Denial Management is the process of systematically investigating each denial, performing root cause analysis of why each claim was denied, analyzing denial trends to uncover a trend by one or more insurance carriers,and redesigning or re-engineering the process to prevent or reduce the risk of future claim denials.
Many physician practices forgo thousands of dollars annually in revenue through denied healthcare claims. These denials typically stem from a lack of strong denial management policies and procedures.
Essentially, you want to lessen the number of denials by seeking the root cause for it as well as the coded cause. Every instance where no payment or lower than expected payment occurs must be investigated.Doing this is an essential part of optimizing your revenue cycle.
These numbers paint a clear reason as to why denial management is an imperative process for physician practices:
An estimated two-thirds of all denied claims are recoverable.
Though all denials result in your physician practice losing out on money you’re owed, they primarily fall under five main categories:
1. Soft Denial: A temporary or interim denial that may be paid if the practice takes corrective action; no appeal is needed.
2. Hard Denial: A denial resulting in lost or written-off revenue; an appeal is required.
3. Preventable Denial: A type of hard denial due to a practice’s action or lack thereof, typically because of registration inaccuracies, invalid codes, and insurance ineligibility.
4. Clinical Denial: Another type of hard denial, though it is due to lack of payment for medical necessity,an appeal is necessary.
5. Administrative Denial: A type of soft denial in which the payer notifies the physician practice exactly why the claim was denied; an appeal is possible.
Knowing the difference between denied and rejected claims is an integral part of denial management. Claim denial occurs when a claim is processed and then repudiated by a payer. In contrast, rejection takes place when a claim is submitted to a payer with incorrect or missing data or coding.
There are a variety of billing and coding issues that commonly cause claim rejections. Some issues include an inaccurate Medicare or CLIA number, insurer name eligibility, non-payable service, a missing diagnosis code reference number, a duplicate claim submission, or a diagnosis not coded to the highest level of specificity.Two key ways to mitigate claim denials and rejections in your practice are to beware of data entry errors and verify referrals on the front end.
A clean claim is one thatis submitted without any errors or other issues, including incomplete documentation that delays timely payment. It also meets all the following requirements:
Physician practices might not realize how much money they’re losing by not paying enough attention to the denial management process. In addition to not recouping all the revenue they’re owed or receiving it days or months later than possible, these practices increase their risk of non-compliance with variousregulations, decrease patient satisfaction, and waste time and resources that can be utilized elsewhere in the practice.
Probably the number one source for denied claims is patient eligibility. This means that the service submitted for payment isn’t included in the insurance plan under which it’s being billed. Other causes include:
According to RemitDATA, which provides comparative analytics data for the outpatient provider market, the five procedure codes that most frequently result in unexpected denials are:
97110 (therapeutic exercises)
Multiple challenges present obstacles to physician practices lowering their denial rate. If you’re unsure of how to calculate your practice’s denial rate, the American Academy of Family Physicians (AAFP) suggests adding the total dollar amount of claims denied by payers within a given period and dividing by the total dollar amount of claims submitted within the given period. If possible, your rate should also be computed by payer, provider, and reason for denial.
Some of the first mistakes in denial management occur at the registration desk. In fact, 30% to 40% of denied claims result from registration and pre-service-related challenges. Staff members in physician practices, especially smaller ones, often are busy doing a multitude of administrative tasks, required to fill many different roles, and must deal with oft-changing industry and regulatory regulations.
A survey from the Healthcare Information and Management Systems Society (HIMSS) found that about one-third of providers continue to perform their denial management process manually. Such manual processes leave room for human error, offer less transparency, are usually extremely time-consuming, and increase the turnaround for claims.
Another obstacle is the lack of financial resources and applicable technology. By not investing in a denial management solution that enables them to correctly submitted claims initially, a practice might not be able to recoup enough revenue to address correcting and appealing denied claims. Similarly, without technology to effectively prioritize, manage, and channel claims, physicians’ practices are unlikely to be able to streamline their denial management and obtain the revenue patients and payers owe them.
The good news for physician practices is that an estimated 90% of denials are preventable. Best practices can be utilized to reduce the number of denied claims and not miss out on revenue from payers.
