Denial Management: Moving Upstream in the Revenue Cycle

By: Glenn Krauss

Managing denials continues to be a thorn in the side of just about every healthcare organization. Traditional approaches to denial management treat the symptom rather than the underlying causes – and the back-and-forth with payers can lead to frustration on both sides rather than the spirit of collaboration that will only become more critical under shared-risk models.

A key strategy for denial management actually comes from the clinical side of healthcare, where the focus is rapidly shifting from reactively treating the sick to proactively keeping patients and populations healthy – aka, value-based care. You may have heard a little something about that.

Essentially, it boils down to the old Ben Franklin axiom that an ounce of prevention is worth a pound of cure. In other words, you don’t have to fix problems if you don’t allow those problems to happen in the first place.

This same principle can (and should) be applied to denial management. The numbers certainly bear this out. Statistically, 2 out of every 3 denials are recoverable, and 90% are preventable. You don’t have to be a math whiz to see the tremendous power of denials avoidance.

By doing a better job of moving further upstream to address denials – rather than leaving it all to the back-office – hospitals and health systems can dramatically improve both net patient revenue and cash flow. They can also reduce their costs, as fewer denials mean less rework, resources, and time devoted to appealing and recovering denied claims.

Reducing denials at the source

While claims are denied for any number of reasons, some of the most common include:

  • Ineligible/non-covered service
  • Prior authorization required
  • The claim is already included as part of a bundled payment of managed care program
  • Lack of demonstrated medical necessity
  • Incomplete/inaccurate demographic information
  • Service covered by another plan/payer

Let’s take a closer look at these to see how doing a better, more thorough job on the front end can help preempt denials so providers can get paid faster, and in full, the first time around.

Eligibility and authorization

Billing for an ineligible or non-covered service is fairly common, as is not realizing prior authorization was required. In fact, ineligibility alone accounts for up to 75% of denials and rejections. Payer rules are often extremely complex, and hospitals and health systems work with a multitude of payers and plans – each of which has its own unique clauses, coding and billing nuances, and carve-outs. What is covered under one plan may not be covered under another – and depending on the procedure, there may even be more granular differences based on patient medical history or secondary insurance.

The good news is nearly all eligibility-related information can be identified and confirmed prior to the time of service – simply by leveraging effective and accurate patient eligibility verification technology.

Even if the full information isn’t verified before the patient arrives, it can be quickly and accurately confirmed or amended as part of the check-in process once the patient presents on the day of service. The result is the patient knows what to expect – and the provider can optimize the likelihood of the most accurate and up-to-date information heading downstream to coders, billers, documentation specialists, and others involved in RCM workflows.

Claim already included as part of a bundled payment of managed care program

One day, when the bulk of hospital and health-system services are reimbursed in the form of bundled payments, managed care, or other shared-risk models, this won’t be such an issue. But we’re not quite there yet.

Managers and staff need to be aware of what shared-risk agreements they have, and how those affect billing and reimbursement. Because each contract is different, the process of verifying this information one contract and one patient at a time can be complex and time-consuming. Yet this pain point can be addressed with intelligent automation and more sophisticated, continuously updated claims-management technology – software that learns as it processes, and applies those learnings across all claims.

Specifically, the right technology can simplify this process by automatically comparing the services and coverage to determine whether they are included in one of the organization’s contracts or should be submitted separately. By reducing these types of denials up front, the organization can then focus more of its denial management on claims that can be effectively appealed with a greater propensity for payment and a higher return on investment from a hospital resource and revenue perspective.

Lack of demonstrated medical necessity

While some services may appear at first glance to be covered, there could be language that limits coverage solely to cases where there is a demonstrated medical necessity. Or there could be a requirement for specific clinical documentation, or coverage only under limited clinical scenarios, or requirement of documented attempt of more conservative therapy first. There could also be specific frequency limitations – what’s covered one time (or several times) might not be covered the next. This is an important caveat to understand – both that it exists at all, and the fact that there are detailed terms or conditions that qualify the service as a medical necessity and approved course of care.

The right technology can alert the staff and/or provider to the existence of this conditional approval, along with details about what qualifies as medical necessity, facilitating a determination made ahead of time on whether it will be covered. The provider knows. The patient knows. And they can discuss it together.

Incomplete/inaccurate demographic information

This is one of those simple mistakes that can create a huge headache later on – and growing denial management backlog. Something as basic as a typo in a name or inputting the wrong address can cause a claim denial, creating more work and delays on the back end. The nature of this problem is a compelling reason to submit claims electronically through RCM software with built-in scrubs, automation, and edits. The software will accurately auto-populate key information, eliminating the need to re-key it each time and reducing the instances of human error. If the information is correct in the database, it will be correct in the form – and when there are discrepancies, the software can automatically correct the outdated information and/or bring the issue to the right person’s attention at the right time.

A sound technology solution will also highlight missing information and prevent claims from being submitted until corrections are made. More advanced technologies will even compare the claim to a vast database of similar claims that have been denied – helping providers avoid known problem areas (such as coding errors) and suggesting appropriate alternatives that will help accelerate full reimbursement.

Service covered by another plan/payer

This has been a growing area of concern in the last few years. Medicare and Medicaid dual-eligibles, patients with supplemental health insurance, and differences in payer response time can all create issues – and lead to lost revenue if timely filing requirements can’t be met.

The right technology can help determine not only which patients have more than one form of coverage, but also the proper primary and secondary order in which to submit their claims to create the smoothest path to payment.

Focus on prevention

Remember that 90% of all denials are preventable. By taking a page from the clinical world and moving your efforts upstream, you can prevent rather than treat the “disease” – and you can keep your revenue cycle, and indeed your entire organization, financially healthier. Denials avoidance is the most cost-effective approach to denial management, and it translates to more time and resources devoted to serving the healthcare needs of the community.

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