Growing Risk of Claim Denials: How to Protect Your Practice

Some key drivers behind the surge in claim denials include:

• Increased Payer Utilization Management Programs – Payers are expanding pre-authorization requirements and published coverage policies, providing more reasons to deny claims that don’t adhere. Payers are also boosting auditing efforts and applying new technologies to identify claims for denial.
• Complex Regulatory Requirements – Compliance with complex regulations around coding, documentation, coverage policies adds reasons for claim denial due to specification errors or incomplete data.
• Contract Terms and Reimbursement Cuts – Changes to payer fee schedules, tightened contract terms, and inadequate contracted rates can all lead to declined claims and the need to appeal underpayments.
• Evolving Medical Practices – Growth of outpatient services, telehealth and new treatment modalities falls outside many payer policies, giving cause for denials.
• Information Gaps – Missing documentation, outdated insurance information, gaps between coders and clinicians contribute to denials.

As payers implement advanced technologies to manage utilization amid rising costs, claim denial rates will likely continue to grow, making denials preparedness crucial.

Increased claim denials significantly impact practice revenue cycles and cash flow:

• Direct Revenue Loss – Denied claims translate to loss of reimbursement for services provided, unless recovered through appeals or resubmissions. This directly lowers collected revenue.
• Provider Productivity Loss – Time spent contesting denials through peer-to-peer reviews and filing appeals decreases provider availability for revenue-generating services.
• Higher Cost of Collections – Denied claims take more time, effort and cost to ultimately collect the revenue, reducing profitability. Staff is diverted to denial management.
• Disruption in Cash Flow – Even if denied claims get paid eventually, delays strain cash flow which can necessitate short term borrowing at added costs.
• Increased Patient Bad Debt – If denials are passed to patient responsibility, this increases uncollectible balances and write-offs.

With growing denials volume, lack of preparation can significantly jeopardize revenues.

Key components include:

Understand Denial Root Causes

Analyzing reasons for historical denials reveals where key vulnerabilities lie within your revenue cycle:

• Missing authorization or outdated pre-cert
• Erroneous or unspecified diagnosis codes
• Payer policy non-compliance
• Untimely claim filing
• Incorrect patient demographic or insurance data
• Duplicate claim submission
• Medical necessity validation failures

Categorize denials by these common causes to pinpoint problem areas.

Identify Vulnerable Areas

Look across the claim workflow to identify weaknesses leading to denials:

Front-end Vulnerabilities:

• Patient eligibility and benefit verification gaps
• Weak pre-authorization process and tracking
• Flawed medical necessity documentation
• Gaps in clinical documentation

Back-end Vulnerabilities:

• Coding errors
• Charge capture and billing mistakes
• Poor claim scrubbing prior to submission
• System issues preventing timely filing
• Minimal use of electronic fund transfers

Documenting vulnerable points across the workflow helps focus prevention efforts.

Review Payer Contracts and Policies

Obtain contracts for top payers to understand:

• Precertification and authorization requirements
• Claim submission and documentation specifications
• Medical coding policies
• Medical necessity standards
• Coverage determinations and exclusions

Know payer requirements inside and out to minimize technical denials.

Improve Front-End Processes

Boost prevention measures early in the revenue cycle:

• Verify eligibility and benefits electronically at every encounter, updating expired policies.
• Integrate systems to feed payer data directly into downstream billing processes.
• Obtain pre-authorization on every service requiring it according to contracts.
• Check policies for covered vs non-covered services and share with patients.
• Have clinicians provide complete medical necessity rationale in documentation.
• Educate staff on payer requirements frequently.

Addressing front-end gaps prevents avoidable denials further down the line.

Enhance Back-End Processes

Apply automation and rigor in claims generation and submission:

• Add automated coding tools and audits to minimize errors.
• Include all required attachments and documentation with claims.
• Scrub every claim against current payer policies before sending.
• Route unusual conditions to coders for review before submitting.
• Transmit claims electronically for faster, error-free delivery.
• Utilize Denial Prevention Programs from clearinghouses to pre-audit.
• Stay on top of ever-changing requirements.

Reducing submission flaws will significantly decrease denials.

Appeal Effectively

Leverage technology and expertise to maximize overturned denials on appeal:

• Assign specialist staff to handle denial appeals efficiently.
• Leverage automation and analytics to prepare winning appeals at scale.
• Track appeal outcomes by payer to focus efforts.
• Identify most common denial reasons to address underlying causes.
• Determine when pursuing appeals provides best ROI vs re-submitting.

Refined appeals management helps recover more wrongly denied payments.

Continuously Monitor and Improve

Make denial prevention an ongoing strategic priority:

• Review denial reports regularly to quickly catch trends.
• Analyze rates by payer, denial reason, provider etc. to pinpoint improvement areas.
• Share denial analytics organization-wide to gain alignment.
• Develop standards and training programs to address top vulnerabilities.
• Set denial rate goals and incentivize staff to meet targets.
• Automate identification of high-risk claims for proactive intervention.

Vigilant monitoring and rapid response keeps denials in check.

Health IT systems provide capabilities to aid prevention and recovery:

• Automated eligibility checks against payer data prevent coverage-related denials.
• Tight EHR-billing system integration ensures complete claim details submission.
• Rules engines flag claims at high risk of denial for review pre-submission.
• Natural language processing identifies documentation gaps tied to denials.
• Machine learning models predict and prioritize claims likely to be denied.
• Tracking dashboards monitor denial volumes and trends in real-time.
• Tools for easily submitting electronic appeal requests and documentation.

Advanced analytics and automation help practices take control of the denial problem and turn the tide.