenue cycle management teams and frontline providers. These advisors speak physician language and can garner the respect and credibility needed to communicate opportunities, challenges and why denials should matter to providers.
- Concentrate on clinical documentation improvement (CDI). When it comes to documentation, ongoing education, training and performance improvement efforts are critical to reducing denials. Ensuring your CDI teams are highly trained and include physician advisors can help improve the effectiveness of your program.
- Focus on concurrent review. Particularly for those providers with a high volume of denials due to lack of medical necessity, an effective concurrent review process can help reduce denials – while also ensuring patients are getting the right care at the right time. With concurrent review, clinical utilization management teams (often nurses) are reviewing charts in real-time, which means any errors or inconsistencies can be addressed with the provider before the patient is discharged.
- Automate denial management. While less denials are better, they’re not going away anytime soon. That’s why it’s worth moving away from manual processes and instead adopting an automated claims denial management system. This technology allows RCM teams to organize and work denials with ease and convenience. Denials can be sorted by value – allowing staff to address the most costly denials first. Furthermore, these systems can help identify common root causes that will lead to fewer denials over time.
Denials management and denials prevention is an extremely challenging endeavor for most healthcare organizations and one that involves a team approach involving all key stakeholders from all revenue cycle departments. Working together, understanding your organization’s largest opportunities for improvement, tackling the most significant issues first, and validating your data before claims are submitted will result in significant improvements to your cash flow and long-term revenue cycle performance. To learn more visit www.gebbs.com
