Don’t Manage What You Can Prevent: 4 Steps to End Persistent Denials

Updated on January 25, 2021

Photo credit: Depositphotos

By Linda Perryclear 

Claim denials are a costly problem that can take a toll on patient satisfaction for hospitals, health systems and other providers, but most denials can be avoided by following a simple, four-step method.

About 9% of hospital charges are initially denied, which equates to $4.9 million in net patient revenue put at risk each year for the average hospital, according to the Medical Group Management Association (MGMA). Although 63% of denials are recoverable on appeal, it costs an average of $118 per denied claim to appeal.

Reworking a claim costs less than appealing it, but the process still averages about $25. Many providers lack the time or knowledge to initiate the process, which is why 50% to 65% of denials are never reworked, according to MGMA.   

In addition, patients frequently view denials as problems with the provider or facility, as opposed to their health plans. When patients believe they are being billed incorrectly, they are more likely to seek care from other providers.

Luckily, providers can take action to prevent most of these denials upfront by following the four-step “Countdown Method,” which is a focused, repeatable and proactive approach to reducing denials.

Step 1 – Identify the top four denial categories: To understand a provider’s denial challenges, it’s important to first obtain an accurate, up-to-date snapshot of the situation. Use your analytics software to run a report that lists the top denials over the prior 60 to 90 days. Examine the top reason codes for each denial, excluding items like non-covered services, and isolate each category into its own denial “bucket.” While many denials occur for the same reasons – duplicate claims, coordination of benefits, medical documentation, timely filing, authorizations and referrals – these may not apply to your organization. Make sure to analyze your claims to identify the proper categories.

Create buckets for your top four denial categories, so you can tackle one category each quarter, and start with what you perceive to be the easiest bucket to solve. This will allow your team to see results more quickly and keep them motivated, building a successful process early on. 

Step 2 – Focus on three reasons that cause the denials: Once you have identified your denial categories, run a quarterly report that covers the previous 60 to 90 days to discover common reasons why this category of claims is receiving denials. For example, in the coordination of benefits category, denials are often the result of a secondary claim submitted without an EOP or a claim submitted with the wrong payer responsibility. Analyze the remark codes to create buckets for each of the top three reasons behind denials. 

Once you have the denials categorized, form a multi-disciplinary committee and include a team member from each portion of the revenue cycle— such as registration, coding, follow-up and reimbursement – to review how each denial is resolved or worked. Start at the end of the process to ensure that you know what it takes to get the issue resolved. Finally, use the 80/20 rule so you don’t spend too much time focusing on situations that are less common. Don’t get preoccupied with cracking that one difficult denial at the expense of ignoring the many others that will require fewer resources to resolve. 

Step 3 – Implement two options to address those issues: Providers have two ways to solve problems with recurring denials: initiate process improvements and/or implement technological tools. Process improvements include:

  • Establish a resource that allows you to view payer-specific rules and issues.
  • Have a copy of the contract on file that includes the current fee schedule, and make sure your team can easily find it.
  • Capture all relevant patient and payer information during the registration process. 
  • Review the charge-entry and claim-filing processes to ensure there is no leakage and you can account for all claims that are filed.  

Technological tools that can help providers address denied claims include:

  • Contract management toolshelp manage complex fee schedules.  
  • Claim editing tools edit claims both pre-and-post submission. 
  • An automated eligibility process pulls information forward from registration into the practice’s other information systems. 
  • Business intelligence tools import data and feature additional reporting capabilities around denials.

Step 4 – Apply ways to measure success: To start, choose one key metric to measure success, such as clean-claim rate, denial rate, or number of days in accounts receivable. Clean-claim rate is a common metric because it is easy to measure and is a key indicator that claims are being accepted into the payer’s system. If claims aren’t accepted by the payer then they can’t be processed, which delays a claim being paid or denied. Additionally, clean claims, by their nature, equal fewer denials.

After establishing your key performance indicators, engage your teams and set incentives to encourage them to meet and exceed these measures. One approach is to use gamification to create positive behaviors within your team and leverage the team’s competitive nature to accomplish the goals. Don’t forget to celebrate and share your success, whether through a partnership with a vendor that has a celebration program, or simply some social media posts recognizing your team for outstanding work.

Although claim denials can lead to lost revenues and frustrated patients, providers have plenty of tools at their disposal to prevent – not just manage – denials. Start with “The Countdown Method” to deliver a roadmap for ending the problem of consistent denials. 

Linda Perryclear is the director of product line for Availity, the nation’s largest health information network.

The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.