United States

3 ways to improve your denials management efforts

INSIGHT ARTICLE  | 

U.S. hospital statistics show that 20 to 30 percent of their claims are rejected or denied on first submission. And many of those denials are not recovered during the initial billing process. Initial denials refer to denied amounts processed and communicated by insurance payers (via 835 electronic remittance advice and paper explanation of benefits). This is usually not what a health care organization writes off. Typically, the initial claim costs $5 to $7 to bill versus $25 to $30 to rework a rejected or denied claim.1

While these statistics are alarming, this challenge also serves as a great opportunity for health care organizations like yours to proactively manage denials instead of letting them manage you. Note the following three ways to improve your denials management efforts:

  1. Leverage your analytics, data or reports to determine your health system’s unique landscape. Understanding how to find data within your organization is a critical component of running a successful denial management program. Two important files within your organization that will help you splice and uncover the data you need are the 835 files and aged trial balance (ATB) reports. With an understanding of Microsoft Excel or Access you will be able to identify a few essential metrics to gain visibility into your facility. With this data you should be able to identify the top 10 denials, common services denied and common payers that deny claims.

  2. Establish strong front-end processes, insurance verification and eligibility checks. As an organization, it’s important to understand by payor how insurance is verified at your facility. For example, while establishing a denial management program at a large facility in the Midwest, our RSM professionals developed a payor matrix to help pre-registration staff determine which tool to use to verify insurance based on payor. This discovery uncovered a number of broken processes within the facility: There was no systematic approach to verify patients, there were many duplicative tools and the data wasn’t being stored in a way that was easy to find if a claim was denied. Your facility may not be as complex as the one noted here but it’s critical to understand where and how to locate the information that you need in order to prevent denials.

    Understanding the importance of insurance verification is critical to the success of a denial management program. It plays a key function in collecting data across the health system. Patient access staff members play an important role in supporting the health system financially and in maintaining patient satisfaction. Ultimately, the success of patient access staff in delivering initial services to patients as well as their knowledge in the use of insurance verification and medical necessity systems are all crucial to the success of the health system. 

  3. Implement a robust claims scrubber and edit tool. Developing checkpoints throughout the revenue cycle is an important part of proactively managing denials. Establishing and monitoring your claim scrubber is vital. SSI and ePremis are some of the most common tools used today. It’s important to collaborate with your vendor to ensure your system is set up to meet the needs of your organization. You should be able to identify the top 10 edits, monitor progress on a monthly basis and create a systematic resolution path for those accounts with edits. Correcting claims that have issues before they are transmitted to the payor can save your staff time and money!

Once you’ve established the framework for a denials management team, the next step is to implement a strategy for these three key steps. Your health systems strategy will be based on staff, technology and the goals of the health system. Below is a kick-start diagram of how to start your denials management program.

Initiating your denials management program

Let’s examine the scenario below to identify the magnitude of how important a strong denials management program is to the profitability of your health system.

According to the Health Financial Management Association, the average denials write-off as a percentage of gross revenue is 0.18 percent. Therefore, the following opportunity may exist for our health system example below:

Clearly there is a sizeable opportunity to reduce denials, create front- and back-end workflows and implement technology to track denials.

Questions to consider

As part of revenue cycle claims management, denials management and payer contracts management play a pivotal role in identifying opportunities to stop revenue leakage, increase revenue and ultimately increase cash. To initiate the conversation within your health system, consider the following questions.

  1. What are the largest initial denial reasons by charges and by volume?
  2. What are the biggest payers causing initial denials by charges and by volume?
  3. What is your current denials management strategy?
  4. What technology do you use to track and monitor denials?
  5. What proactive steps is your organization taking to mitigate denials?

Get more technology solution insights. Questions? Contact us.

1 California Primary Care Association, ClaimRemedi, Inc.

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