Healthcare professionals faced with the modern-day challenge of claim denials would be well-served to follow the age-old adage: “An ounce of prevention is worth a pound of cure.”
On average, three out of 10 insurance claims are initially denied by their payer1. So engrained is the denials-are-a-fact-of-life mentality, many organizations have become conditioned to working the back-end denials management process that often drags out 120 days or more, many times resulting in write-offs or partial payments. Time and money are spent appealing denials, but little attention is focused on the root cause.
Despite the damage that denials have on the bottom line, there is an assumption from many hospitals and physician groups that denials are simply the cost of doing business.
Let’s take a look at some numbers. For an average 300-bed facility, just one percent of net patient revenue can equate to $2 million – $3 million annually2; yet, an estimated 30 percent of claims are denied or ignored on first submission2, leaving money in limbo.
With an average cost of $25 to rework a single claim and as many as 65 percent of denied claims remaining unresolved3, prevention tactics can save money upfront and accelerate time to reimbursement.
Claim Denials by the Numbers3
of Claims Denied or Ignored on First Submission
of Denied Claims are Unresolved
Net Revenue Loss Caused by Denials
days+ to Address Denied Claims
Often,the cause of denials can be resolved through process improvements, even surprisingly simple ones. At one hospital, care management was not able to enter an authorization code in the correct field within the electronic health record, resulting in denials. All it took was someone to point it out— and a quick call to IT— to resolve the problem.
5 Keys to Successful Denials Prevention
By partnering with hundreds of hospitals, health systems and physician groups, Conifer Health Solutions has found five key building blocks to a successful denials prevention program.
Identify Your Leaders
Change is always a challenge, and it’s difficult to sustain it if there isn’t full buy-in from the top. Recruit an executive sponsor who understands the benefit of the program, in most cases, the CFO or COO. The champion can continually advocate for investment in the effort and readily answer questions from other leaders. In addition to a champion, creating a formal Denials Prevention Manager position within the organization is critical to sustainable success. This manager should be someone who has payer knowledge and a deep understanding of the complete revenue cycle.
Set Your Goals
To start, the focus should be on setting goals for each function of the revenue cycle, as opposed to broad goals for the overall organization. Breaking things down by function is more manageable, and it forces you to look closely at every phase of your revenue cycle, building accountability for the process each step of the way. Make sure you get a clear picture of your current state by analyzing the data associated with your denials history. Keep in mind that is it often during the registration process that hospitals are most vulnerable to the top four denials categories: authorization, medical necessity, coding and eligibility. The frequency of denials related to each category will likely vary depending on a range of factors, including your organization’s structure and whether you are operating in a high accountable care environment or an exchange market.
Establish a Contract Management Strategy
An effective and sustainable denials prevention program is a team effort — and that includes your payer contract team. Review denials with your contract team to help inform and educate on your revised payer strategy. Meet with payers to develop an effective escalation/mediation process.
Develop an Analytics-Based Program
Numbers don’t lie. This is your chance to dig into the denials data and break it down to identify problem areas as well as the potential departments, procedures and payers involved. In order to optimize your denials prevention efforts, observe work where it actually happens.
Remember Education is Key
Achieving maximum benefit from your program requires awareness and buy-in across your organization, including with physicians. Develop an education campaign that clearly communicates your goals, the shared benefits of denials prevention, and the role that different departments play in the program’s continued success. A good example is if a new pharmaceutical drug enters the market, payer contracts need to be reviewed to see how the drug is reimbursed.
Once you establish momentum, make sure a strategy is in place to keep it rolling. Emphasize transparency, continued data-sharing and promoting positive results to keep departments engaged and in compliance.
Reduce Denial Backlog and Recapture Underpayment
In organizations that have grown accustomed to managing denials, turning the focus to prevention can seem daunting.
Conifer Health’s Denials and Appeals Management program can help design a well-planned, systematic approach that has clear benchmarks for success, addressing your backlog while applying best practices to reduce future denial rates. That makes for greatly improved efficiency, happier physicians and patients — and a much-improved bottom line.
- Becker’s Hospital Review. Average Claim Denial Rate for Large Hospitals, by Region. March 2017
- Becker’s Hospital Review. 4 Ways Healthcare Organizations Can Reduce Claim Denials. July 2016.
- Healthcare IT News. Reduce Claims Underpayments and Denials Through Integration. January 2016.