According to Change Healthcare, of the estimated “$3 trillion in claims submitted by hospitals in 2016, an estimated 9% of charges ($262 billion) were initially denied.” Although over 60% of these denials are recoverable, on average, the majority of these denials are avoidable. Effective denial management can reduce time to reimbursement and ultimately improve a hospital’s bottom line.
The following is a true story of a facility that was focusing zero efforts in this area – that is, before inviting Impact Advisors to completely transform its Revenue Cycle. Spoiler Alert! In the end, the revenue cycle staff drive out denials and become heroes!
Starting Point: Zero
Throughout the lifecycle of a hospital or professional claim, there are numerous opportunities for both avoiding and analyzing lost revenue. While many hospitals dig into Discharge Not Final Billed (DNFB) metrics, Accounts Receivable (A/R) Days, or a detailed analysis of the daunting Aged Trial Balance (ATB) to parse out specific data points, denials management remains an opportunity for many organizations.
My favorite place to start is with resources already available to most revenue cycle staff: 835 EDI remittances, paper EOBs, and a large coffee should get you started. Better yet, check your EHR or billing scrubber for denials-related reporting.
Most denials fall into a few specific categories. After sifting through available reporting or high-dollar EOBs, try to file specific examples into one of the following rollups. Note that each rollup is grouped with a typical root-cause offender:
- Non-Covered Service (Patient Access/ Front End)
- Additional Information Requested (Other)
- Billing/Claim Error (Patient Financial Services/Back End)
- Bundling (Patient Financial Services/Back End)
- Eligibility (Patient Access/Front End)
- Service(s) Rendered Outside of Network (Patient Access/Front End)
- Level of Care (Case Management/Mid-Cycle)
- Medical Necessity (Case Management/Mid-Cycle)
- Duplicate Claim (Patient Financial Services/Back End)
- Invalid or Missing Authorization (Patient Access/Front End)
- Past Timely Filing Limits (Patient Financial Services/Back End)
Ridding the Rev Cycle of Costly Denials
Quantify – After denials are analyzed and categorized into groups, assess total financial impact of each category. Most facilities can expect a high number of Authorization, Registration, or Eligibility-related denials. On the other hand, I would hope that Timely Filing denials are few and far between. Either way, every effort should be made to assign dollar values to overarching denials groupings. This will help guide the next step of the denials management process.
Elevate – Because denials span the entirety of the patient stay, buy-in from across the organization is crucial; a financial analyst reviewing denials will undoubtedly need assistance from the Patient Access manager to correct issues related to eligibility. By assigning a dollar value to each denial grouping, you’ll have an easier time of gaining hospital executive and department buy-in.
Huddle – Form a Denials Taskforce, including representatives from Patient Access/Registration, HIM, IT, and Patient Accounting. Adding representatives from clinical departments is ideal. This group should have a grasp of the current state of denials across the organization and must be empowered to impact change. Executive sponsorship is critical to successfully decreasing denials.
Data: A Most Effective Weapon
I’ve seen many denials management programs excel through data exploitation – by assigning financial impact to denials across the organization, a single person or larger Denials Taskforce group can have substantial impact. To be successful, denial-related reporting must be available and relevant. Shoot for a system that enables constant monitoring and ties effort to financial impact.
Setting goals is important with any denials initiative. By starting with root-cause areas or issues that have the biggest impact and assigning a goal for improvement, a denials management effort can spark and maintain momentum.
Everybody Likes a Hero
Remember: communication is key. Be proactive about communicating both issues AND successes. Mentioning the few hours of training given to a new Registration representative who is now notating eligibility information isn’t exactly newsworthy. Add in the fact that the very same Registration representative and issue was responsible for $150,000 in denied claims from the last quarter and that the underlying issue is now fixed… suddenly this story has a hero!