Practices, clinics, and hospitals across the country use a substantial amount of resources to react to claims management issues. In fact, 25% to 31% of the nation’s total healthcare expenditures are direct transaction costs for inefficiencies associated with claims management. To remedy claims issues such as payment reconciliation and claims follow-up, healthcare revenue cycle professionals implement the denials management process.
However, denials management is far from perfect. For many organizations, the denial management process is filled with inefficiencies that lead to wasted resources and lost revenue. Claim denials bog down billing teams and can lead to a backlog of unprocessed claims.
The first step to solving this challenge involves understanding key stages in the denial management process so that your organization can implement targeted improvements. Here’s everything you need to know.
Denials management in healthcare is the systematic process of identifying and resolving denied insurance claims to capture lost revenue. It plays a key role in revenue cycle management (RCM) by minimizing revenue loss and addressing the root causes of denials.
Specifically, denials management consists of the following steps:
So, why do claims get denied in the first place? Common reasons include the following:
It’s important to differentiate between denials and rejections. A payer will reject a claim when they lack sufficient information to process it. Your organization can typically correct and resubmit these claims.
Claims denials occur when the insurance company processes a claim and deems it unpayable. A lack of coverage or questions about medical necessity are common reasons for denials.
The denials management process includes the following critical steps:
Essentially, this step consists of gathering information about your denied claims and either inputting data manually or using a tech solution to organize your findings. First off, you’ll need to aggregate as many of your claims as possible.
Though tedious, you’ll need to look through all of the Claims Adjustment Reason Codes (CARCs), or generalized reasons for denial found on your 835s, as well as the Remittance Advice Remark Codes, or supplemental explanations for monetary adjustment or policy information advice for remittance.
Classify each claim into two categories: soft denials and hard denials. Soft denials are temporary and can often be reversed by submitting additional information or correcting the original claim documents. Hard denials are final and will typically result in lost revenue. Categorizing denials allows your team to focus on opportunities to recapture revenue while ignoring claims that are not valid.
After you’ve gathered your data, it’s time to sort through what you’ve collected. At this stage, your denials are already organized in columns for year/quarter, CARC, billing provider, rendering provider, etc. (whether automatically with a software like Rivet or manually using something like Google Sheets or Microsoft Excel). It’s now time to drill down into the data and analyze trends.
Do you know your average denial rate? If you don’t, now’s the time to find out. You’ll want at least three months of data to get a good look at trends.
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. Unfortunately, it’s the new normal to have a denial rate above 10%. In fact, the national average denial rate is now at 11%; a 23% increase since 2016 (Change Healthcare 2020 Revenue Cycle Denials Index).
Approximately 66% of denied claims are recoverable, but 50–65% of denials are never reworked and lack of claim rework may be due to your team’s current workflow. A few teammates may have extremely efficient workflows, but how will you know until you speak to your team? Align the best way to work denied claims based off of success rates.
Once you’ve aligned your team, focus on the soft denials that have a high chance of being overturned. You don’t want to waste time or resources on hard denials or claims that require a ton of reworking. Early on, focus on easy wins that will generate short-term revenue.
The Kaiser Family Foundation found that between 86 and 90% of denials are actually preventable, so in this step you’ll be uncovering ways your team can prevent denials and make solution plans. In step #3 you should have gathered a wealth of information and realized where issues are happening on your team. Is it at the front end with registration? Is it in medical coding? You should have a lot of data at this point, so you’ll need to do some form of triaging to find where to begin.
Whether issues are found in registration, coding or somewhere else, you can and should build a plan and continue to rebuild plans as you go. Remember: You aren’t solving every problem your team has in this first iteration of the prevention plan. You’ll likely need to perpetually return to this step to tweak, or course correct, for your team as you continue to monitor your claims.
Effective denials management requires a combination of sound policies and skilled employees. You must also empower your team members with robust analytics and revenue cycle management tools. Here are some best practices for integrating these concepts into your denials management program:
Your employees need consistent, easy-to-follow protocols for addressing denials. As soon as a denial comes in, they should know what to look for, how to process the claim, and whether it is worth resubmitting or not. Standardized workflows reduce revenue loss and allow your organization to focus its efforts on the claims with the greatest chance of approval.
Each payer has its own denial tendencies, which can change during every contract period. These tendencies can result in specific types of procedures or billing codes getting denied at unusually high rates.
Tracking denial trends gives you an opportunity to pinpoint instances of payer underperformance and proactively address those issues. For instance, if a particular payer frequently denies a specific procedure, you can reach out to find out why and what your organization needs to do differently to recapture the lost revenue.
Continuous education ensures that your team remains proficient with the latest coding standards. Make it clear what documentation is required for each type of claim so that they can reduce initial denials and recapture more revenue for the organization.
ContiRevenue cycle software from providers like Rivet Health can be a difference-maker for your organization. Our state-of-the-art solutions integrate with all of the top electronic health records (EHR) systems, enabling your organization to get paid for denied claims.
The platform includes built-in automation tools, which reduce the burden on your team while decreasing the risk of errors.
nuous education ensures that your team remains proficient with the latest coding standards. Make it clear what documentation is required for each type of claim so that they can reduce initial denials and recapture more revenue for the organization.
Claim denials are unavoidable in today’s healthcare environment. Payers are more stringent than ever with their processing requirements and frequently kick back valid claims due to minor errors. How your organization handles denials management will make all the difference in its financial health.
Improving denial prevention strategies and quickly resubmitting high-quality claims can maximize revenue. However, to optimize denial management, you need a nimble claims resolution solution like Rivet Health.
Rivet allows you to manage all of your analyses, auto-assign denials to specific team members, and manage denials with notes and timely filing deadlines. Schedule a demo with Rivet Health now to discover the software’s capabilities as a denial management service!
