Effective Denial Management Program a Key Component of Revenue Integrity

Updated on November 29, 2022
Abstraction on a theme business. Vector illustrations
Ritesh Headshot copy

The best time to rework a denied claim is before the claim is ever submitted.

According to MDaudit research, up to 80% of all denial dollars can be traced to just 20% of claims. Most of these denied claims stem from systemic issues that can be solved through retrospective diagnostics and predictive analytics.

Identifying and correcting issues that impact denials on the front end can help providers protect their revenue streams, which remain under threat from high costs, tight labor markets, and increased federal efforts to scrutinize spending more closely.

An effective denial management program can help protect critical revenues that keep providers in business.

Claims rejection rates on the rise

The latest MDaudit Annual Benchmark Report shows a higher rate of year-over-year denials of up to 10%, depending on the category. Top reasons for denied claims include claims submission and billing errors, duplicate claims, bundling issues, and pre-certification or pre-authorization problems.

The report shows that in 2022, there was:

  • a 12% professional claims rejection rate (average charge, $288)
  • a 26% hospital outpatient claims rejection rate (average charge, $602)
  • a 27% of hospital inpatient claims rejection rate (average charge, $5,810)
  • a 10% of telehealth claims rejection rate (average charge, $280)

Exacerbating the situation, recent research into denials found that more than half (65%) of denied claims are never resubmitted, translating into $3.25 billion left on providers’ tables. Further, the average cost to rework a claim is $25, so even claims that are successfully resubmitted reduce overall revenues.

Federal payers get serious

Using predictive analytics to examine denials can help maximize revenue from federal payers, which are increasingly using similar tools to gauge the accuracy of claims. The federal Health Care Fraud and Abuse Control (HCFAC) Program and the Medicaid Integrity Program will receive nearly $2.5 billion in FY 2023 to conduct activities, $80 million more than the previous year. On a three-year rolling average, Medicare program integrity activities, inclusive of medical review, return $8 to federal coffers for each $1 spent.

The Centers for Medicare & Medicaid Services (CMS), the U.S. Department of Justice (DOJ), and the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) are also working collaboratively on integrity tools to fight fraud, waste, and abuse.

“New advancements in predictive modeling and artificial intelligence will allow CMS to enhance existing efforts to reduce improper payments, prevent fraud, and target bad actors, while limiting burden,” the agencies’ budget document states. “For example, CMS is exploring methods of using machine learning to conduct more rapid review of chart documentation to improve payment accuracy.”

Fix claims issues before they become denials

Traditionally, audit staff have focused on billed claims to understand trends and identify outlier procedures, visit types, coders, and providers to ensure their completeness and accuracy and provide education where needed. They generally considered denials out of scope.

However, the industry is undergoing a shift toward including denials in audit processes, even initiating audits directly from the denial insights. This approach makes sense to maintain revenue integrity at each step of the claims process. Think about a specialty practice that provides certain types of procedures or tests with regularity. If the claims process is generating denials for a particular routine procedure, that could mean dozens of denials per week. Rather than fix dozens of individual claims, it’s much easier to examine what is causing the denial, correct the issue, and train staff that was making the error. 

Denials are a leading indicator of systemic revenue leakage problems in your health system. Similar to charge audits, denied payment audits can occur both retrospectively and prospectively. Retrospective denial audits help auditors with a strategic view of revenue leakage and learn from historical data to better understand trends and the root causes of denials. Simple process changes can improve first-pass rates and bring faster reimbursement and fewer days in accounts receivable. Retrospective audits can be part of continuous monitoring, starting an audit immediately following a denial or aggregating denial information to tease out trends impacting performance.

Historical data can also be applied proactively to address denials due to medical necessity, pricing, or treatment-related issues such as specialty drug and/or durable medical equipment (DME) utilization, thereby resolving the issues that cause high-dollar hospital claims to be denied.

Automated, intelligent processes

By identifying, prioritizing, and addressing denial risks that have the greatest financial cost, health systems and providers can improve overall revenue integrity. Technology that features augmented intelligence can help improve human decision-making while streamlining processes associated with audits, allowing staff time to perform more audits or more conduct more effective education. 

Healthcare revenue teams also need partners with expertise in providing proven revenue cycle management services and solutions that include workflow automation, risk monitoring, and built-in analytics and benchmarking capabilities.

In healthcare, every dollar counts toward long-term viability. Making sure claims are correct before they are submitted will help providers achieve speedier reimbursements and improve overall finances.

Ritesh Ramesh is COO of MDaudit, a leading health IT company that harnesses its proven track record and the power of analytics to allow the nation’s premier healthcare organizations to retain revenue and reduce risk.