Providers spend more than $10 billion annually reviewing and managing denials for claims that should have been paid upon first submission. Medicare Advantage (MA) plans are particularly problematic as more than half of their denials are eventually overturned, meaning they should have been paid initially. The time and money spent to research and appeal these claims cause providers to lose out on much-needed revenue, especially since they often don’t have time to appeal every denial.
According to a recent survey, the average cost to appeal a denial is now $43.84. The survey also found that providers “conduct an average of three review rounds with payers to ultimately get paid for initial claim denials,” each round taking up to 60 days to complete. It is easy to see how devastating denials are on a provider’s revenue cycle.
Of all denials, clinical denials — those based on medical necessity, level of care, and lengths of stay — are becoming increasingly problematic.
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Choosing where to focus: Prevention vs management
With current limitations in staffing and financial resources, providers would be wise to do all they can up front to avoid denials. Increasingly, organizations are creating a dedicated team to do just that. It’s an intelligent move that can return significant benefits.
Denial management, which is working on a denial after it happens, is a resource-intensive, costly process. It requires extensive research and calls to payers to identify the root cause. Then comes the tedious process of compiling the supportive documentation and creating an appeal letter. Meanwhile, money owed to the provider is sitting in the payer’s bank account, adding to their cash flow instead of the provider’s.
Prevention, on the other hand, focuses on identifying systemic revenue cycle trends that are problematic for the organization. A dedicated team can dig deep to investigate these issues, identify a solution, and then implement workflow improvements and education to address the problems. They are also tasked with tracking the intervention over time to ensure sustainable improvements are made.
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The top priority of a denial management team is successfully overturning a denial, while the top priority of a denial prevention team is identifying and implementing solutions that prevent denials from happening in the first place.
Functions of a denial prevention team
The first priority of a prevention team is to investigate first-pass data to identify the highest volume and highest dollar denials. Within this investigation, outpatient denials, especially for chemotherapy, biologics, and hyperbaric treatments, should be at the top of the list. Next should come labs and physical and occupational therapy. While labs are low dollar, they are very high volume. Preventing them is the only way to avoid losing revenue. Finally, inpatient denials should be investigated, with particular attention on levels of care and inpatient-to-OBS downgrades.
When analyzing data, it’s essential to look for commonalities, such as the payer, provider, location, or diagnosis. Reviewing these denials one by one will help inform which areas need further investigation and action.
Once issues are identified, the next step is to educate providers about those issues and what they can do to help prevent them in the future. In many cases, providers are unaware that their actions are leading to denied claims. As part of this education, providers should be made aware of, or reminded about, the importance of following National Coverage Determination (NDCs) and Local Coverage Determinations (LCDs) policies.
Tracking and measuring success
The only way to know whether an intervention is working is to track its success, which should include the changes that have been implemented and the dollars saved. Additionally, it is crucial to identify and track what the success — or failure — can be attributed to. This allows for course correction when necessary. Follow-up should be conducted every three months to enable proactive interventions.
Of course, it can be difficult to control whether or not those involved in process improvement, such as providers, adhere to the new workflows. Keeping a detailed report on progress can help them better understand their role in success.
Denial prevention is a long-term initiative that doesn’t happen overnight, so diligence and perseverance are the keys to success.
Collaboration and continuous improvement
In addition to tracking and measuring success, it is also vital to collaborate with managed care contracting teams to ensure all payer-related issues are resolved. The goal should be to use data from findings to hold payers accountable for not following policies, guidelines, or contracted terms.
Leveraging lessons learned from the denial prevention team can be used to support future contracting language that addresses these issues proactively. These often include appeal deadlines and audit limits.
It can also be helpful to include the organization’s joint operating committee in the denial prevention initiative. The committee should review the insight from the denial prevention investigations, as well as any other vital data that could be helpful.
Calculating ROI on denial prevention
The most effective way to determine a return on denial prevention efforts is to look at the improvement rate by percentage of additional reimbursement over a specific period of time. The cost saving of rework avoidance should be included in this calculation. This will provide a reasonable estimate of what has been saved due to denial prevention efforts.
Putting it all together
Sluggish margins and high costs have created a challenging environment for provider organizations. With the number of denied claims increasing significantly over the past few years, so has the time and resources needed to manage those denials. A better approach is to establish a denial prevention team to identify opportunities to implement process improvements to proactively prevent denials from happening. Doing so can bring lasting revenue cycle improvements and long-term financial sustainability.
Photo: Mironov Konstantin, Getty Images
Rhonda Kamenick serves as the Senior Director of CRC Operations (Clinical Appeal Team) for Conifer Health Solutions. Prior to this role, Rhonda spent 20 years working for Advocate Health, most recently as Director of Revenue Recovery in the Midwest (WI and IL), which included Denial Prevention (both hospital and professional), Clinical Appeals, and Government and Commercial Audits.
Originally a Registered Nurse, Rhonda has used her broad clinical knowledge to help bridge the gap between operations and the Revenue Cycle while working hand in hand to prevent work denials. Over the last ten years, she has grown the denial prevention department from one 0.5 FTE to more than 60 full-time team members.
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