4 Tips for Healthcare Systems to Manage Denied Claims

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By Dan Schulte

From wearables that fight chronic disease to drones delivering automated defibrillators, provider healthcare technology has moved very quickly toward advancing clinical care. But in terms of the provider’s financial processes, innovation has been too slow. Smarter management of the A/R is an area well worth renewed focus as part of today’s move toward stringent cost control. Consider the fact that gross charges denied by payers have doubled to 15% – 20% of all claims submitted, with the potential for 40% – 60% of those denials recoverable on appeal. That should be impetus enough to find ways to move forward quickly with new processes and new technologies to manage these denied claims.

Revenue cycle management (RCM) inefficiencies are caused by myriad issues from clerical capabilities to laggard technology. It’s a fact that some health systems have complex, poorly integrated and often outdated technology, and many legacy accounting and patient billing systems are 10 – 25 years old and not capable of meeting the needs of a rapidly changing healthcare reimbursement environment. 

Many of today’s revenue cycle organizations are reluctant to adopt disruptive processes and technologies, simply from a natural inclination toward protecting the system’s assets. Notably, few provider organizations are widely engaging in hospital financial automation, according to a new Black Book CFO survey. Only 20% of the 1,600 hospital and health system CFOs surveyed said more than a quarter of their organization’s financial and revenue cycle operations were fully digitized or automated. And those who digitized more of their financial process said the ROI was substantial.

STRATEGIES FOR IMPROVEMENT

Healthcare organizations can significantly improve their contractual payment ratio (what you should capture from your payers), as well as accelerate recoveries by focusing on these four key areas of focus:

  1. Invest in your front office. Recruit, onboard and train your best people to optimize operations, and at the front of the house, capture good information and inform your patients of their financial obligations. 
  2. Ensure accurate coding and supplemental clinical documentation, supported by optimized process and technology.The latest hospital coding compliance technology will help to identify and correct processes that lead to claim denials. Robust coding processes and contract compliance automation systems help hospitals to get ahead of coding and medical necessity denials, with the added benefit of educating coders, financial analysts and providers on how to submit clean claims the first time. 
  3. Maintain a fast focus on denials. Today’s payment variance reporting can identify underpayment and overpayment trends for analysis with broad-reaching, sustainable return.Chargemaster assessment tools and concurrent charge integrity tools are also highly effective and are not currently being widely used.
  4. Understand the difference between denials and rejections and know what workflows must happen for each. Rejections can cause a great deal of wasted effort. It may help to think of rejections as the end of the story, with payment  a lost hope unless the account is reworked from the beginning. Denials, on the other hand, are an opportunity to identify the probability of payment  whether the payer’s request is for authorization, coding or additional information. Denials need immediate response from a trained group who can quickly:
  • Define the needs raised by the payer
  • Address shortfalls according to payer protocols 
  • Prepare root cause analytics to address internal issues and errors made by technologists, technicians and physicians in the revenue cycle’s process

A NEW FOCUS

Once the areas above are addressed, healthcare organizations can focus onscalability, process optimization the quality of data reporting to payers and regulators and navigating the reimbursement structure of covered charges, provider liabilities and growing out-of-pocket expenses for their patient-consumers. The answer is a proactive approach to denials management: Determine the sources of the health system’s denied claims and address them.

 While claims denials will never fall to 0%, today’s health systems find benefits from being equipped with people, processes and innovation necessary to recoup the dollars denied by payers and thereby contributing to financial sustainability of the organization.

Daniel Schulte is senior vice president, provider operations, at HGS Healthcare, a global business processing management company.

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