Originally published May 7, 2019
Managing claims can be a challenging process for any healthcare provider, no matter the size. Even the largest health systems with experienced coders experience denied claims. That’s why it’s essential for physician practices that want to maintain a strong revenue cycle to implement a comprehensive denial management strategy.
Denial Management Definition
An often-used definition of denial management comes from healthinsurance.org: “the refusal of an insurance company or carrier to honor a request by an individual (or his or her provider) to pay for health care services obtained from a health care professional.” Forms of denials include “soft denials” or a temporary denial that goes not require an appeal and could still be paid if the followed up on, and “hard denials” or a denial that could result in lost revenue if not appealed.
While an estimated 67 percent of denied claims are appealable, as many as 65 percent are not reworked because the time and expense of reworking the denials manually would be more than the revenue they could generate.
When you’re processing hundreds or even thousands of complex medical claims every week, a small percentage of denied claims can have a significant impact on your bottom line. Physician practices that don’t employ denial management in medical billing essentially forego revenue they’re due.
According to the American Medical Association (AMA), 1.38-5.07 percent of claims are denied by payers on the first submission. Commercial and public payers deny about one in every 10 submitted claims. Half of denials are caused by front-end revenue cycle issues.
Whether claims are denied due to missing or incorrect data, lack of documentation, procedure coding errors or other common reasons, they can’t be resubmitted. They have to be corrected based on the reason declined.
Importance of an Automated Denial Management Strategy
Unlike claim rejection, which occurs when a claim is submitted to a payer with incorrect or missing data or coding, claim denial happens when a claim is processed and then denied by a payer. The purpose of claims denial management is to investigate every unpaid claim, uncover a trend by one or several insurance carriers and appeal the rejection appropriately.
For additional information on this topic, download our white paper, “Reasons for Medical Billing Denials and Actions to Avoid Them.”
The best solutions for denial management in medical billing are those which catch a mistake before it occurs. For larger healthcare organizations, the sheer volume of claims requires more than a manual process.
Automated denial management can help bridge the gap between claim denials and higher profit for healthcare providers. Conversely, physician practices utilizing an outdated billing system risk an increased failure to collect copays, overly complex claims processes and unnecessary errors. They also have an increased potential for inaccuracy and ineligibility.
Automated claims management solutions are regularly updated with codes and can be used to route denied claims directly into work lists. They also offer decision support to enhance denial management workflow and mitigate the need for practice staff to spend multiple hours manually processing claims.
Automation fits into a well-tuned denial management strategy at three-phases: pre-and post-denial and advanced reporting.
Automating the Denial Management Workflow
Joseph Gesser is the Director of Technology Solutions for Pollux Systems Inc, a multi-specialty billing company and ImagineSoftware client of five years. In comparison to billing companies that bill for one specialty, Pollux Systems bills for specialties that have very different coding and billing requirements, so utilizing a medical billing software solution that has the ability to interface with all of them effectively is key.
"We've been able to increase our interface capabilities with our clients to automate certain features, as well as increase our ability to work denials automatically and be more effective on the collections cycle."
According to a 2016 HIMSS survey, nearly a third of providers are still using manual claims denial processes. Out of the 69% using an automated denial management solution, 44% use a vendor and 18% manage their own system in-house. The best solutions to common medical billing mistakes are those which catch a mistake before they occur. For larger healthcare organizations, the sheer volume of claims requires more than a manual process. Automation fits into a well-tuned denial management strategy at three-phases: pre-denial, post-denial, and advanced reporting:
Pre-denial Management
Start by putting the necessary processes and technology in place to ensure all anticipated causes of denials are accounted for and segmented into the correct course of action to be resolved. This can be accomplished by:
- Correcting errors from duplicate billing, incorrect CPT modifiers and inaccurate patient demographic information. Reconcile missing patient information with existing records. An automated tool like ImagineAITM verifies and corrects patient demographic details immediately.
- Getting insurance authorization for healthcare services that require prior approval. Systems that conduct pre-authorization services can complete this in minutes instead of hours like that for manual processes.
- Verifying insurance eligibility, the most common type of denied claim. Use a tool that identifies coverage opportunities, including overlooked alternative payment methods.
Post-denial Management
Recover hidden revenue and minimize the impact of denials by top causes and sources of denials. Solutions such as ImagineIntelligenceTM enable physician practices to:
- Automatically sort by dollar amount from greatest to least and/or date of service to head off filing any late claim denials, a process that can take hours, if not days, to complete manually.
- Systematically assess the business impact of each kind of denial and prioritize denials that represent the greatest opportunity for quick revenue recovery.
- Implement a system where claims with the same payer and cause of denial are appealed in bulk.
- Isolate complex bills into a separate bucket to be reviewed by a trained billing manager.
Advanced Reporting
High-level data analytics can help determine if you do not have enough people working on denials and identify problems within your denial management processes. Use these analytics to:
- Conduct “root cause analysis” to pinpoint trends in denials.
- Share insights with front-end and middle-stage revenue cycle teams about the reason(s) for denials. This can help reduce the flow of denials and address issues further upstream. For example, if a significant portion of your denials are prior-authorization denials, review your front-end authorization process.
- Establish benchmarks, analyze workflow performance and track staff productivity related to denied claims. Reviewing automatically created clean claim and denial rates with your employees can open silos and identify new opportunities for collaboration.
ImagineSoftware’s claims management solutions enable physician practices to get claims out more quickly to expedite reimbursement. We offer an average of 35 days in A/R and a 97% net collections rate. For additional information on this topic, download our white paper, “Reasons for Medical Billing Denials and Actions to Avoid Them.”