Reverse Engineering Denials Management

Reverse Engineering Denials Management

If your organization could prevent denials at the root cause then you would, right? 

Unfortunately, this is not what reality looks like for 49.5% of the organizations who responded to a recently released survey conducted by HFMA. In fact, only 17.3% of the organizations who responded shared that they have resources specifically focused on front-end denial prevention tasks. When you compare this to the fact that 67% of the denials originate from front end workflows, you can see why organizations are losing the game when it comes to Denial Management.

The Alarming Rise of Denial Rates

Post Covid, denials have grown to an alarming 18%-20% of claims submitted. According to many studies, the average cost to rework and appeal a claim is $32.00 per claim. As many as 65% of claim denials are never worked even though approximately 69% of all these denials are appealable.  

This system is set-up for complete failure. Organizations must have tools that help them analyze the errors, evaluate trends, and predict payor behavior. This can be segmented down to specific payor categories, services rendered, or even policy level specifics. 

An organization’s focus is to make sure that the medical care provided is compensated accordingly. Most organizations state that staff shortages continue to slow submission speed and undercut the efficient resubmission of denials. By reducing the need for manual input, claims management can be accelerated while freeing up staff to focus their attention where it matters most. Automation and digital technology are useful counterweights to the shortage of qualified staff and an organization has no other option than to automate denial prevention and denial management activities.

Leveraging AI for Denials Management

Many industries, including healthcare, are adopting automated artificial intelligence (AI) and technologies. 

In terms of claims management, AI can accurately predict denials, ensure correct data entry, streamline manual processes, and identify denial trends, greatly improving rates while freeing up staff to focus on higher-value activities. And in terms of assessing and managing existing denials, AI can integrate into billing workflows to prioritize the work queue to resubmit claims. 

But adopting new tools and processes is a commitment. In order for an organization to determine if the costs are worth the investment, they need only to look at the ROI.

Through that lens, here are the top points that should drive organizations to adopt AI solutions for claims denials:

  1. Reduction of hours spent appealing and resubmitting claims
  2. Improvement in wasted time spent in appealing/resubmitting as a comparison to reimbursement
  3. Improved Clean Claim Rates
  4. Reduced Denial Rates

Tips to Reduce Claims Denials

Reducing medical claim denials is essential for financial stability, operational efficiency, and many other reasons. In a nutshell, reducing claim denials can be accomplished by performing these five easy steps:

  1. Code diagnosis to the highest level of specificity
  2. Ensure insurance coverage and eligibility
  3. File claims on time
  4. Stay current with payer requirements
  5. Track the claim throughout the entire process

In addition, you can prevent and better manage claim denials by tracking every single claim, 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.

Common Types of Claim Denials

Resolving and reducing denials are crucial for your healthcare organization. Though all denials result in your organization losing out on money you’re owed, they primarily fall under five main categories. Below are the most common types of claim denials

  • Soft Denial: A temporary or interim denial that may be paid if the practice takes corrective action; no appeal is needed.
  • Hard Denial: A denial resulting in lost or written-off revenue; an appeal is required.
  • 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.
  • Clinical Denial: Another type of hard denial, though it is due to lack of payment for medical necessity, an appeal is necessary.
  • 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.

Top Reasons for Denials in Medical Billing

Organizations may not realize how much money they’re losing by not paying enough attention to the denial management process.

Top reasons for denials in medical billing include: 

  • Patient eligibility 
  • Missing or incorrect data
  • Duplicate or late submissions
  • Improper or outdated CPT or ICD-10 codes
  • Lack of documentation or prior authorization
  • Out-of-network care
  • Lack of medical necessity
  • Procedure coding errors
  • Lack of prior authorization

Top Challenges in Denials Management

Multiple challenges exist in denials management and lowering an organization’s denials rate. Below are a few key challenges. 

Lack of Staff Training 

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.

Lack of Automation

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, among other things. 

Lack of Financial Resources

Without technology to effectively prioritize, manage, and channel claims, organizations are unlikely to be able to streamline their denial management and obtain the revenue patients and payers owe them.

Denial Management Best Practices

The good news for many organizations is that an estimated 90% of denials are preventable. A few quick denial management best practices include but are not limited to the following:

  • Offer patients pre-registration by sending them a packet with a return envelope before their appointment.
  • Ensure that necessary information is collected that is critical for payment (i.e. photo ID and address verification). 
  • Reschedule the appointment if the patient does not send the information before the appointment — and thus insurance cannot be verified. 
  • Reschedule the appointment if the patient requires a referral, and either doesn’t have one or can’t obtain it.
  • Ask the patient to sign an acknowledgment that he or she may be responsible for payment if insurance doesn’t cover it.

Denial Management KPIs

By tracking important denial management KPIs, organizations realize improved reimbursement, faster payment, less time spent on denials and appeals, and an overall optimized revenue cycle. A few crucial KPIs organizations should calculate are below. 

Denial Rate

An organization’s denial rate shows the percentage of claims denied and measures the efficacy of its claims processing.

Total Number of Denied Claims / Number of Claims Remitted = Claim Denial Rate

Final Denial Write-off

Implementing a KPI for denial write-off as a percentage of net patient service revenue gives your organization the ability to examine what percentage of their claims resulted in lost reimbursement. 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

Clean Claim Percentage

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

Reverse Engineer Your Denials Management

As a top revenue cycle management vendor and solutions provider, Medical Practice Success will be happy to review your organization’s Denial Prevention and Management strategy.

As a best practice, we get to the root of the problem and establish the foundation to reduce the risk of future claim denials. Contact us today to get started.