We offer an overview of building a denial management program to recoup lost revenue from claim denials.
Causes of Rising Denial Rates
There are multiple contributing factors behind the notable upswing in denied medical claims:
- Payers Expanding Pre-Authorization Programs – Requirements for pre-approval of services leads to more denials when authorization is lacking.
- Utilization Review Intensification – Payers augmenting retrospective claim audits and documentation checks results in more payment denials.
- Coding Policy Changes – Routine coding guideline revisions lead to rejections as practices struggle to keep up.
- Coverage Policy Updates – Changes to payer policies on covered vs non-covered services prompts denials for previously approved services.
- Contracting Issues – Out-of-network billing, contractual limitations and bundling rules also Create denials.
- Evolving Regulations – Mandates around documentation, coding and billing spawn denials until compliance achieved.
- Batch Submissions – Small billing errors lead to mass denials when claims submitted in batches without pre-checks.
As payers tighten utilization management, claim denial rates will likely continue to grow, making proactive denial prevention and management strategies essential.
Revenue Impacts of Rising Denials
Without denial management programs in place, the monetary impacts of denial increases on practices are substantial:
- Revenue Leakage – Denied claims lead to non-payment for rendered services and utilized resources. Appeals are not always successful, resulting in permanent revenue loss.
- Higher Costs – The labor involved in correcting and refiling denied claims significantly increases the cost of the billing process. Denials consume 35-40% of billing costs.
- Delayed Cash Flow – Even after appeal, payments on denied claims face delays stretching accounts receivable days. This strains cash flow.
- Provider Dissatisfaction – Repeat claim denials for their services frustrates providers who expect payment for legitimate services. This can spur provider attrition if unaddressed.
- Patient Satisfaction Declines – As denial costs shift to patient responsibility, this increases bad debt write-offs and raises patient complaints.
Building a Proactive Denial Management Program
An effective denials management program takes a proactive approach with these key elements:
Measurement and Analytics
- Track denial rates overall and by common categories – eligibility issues, coding, non-covered services etc. Metrics shine a light on problem areas.
- Dig into denial contrasts across payers, service lines, providers, patient types and other variables to pinpoint systemic issues.
- Note trends in denials over time – seasonal fluctuations, spikes after payer policy changes etc. to guide outreach.
- Set benchmark goals for overall denial rates and denial reason distribution based on past trends and peer benchmarks.
Identify Top Denial Root Causes
- Leverage denial analytics to categorize and quantify leading sources of denials – authorization, duplicate claim, eligibility verification, etc,.
- Drill down to find top denial reasons by payer, specialty, patient type, claim type etc.
- Uncover common coding denial triggers like unspecified codes, sudden spikes in high-cost codes etc.
- Assess denials during pre-audit versus post-payment to focus prevention or recovery efforts.
Denial Prevention Processes
Reduce denials proactively by targeting the identified top sources:
- Add pre-authorization field in scheduling system and train staff on payer requirements
- Implement daily eligibility checks and flag expired policies for patient outreach pre-visit
- Update EHR problem lists when new diagnoses identified to ensure documentation completeness
- Activate automated claim edits to catch unbundled or unspecified codes before submission
- Build payer policy rule sets into billing system to check claims against guidelines
- Conduct billing audits pre-submission focused on historically problematic areas
Denial Appeal Management
Manage collection of denied claims efficiently and effectively by:
- Automating identification of denials eligible for appeal vs reconsideration to save time
- Assigning specialized appeal staff equipped with latest payer requirements to optimize success rates
- Tracking appeal outcomes by denial reason, payer and history to refine arguments
- Following up verbally with payers on pending appeals that exceed expected timelines
- Appealing overall payer denial rate variations from contracted terms
Continual Improvement
Keep enhancing denial management performance by:
- Establishing routine denial audits and presenting findings to leadership
- Revisiting denial goals and realigning prevention priorities quarterly
- Incentivizing staff activities that demonstrably reduce denials
- Developing schedules for regular payer contract reviews and updates
- Automating denial reports distribution to provide broader visibility
With robust denial analytics, prevention processes, and APPEAL management, a steady denial rate decline can be achieved.
Leveraging Technology to Tackle Denials
Specialized denial management technology automation enables practices to efficiently address rising denial volumes:
- Claim scrubbing solutions use payer rules to catch errors pre-submission, preventing denials.
- Denial databases track reasons, rates, and appeal success by payer for focused process improvement.
- Automated tracking monitors claims status through the lifecycle to catch impending denials quickly.
- Natural language processing of denial letters allows categorization of reasons at scale for big data analytics.
- Predictive analytics tools apply machine learning algorithms to identify claims likely to be denied for proactive intervention.
- Automated appeal preparation and submission tracks and expedites processing of reclamations.
Advanced analytics and automation technology alleviates administrative burden and provides actionable insights from denial data.
Top Strategies for Clinical Staff to Tackle Denials
While billing teams lead denial management, clinical staff play a crucial role by:
- Acquiring necessary pre-authorizations based on scheduled services and payer requirements.
- Capturing complete details like specific diagnoses, medical necessity, complicating conditions etc. in visit documentation.
- Following each payer’s evidence-based care guidelines applicable to the patient’s case.
- Clearly documenting details on referred services ordered like labs, imaging etc. to establish medical necessity.
- Submitting records and evidence quickly when requested for payers auditing claims.
- Reviewing proposed denials and providing additional clinical context to billing team.
- Appointing denial prevention coordinators for each specialty service line to provide oversight.
With clinical and billing staff alignment, denial rates can be lowered across the revenue cycle.
The Path to a High-Functioning Denial Management Program
Building a robust denial management program takes commitment but pays long-term dividends through recouped revenues and reduced administrative waste. Key steps for establishing a high-functioning denials solution include:
- Securing executive backing and resources
- Hiring denial experts dedicated to appeal success
- Implementing analytics tools for visibility into denial drivers
- Establishing denial rate goals and benchmarks
- Developing standardized protocols for denial prevention and recovery
- Automating tracking and intervention identification leveraging AI
- Providing extensive payer policy education for staff
- Maintaining constant communication between billing and clinical teams
With the stakes high, overcoming denial challenges takes an organization-wide effort combining people, processes, and technology. But with rigorous denial management practices, the tide of revenue losses from claim denials can be stemmed.