Trends in Denial Management: Strategies to Reduce Revenue Loss
Date Posted: Wednesday,
December 04, 2024
Denials slow down healthcare revenue cycles and increase operational costs; having the right strategies in place can protect cash flow and productivity
As hospitals and health systems focus on delivering quality care, they require efficient revenue cycle management (RCM) to thrive and grow. The expansion of medical insurance has significantly enhanced access to care for a large section of the population. However, the process of claiming reimbursement for the services provided by a healthcare organizations or medical practices can be tedious and challenging. Frequent claim denials make the process even more complex. When insurers refuse to pay for a service after a claim has been submitted, it disrupts cash flow, raises operational costs, and ultimately results in lost revenue.
Reports indicate a high and increasing rate of claim denials. The good news is that a large percentage of rejected claims are recoverable with proper denial management. This article discusses the current trends in denial management, and how having a proactive denial management strategy in place can prevent revenue from slipping through the cracks.
Understanding Denial Management
Medical billing denials management is the process of identifying, analyzing, effectively resolving, and preventing medical claim denials. Missing or invalid information, coding and billing mistakes, and services not covered by the plan are common reasons why payers deny reimbursement. Efficient denial management plays a crucial role in addressing denials and promoting a healthy revenue cycle.
The industry benchmark for medical billing denials is 2% for hospitals, according to Change Healthcare. The report indicated that medical billing denial rates range from 5-10% in medical practices and that for some organizations, denial rates are as high as 15-20% on initial claim submission.
Many medical billing denials can be reversed and even avoided with the right strategies in place. Knowing why denials occur is the first step towards addressing or preventing them.
Top Reasons for Denials
Claim denials fall into two categories: hard and soft. Hard denials occur when a claim doesn't meet insurer criteria and cannot be reversed or corrected, resulting in lost or written-off revenue . Soft denials are temporary denials that can be resolved and paid if the provider corrects the claim or provides additional information. Denials can also be full or partial; partial denials happen when certain claim aspects don't meet policy terms or specific exclusions.
Insurers use denial codes to explain why they cannot cover the healthcare service. When they receive a denial code, providers can understand the reason why the claim was not processed and take steps to address it.
Common reasons for claim denials and their denial codes are listed below:
- Missing or Invalid Information - CA 16
- Service Not Covered by the Plan - CA 96
- Duplicate Claims- CA 18
- Eligibility Issues CA 31
- Authorization Not Obtained CA 197
- Timely Filing CA 29
- Medical Necessity Denials CA 50
- Coordination of Benefits CA 22
Though these codes can vary by payer, they are often encountered across various insurance plans.
Electronic remittance advice (ERAs) provides information on claim denials and denial codes. By understanding the top reasons why claims are not paid, providers can implement targeted strategies that minimize revenue loss and improve claims processing.
Emerging Trends in Denial Management
Claim denials can be a nightmare for providers, resulting in financial strain and administrative challenges that disrupt patient care. Here some emerging areas in denial management:
• Focus on Addressing Increasing Denial Rates
In 2023, the American Hospital Association (AHA) reported that Medicare Advantage denials jumped 56 percent. A recent Premier Inc survey report noted that medical claim denials cost an average of $43.84 to fight and up to 18% of respondents indicated losing more than one million dollars every year. Denials impact providers in many ways:
Decreased revenue : Rejected claims result in lost revenue. In 2023, Health Leaders reported on a survey which found that more than 40% of respondents reported losing over half a million dollars annually from denials. This can affect daily operations and patient care.
Increased workload : The billing team's workload increases. They will need to check the rejected claims, identify the reason for the denial, and rework them for resubmission. It can take hours to fix the claims denied, with the time it takes depending on the reason for the denial and the type of appeal requested.
Increased operational costs : A rejected claim comes with additional operational costs. Processing rejected claims will take time from working on submitting new claims. Providers are losing significant amounts of money due to denied claims, according to recent reports.
Denial management is essential to addressing these issues and maintaining financial stability. Up to 43% of the respondents in the Premier Inc survey stated they are prioritizing denials management in 2024.
