In this article, we’ll introduce the most effective denial management strategies and demonstrate how to take a proactive approach to decrease future denials at your medical practice or healthcare organization.
Healthcare claim rejections are an annoying, but inevitable, occurrence for physician practices throughout the United States—yet between 86 and 90% of denials are actually preventable, according to research from the Kaiser Family Foundation.
Getting claims paid is actually the biggest revenue cycle challenge for healthcare providers. High claim denial rates are a huge hindrance of claims being paid, according to a poll from the Medical Group Management Association (MGMA).
Simply put, a denial is a claim that a payer has denied to pay.
Here’s how it works.
A physician practice must submit a claim for a patient service in order for an insurance company to pay the provider. This is simple in theory, but it’s easy to send claims with incorrect or missing information. The insurance claim must include information about the patient, their insurance coverage, the service, their provider and anything else pertinent to the service. If anything is wrong or missing in the claim, the payer may issue a denial to the provider.
Often, providers will have the opportunity to correct whatever was wrong with the initial claim. These soft denials are denials that have the potential to be reversed and eventually paid.
Unfortunately, some denials will never be paid. Hard denials are final and there’s nothing a provider can do to get those claims paid. For instance, if a patient isn’t insured by a specific payer, their claim would become a hard denial from the payer. On the bright side, the number of truly unavoidable denials is small, making up only 14% of denials, per Change Healthcare 2020 Denials Index.
According to the Michigan State Medical Society, clean claims, or claims that are accepted and paid:
Without any of the items above, a claim can be denied.
MGMA found that the average cost to rework a claim is $25. One rework is $25?! That’s going to add up! Maybe not today or this month, but it might add up this quarter or this year.
Denied claims:
Reworking denials can be expensive and time consuming, but you’re leaving thousands of dollars on the table if you don’t get your claims paid.
Though you won’t always get paid in the end.
Of the denials deemed definitely avoidable , 48% cannot be recovered, according to the Change Healthcare 2020 Denials Index. Don’t get too discouraged yet: you can prevent denials by understanding why and how they’re happening.
There are many reasons for a denial to occur, so remember that examining your revenue cycle processes is the best way to understand particular patterns and problem areas.
Most frequently, denials stem from front end issues with things like insurance eligibility and registration. An MGMA stat poll conducted in December 2020 asked healthcare leaders to name the top reasons for denials within their organizations.
Here’s what they said.
Prior authorization is exactly how it sounds: prior approval from the payer before giving service to a patient. Payers use prior authorization to control costs, but many clinicians believe prior authorization can delay care and undermine treatment decisions for what is more cost effective for the payer. In many cases providers have people or teams dedicated to prior authorization alone.
The second-most common denial reason is demographic issues. This includes patient information that is incomplete, incorrect or missing on the claim. Something as simple as a misspelled name or incorrect insurance ID number can result in denial. Healthcare revenue cycles that rely on manual processes without any automation are more prone to this type of error.
Timely filing can make anyone feel like a circus juggler. Each payer—and sometimes plans within the same payer—have different timely filing limits for claim submission, ranging from 90 days to a year. Filing your claim within your allotted time can be a lot of work to keep track of.
Those that indicated “other” on the MGMA poll cited many different issues that can hinder the denial management process. such as medical coding issues, payer requirement inconsistencies, medical necessity requirements, missing information/documentation, coordination of benefits and out-of-network.
It’s sad to say it out loud, but even the best billing and coding departments can expect to encounter some denials. Fortunately, strong revenue cycle management (RCM) practices can keep your denial rate very low. While the industry average rate of denial is 5 to 10%, the recommended rate of denial is below 5%, according to the American Academy of Family Physicians.
Examine and identify the specific revenue cycle processes that allowed the mistake to slip through the cracks. For example: if verifying patient eligibility and coverage isn’t part of your registration staff’s process, your physician practice might frequently run into a large number of eligibility-based denials.
Though two-thirds of healthcare organizations’ denied claims are recoverable, according to Advisory Board, the MGMA estimates 50–65% of denials are never reworked. Often, physician practices don’t have the technology in place to properly assist in the denials process, per the Change Healthcare 2020 Denials Index.
But there is a solution.
Rivet is a reimbursement software that gives you the big picture of what’s going on in your practice with payer contracts, fee schedules, denials and underpayments. You can also check eligibility and provide accurate up-front patient cost estimates before services are rendered. The Rivet team will help you aggregate your fee schedules and input your claims data to enable you to increase revenue and decrease patient A/R days.
For more information about the tools Rivet provides schedule a Rivet demo.