Healthcare professionals faced with the modern-day challenge of claim denials would be well-served to follow the age-old health saying: “An ounce of prevention is worth a pound of cure.”
Specifically, a denials prevention approach can be much more efficient and cost-effective than addressing denied claims through the costly and time-consuming denials management process that often drags out 120 days or more, and too often results in write-offs or partial payments.
A look at the numbers supports the case for a preventive approach that halts denials before they ever happen. For an average 300-bed organization, just 1% of net patient revenue can equate to $2 million to $3 million annually1; yet, an estimated 30% of claims are denied or ignored on first submission.2
Despite the damage that denials have on the bottom line, there is an assumption from many hospitals and physician groups that denials are just the cost of doing business. In fact, so engrained is the denials-are-a-fact-of-life mentality, that many organizations have become conditioned to working the back-end denials management process without ever taking the time to understand the root cause. Countless hours are spent appealing denials, but little attention is focused on fixing and preventing the issue.
The reality is that denials prevention offers a much more cost-effective and logical long-term solution. With an average cost of $25 to rework a single claim and as many as 65 percent of denied claims remaining unresolved3, denials prevention tactics can help save money upfront and accelerate the time to reimbursement. Often, the cause of denials can be achieved through process improvements – and sometimes the solution can be a relatively simple fix. For instance, at one hospital, case management was not able to enter an authorization code in the correct field within the EMR system, resulting in denials. All it took was a quick call to IT to resolve the problem.
Claim Denials by the Numbers
Your overarching goal is straightforward: Through establishing a denials prevention program, you aim to lower the number of denials overall and reduce write-offs associated with those denials.
From there, the focus should be on setting goals for each function of the revenue cycle, as opposed to broad goals for the overall organization. The breaking down by function is critical. It forces you to look closely at every phase of your revenue cycle and builds in accountability for the processes each step of the way.
Finally, during the goal-setting stage, 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 that registration process that hospitals are most vulnerable to the top four denials categories, which include 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.
For example, you may find that the majority of your authorization denials are inpatients who were admitted through the emergency room with no scheduled appointment. Mining this data early in the process helps you better determine strategies to address the true root cause of the denials and puts you in the best position to deliver the best ROI for your efforts.
5 Considerations for Successful Denials Prevention
Once you have established a framework for what you aim to achieve, as well as the best opportunities for success, you can focus on building the foundation for a successful denials prevention strategy. Through experience in partnering with hundreds of hospitals, health systems and physician groups, Conifer Health Solutions has found the following five key steps to provide the best opportunity for denials prevention success.
- Identify an Executive Champion: Your technology and systems should drive efficiency, not create complications. As a result, you should consider retiring your patchwork system of bolt-on applications that slows registration and financial clearance. Deploying a single, integrated front-end solution will streamline processes and automate workflow – and ultimately get patients registered in a few minutes, with a few clicks. By streamlining pre-registration and arrival tasks for scheduled appointments, you’ll free your staff to more effectively handle non-scheduled events and complete the process in less time.With any technology selection, it’s important to evaluate the total cost of ownership, ease of adoption by staff members and the ability to integrate into other systems to help ensure you’re making the right decision to ease the workload on staff to better focus on patient care.
- Appoint a Denials Prevention Manager: Everyone in your revenue cycle process is already busy, which is likely part of the reason that prevention has already taken a back seat. That’s why creating a formal Denials Prevention Manager position within the organization is critical to sustainable success. This manager should be someone who has payer knowledge, as well as a deep understanding of the revenue cycle, from the first patient encounter through final collections.
- 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: Denials prevention is a proactive approach based on data and analytics. As you develop your prevention program, take the time to dig into the denials data and break it down to identify problem areas, as well as the potential departments, procedures and payers involved. Align denial types with 21 common points of failure, which align to playbook best practices. 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 and with physicians and other stakeholders. Develop an education campaign that clearly communicates your goals, the shared benefits of denials prevention, and the role different departments play in the program’s continued success. For instance, 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. Find champions throughout the organization. Also, emphasize transparency, continued data-sharing and promoting positive results as incentives to keep departments engaged and in compliance.
In organizations that have grown accustomed to managing denials, turning the focus to prevention can seem daunting at first. Yet, by taking a well-planned, systematic approach that has clear benchmarks for success, you can move toward avoiding many denials before they ever happen. That makes for greatly improved efficiency, happier physicians and patients, and a much-improved bottom line.
1. Becker’s Hospital Review. 4 Ways Healthcare Organizations Can Reduce Claim Denials. July 2016.
2, 3. Healthcare IT News. Reduce Claims Underpayments and Denials Through Integration. January 2016.
Conifer Health offers a comprehensive portfolio of solutions to help clients make informed decisions that reduce cost and deliver quality outcomes as healthcare organizations, employers and unions adapt to new realities in the fee-for-value era.