Denial management in healthcare is of utmost importance as up to 40% of claims are denied by payers, with an average of 18% (1). More worrisome, very few denied claims were appealed, and issuers overturned the denials in only 14% of cases.
Most healthcare facilities lose 3-5% of potential revenues to denied claims (2). The impact on profitability is obviously much higher.
Clearly, claim denials are bleeding your medical practice’s revenues. Your staff and you spend significant time and resources on denial management of medical claims.
Biggest challenges for effective Denial Management
A Medical Group Management Association poll in 2019 (3) found that two-thirds of claim denials were because of incomplete information and absence of pre-authorization. Other reasons also contributed (see chart).
What causes Claim denial in healthcare
Illegible claim. Some payers are still asking for paper submissions. Make sure the printout onto the form is accurate.
Improper coding. Accurate and specific coding of diagnoses and procedures is the most important thing you can do to ensure speedy reimbursements. CPT codes tell the payer what was done for the patient; ICD codes establish the need. Both are essential.
Incomplete information. This will often lead to the claim being denied. Dates of admission and procedures, patient identifying information, and codes are especially important. A well-designed registration form is very important (2).
Medical necessity requirements not documented. Establishing the medical necessity of the treatment and services provided is an important component of claims denial management.
Prior authorization required but not conducted. In this situation, a denial is almost inevitable.
Patient not covered. Always make sure the insurance is current, and that it covers the treatment being provided.
Patient responsibility. The patient has reached the limit provided by the payer. You will have to collect directly from the patient.
Service not covered. Again, an inevitable denial.
Delayed submission. This is an avoidable situation. Your practice should aim at early claim submissions rather than waiting for the last date.
Denial management in healthcare
Denial management in medical coding and billing aims at protecting your practice’s revenue and to reduce the cost to collect. Beginning with setting up procedures, using the right tools to staff training from time to time, all help towards successful medical claims denial management.
Processes: Good systems, processes, and workflows in your clinic are required for timely filings. Create standard operating procedures for correcting and appealing claims that are initially denied. Putting procedures in place for different types of denials is of more use than simply adding more employees.
Analysis: Appropriate reporting and diagnostic tools to assess denials data are necessary for keeping revenue flow smooth. Analyze the cause of denials on a regular basis and implement corrective measures.
Regular training and audits: The staff carrying out billing should receive training in CPT, ICD-10, and Advance Beneficiary Notices (ABNs). Frequent changes make knowledge obsolete, and staff needs continuous training and audits.
Collect necessary information: Identity, insurance coverage details, and other details needed to submit the claim are best collected during the registration process.
Identify fussy payers: Some payers have a high rejection rate. The submissions to those should go through an additional level of checks before submission.
Avoid non-coding denials: These are difficult to overturn on appeal, and include non-covered services, delayed submission, and problems with eligibility and credentialing.
Aim for a high first-pass resolution: Motivating your staff to achieve this has several benefits. First submission reimbursement is quick, and avoids the costs of reworking the denied claims.
Denial management in healthcare is an ongoing effort.
Proper denial management in medical billing significantly improves a practice’s revenues. Well- designed procedures and training yield better returns than simply adding more resources and staff. Having a denial management process in place and reviewing it regularly is required for your medical practice.
If you find all this a little bit tedious or overwhelming, you can always outsource to medical billing or denial management companies who can manage it for you.
1. Claims Denials and Appeals in ACA Marketplace Plans. Karen Pollitz, Cynthia Cox and Rachel Fehr. https://www.kff.org/health-reform/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans/
2. Kovach, Jamison V. PhD; Borikar, Shrutika MS Enhancing Financial Performance: An Application of Lean Six Sigma to Reduce Insurance Claim Denials, Quality Management in Health Care: July/September 2018 – Volume 27 – Issue 3 – p 165-171.
3. Katie Nunn. Medical Group Management Association Stat Poll. https://www.mgma.com/data/data-stories/strategies-for-avoiding-common-insurance-denials
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