• Shift from Denial Management to Denial Prevention
With the rising challenges of denial management, RCM experts are advocating a shift in focus from denial management to denial prevention. Continuous training of billing staff on policies, ensuring accurate patient information, and filing timely claims are vital. Staying updated on changes to the claims process, using electronic medical records, and verifying patient insurance before services are provided further support successful denial prevention.
• Application of Artificial Intelligence (AI)
Advanced automation can enhance the accuracy and efficiency of denial management in many ways:
• By analyzing historical data, AI algorithms can identify common reasons for rejections and predict which claims are likely to be denied, allowing providers to take proactive action.
• AI can identify a comprehensive set of codes and capture critical complications often overlooked in large, complex medical records.
• AI models can provide reason codes for denials, which can help investigators focus on key issues and help patients and providers fix claims. For example, an AI model might detect that a claim was denied due to missing authorization (CA 197) , eligibility issues (CA 31) or timely filing (CARC 29) by analyzing claim submission data. This allows the billing team to quickly pinpoint denial patterns without manual review and prioritize them.
• AI can also automate repetitive tasks like insurance verification and pre-authorization, reducing the risk of human error.
• Advanced natural language processing NLP enables AI to communicate effectively with insurance companies, streamlining appeals and negotiation.
By integrating flawlessly within existing RCM software, AI can provide an intelligent and centralized hub for managing the revenue cycle and reducing/preventing denials. By automating various administrative tasks, AI frees up healthcare staff to focus on enhancing patient care and satisfaction.
A medical claim scrubber is a complementary tool , which automatically matches ICD-10 diagnosis codes with the appropriate CPT/HCPCS codes. This ensures that claims adhere to all nationally accepted coding guidelines and standards, reducing errors and improving the likelihood of reimbursement.
• Addressing Prior Authorization Challenges
Premier Inc reports that nearly 15 percent of claim submitted to private payers are denied, even those that were pre-approved through prior authorizations. To mitigate this trend, industry stakeholders are advocating for standardized authorization guidelines, streamlined workflows, and enhanced communication between providers and payers.
The American Medical Association (AMA) advocates for standardized authorization guidelines to improve the patient experience and reduce the burden on physicians. Reforms mooted by the AMA include eliminating requirements for regularly approved care or using gold-carding programs to exempt physicians with specific approval rates. The AMA also recommends a 24-hour response time for urgent care and 48 hours for nonurgent care and making prior authorization data public, including approvals, denials, appeals, and wait times.
Best Practices for Successful Denial Management
Claims denial management and prevention hinges on having the right expertise in addition to a z ero-tolerance mindset for preventable denials . The American Health Information Management Association (AHIMA) recommends reassessing the severity, likelihood of occurrence, and detection probability of top failure modes, along with post-resolution evaluations to evaluate the effectiveness of corrective measures.
Clinicians need to ensure proper documentation so that coders can ensure coding compliance. It is essential to identify all denials and recognize the reasons why they occur. Once done, the next step is to take targeted corrective actions aimed at minimizing both their occurrence and recurrence. This process involves assigning clear responsibility for each corrective task, ensuring completion by a set deadline in accordance with payer requirements.
Following these strategies can enhance denial management:
- Track and analyze rejection and denial trends and understand the reasons for rejections.
- Implement a workflow to track submitted claims.
- Consider automation possibilities and implement them wherever possible.
- Verify patient insurance coverage before services are provided.
- Focus on resolving denials quickly, preferably within a week of receiving the denial notification.
- Collaborate with payers. Payer-provider collaboration can help in resolve denials more efficiently
- Submit claims in the standardized and latest format
- Meet claim filing deadlines.
- Perform regular follow-ups and resubmit and appeal denied claims.
- Establish a team: Have a robust team in place to identify root causes and track and report developments.
- Conduct audits of performance covering insurance verification quality, write-off adjustments, and zero payment claims
Knowing how to file appeals is critical. Before submitting an appeal, it's crucial to confirm if the coding is correct, the relevant documentation is included, and medical necessity for the service. Identifying and addressing any inefficiencies in internal processes and workflows and can also prevent future denials.
Loralee Kapp
Loralee is a Solutions Manager at Managed Outsource Solutions, holding a degree in Health Information Management and Technologies. With over five years of experience in medical coding and health information management, she has been a valued member of the MOS team since 2021. www.managedoutsource.com
