When commercial payers deny medical claims, it takes a bite out of a healthcare organization’s annual revenue. According to Modern Healthcare, this loss, nationwide, totals to an estimated $262 billion. Today, claim denials are a significant contributor to the myriad of financial/net revenue challenges that have impacted US hospitals, healthcare providers, and patients alike.
Up to 1 in 5 claims are either delayed or denied; and while health systems continue to attack denials and seek answers to their draining revenue stream, it’s important to remember that there is no single root cause, nor single problem area, that leads to a denied claim.
To end this pervasive, persistent problem, organizations must broaden their scopes, understand/identify different causations, reflect on data, and employ a series of preventional strategies specific to their operations, systems, and medical staff. In this article, we will provide an overview of denials, analyze and identify common causes, and provide examples of front/back-end denial preventional strategies.
Denial of a claim is the refusal of an insurance company or carrier to honor a request by an individual, or his or her provider, to pay for a health care services obtained from a healthcare professional.
There is a myriad of reasons why these claims are denied; from documentation errors and missing information to non-coverage, incorrect authorization, or required payer precertification. Even if a claim submission is processed and paid, it may be deemed incomplete; costing healthcare providers large sums of revenue for submitting bills that do not include all of the services provided.
Soft vs. Hard Denials
Most claim denials fall into two categories. Soft denials are temporary denials that require follow-up action within a specific amount of time. These claims do not require appeal; instead, they must be revised to include whatever information was missing or correct the errors found in the initially submitted billing. Examples of soft denials include:
- Denied due to missing or inaccurate information
- Coding or charge issues
- Pending itemized bill
- Pending receipt of invoice
- Pending receipt medical records
A hard denial, on the other hand, must be appealed if any payment is to be made at all. Failure to appeal results in lost of written-off revenue. Factors that can lead to a hard denial include:
- Not a covered service
- Untimely filing
- No pre-authorization
If your goal is to minimize the number of denied claims and regain the associated revenue, you must first centralize your denials management approach. Create a task force to track every claim made. Tune out your processes that span beyond payer-specific issues. Address and measure front and back-end operations. Adopt an analytics approach. Identification, analyzation, implementation, prevention. It may sound like a handful, but a systemized, big-picture, approach can empower revenue cycle leaders and clinical/administrative staff to identify /improve processes and errors that contribute to denials. Let’s break it down.
Where does the bulk of errors occur in your organization?
The first step in doing this is to track your claims; employ a new level of attention to the origins of problems. This can be done automatically through ERA or EOBs. However, you may find that it’s more effective to create and customize a system for tracking claims. Focus on the people, processes, and technology of your organization, and consider using a spreadsheet that includes more detailed information than what many automated tracking systems routinely capture.
Your manual spreadsheet could consist of:
- Reason for denial
- Ability to appeal
- Date of denial
- Billing date
- Amount denied/recovered
Before changing any of your processes, track your denials for three months to develop a baseline ratio of denials to charges. A broad organizational platform will help you better pinpoint causalities and determine how much revenue has been lost to claim denials. Analyze the gathered data to determine the percentage of denied claims across workflows, including both the volume and dollar amount of denials. After further organizing your denials into “source- of -blame” and “revenue lost” categories, ask yourself, “Where do we need to focus our efforts most.”
From here, you can map out a clean claim process solution to reduce or eliminate errors. Perform a Failure Mode and Effect Analysis (FEMA) to note any problems that could potentially occur and result in a denial. This will help you generate corrective actions for reducing/preventing severe long-term consequences. Here are some key terms to know before conducting your FMEA:
- Failure modes: what could go wrong?
- Failure effects: what would be the consequences of each failure?
(Rate the severity of the effect on a scale of 1-10)
- Failure causes: why would the failure happen?
(Rate the likeness of the occurrence of a failure on a scale of 1-10)
- Detection mode: what controls are in place to prevent the failure from occurring or detect it should it occur?
(Rate how easy it is to detect a failure on a scale of 1-10)
Train your staff members about common mistakes; create a deadline-driven process to ensure that claims are filed or appealed in a timely manner, and encourage communication across departments and front/back-end staff. Create a transparent process that allows your team to see where each claim is within the claims cycle. This will help enable the taking of immediate action on those claims which require it, thereby helping to prevent soft denials from becoming permanently denied. The more transparent your system, the easier it will be to identify soft-denied claims that could easily be collected.
Managing Your Denials
There are many different ways you can reduce your denial rate at different points within the revenue cycle. For example, if claims are denied during the patient access part of the revenue cycle, you can address issues such as getting pre-authorization for procedures by making certain that any non-emergency service is scheduled a day or more in advance so that there is sufficient time for the authorization to be completed. Another solution is to make certain that all of a patient’s insurance information is on record. This allows you to discuss any non-covered services with the patient so that self-pay arrangements can effectively be made.
If a large percentage of your claims are denied due to coding issues or the untimely submission of information, you can create a system which makes certain that all records are coded quickly and correctly. This may include using an outside firm to audit and validate all medical coding as a way to ensure that it is correct.
Dealing with denied claims can be challenging, and a source of stress for healthcare providers, but common denial causes can be reduced or eliminated with the proper tools. By partnering with a third party, such as eReceivables Inc, it is possible to reduce the number of claims you have denied while at the same time avoiding the need to put more responsibility on the members of your team or bring in new employees. The experts at eReceivables have years of experience in identifying/analyzing the cause of medical claims denials, providing customized solutions to healthcare organizations, and regaining lost revenue.