Again, the goal of denial management solutions is to reduce the number of denials, and it starts at registration. A few recommendations for streamlined registration in your practice include:
Also, it’s imperative that you track all your claims by monitoring and documenting each of them and identifying why they’re denied. Tracking claims gives you the opportunity to ensure that claims are submitted and appealed promptly, spot trends in denials, and maintain detailed oversight of the claims portion of your revenue cycle.
Similarly, by routinely running a detailed report of your practice’s denied claims, you can more easily pinpoint specific claims without having to sift through multiple ones. Any problematic trends identified through these processes should be addressed immediately to avoid additional claim denials.
If you’re still using paper-based processes to perform claims management, consider investing in an automated solution to reduce the possibility of inaccuracy and ineligibility. Automated claims management solutions are regularly updated with codes, offer decision support, and can be employed to route denied claims directly into worklists.
If you still don’t think denial management means much in the way of added revenue for your practice, consider this example:
ABC Physician Practice sees approximately 400 patients per month but has a denial rate of 12%. That equals 48 denied claims each month at a per claim rework cost of $25. That calculates to $1,200 monthly and $14,400 annually to rework those 48 claims. This revenuecould be used to invest in other resources for the practice, such as technology or staffing.
By tracking important KPIs, providers realize improved reimbursement, faster payment, less time spent on denials and appeals, and an overall optimized revenue cycle. Three crucial KPIs physician practices should calculate aredenial rate, final denial write-off as a percentage of net patient service revenue, and clean claim percentage.
A practice’s denial rate shows the percentage of claims denied and measures the efficacy of its claims processing. It can be categorized into denial appeal success, initial denial, and denial resolve rates and by payer, reason for denial, and time period.
Total Number of Denied Claims / Number of Claims Remitted = Claim Denial Rate
Implementing a KPI for denial write-off as a percentage of net patient service revenue gives providers the ability to examine what percentage of their claims resulted in lost reimbursement. This number is figured afterall appeals are completed, and claims are written off, usually for tax purposes. This statistic indicates a practice’s capability to comply with payer requirements but can also point to a breakdown in its revenue cycle.
Net Dollars Written Off as Claims Denials / Average Monthly Net Patient Services Revenue = Final Denial Write-Off as a Percentage of Net Revenue
This KPI measures the percentage of clean claims against the percentage of those rejected by payers. A higher percentage of clean claims indicates optimal financial performance for a physician’s practice, while a lower one denotes ineffective claim processing.
Number of Claims Reimbursed on First Submission / Number of Claims Accepted into Claims Processing Tool for Billing = Clean Claims Percentage
Many industries, including healthcare, are adopting artificial intelligence (AI) and machine learning. This algorithm-based technology increases accuracy and automates many time-consuming tasks, thereby enabling employees to focus on other operational tasks.
In claims management, AI and machine learning accurately predict denials, ensure correct data entry, streamline manual processes, and identify denial trends. They also integrate into billing workflows to prioritize the work queue to resubmit claims. These benefits not only cut costs but also increase patient satisfaction, resulting in increased retention of those patients.
Reducing claim denials can be accomplished by performing these five easy steps:
In addition, you can prevent and better manage claim denialsby tracking all your claims, identifying the reasons they’re denied, knowing each of your carrier’s deadlines and rules for claim submission, and involving patients in the denial process. By following these tips, you can optimize your revenue cycle one step at a time and not lose out on money your practice is owed.
At RevenueXL, we are claim denial processing experts. Our denial management solution is comprised of three main components – data capture, denial analysis and reporting, and denial process redesigned. Our denial management solutions add value to your practice’s bottom line and improve the care you provide to your patients.
Our solution ensures that 100% of your claims are paid correctly after the first claim submission. It addresses a variety of rejections and denials issued by payers and gives each functional unit within your organization the tools needed to identify and take corrective action before denied revenues have to be written-off. By analyzing trends over time, you uncover problems, pinpoint causes, and reduce denials, allowing you to cover not only current costs but also finance strategic growth and improvements within your practice.