Implementing Denials Management Best Practices

Medical claim denials are a recurring pain point for healthcare providers, and they’ve only gotten worse during the COVID-19 pandemic. A new report from the American Hospital Association (AHA) states that 89% of hospitals and health systems have experienced increased denied claims from payers over the past three years, with 51% saying the increase has been “significant”. In fact, HFMA reports both commercial and public payers are now denying about one in every ten submitted claims, representing nearly $5 million in denials, on average, per provider in the United States.

With healthcare providers approaching a “denials danger zone” and facing millions in lost revenue, it pays dividends to take a closer look at this vital healthcare revenue cycle function and share some best practices from seasoned denials management experts.

Denials Management Affects the Entire Revenue Cycle

Denials Management is a closed-loop business process that involves investigating each denial, performing root cause analysis of why each claim was denied, analyzing denial trends to uncover payer behavior, working with insurance companies and public payers to overturn denials, and implementing denials prevention processes. Managing denials affects all revenue cycle stages – from front-end (denials prevention) to middle and back-end (denials recovery). Denials management influences cash flow, reimbursement, cost-to-collect, and touches patient access, clinical, health information management (HIM), and patient financial service teams.

Types of Denials: Soft vs. Hard

Denials fall into two categories and can result in healthcare organizations losing or delaying money they are owed. Knowing the difference is an integral part of denials management.

Soft denials involve rejected claims that temporarily impact cash flow and may be paid if the healthcare provider takes corrective action. Soft denials do not require formal appeals, but healthcare organizations must invest resources to follow up and provide the additional clinical documentation or corrections the health insurance company requires. 

Hard denials lead to lost or written-off revenue and require formal appeals to attempt to collect. Hard denials frequently occur due to registration inaccuracies, invalid codes, eligibility errors, lack of prior authorization or referrals, medical necessity, and Medicare statutorily excluded services.

Proactive Denials Management and Prevention

The good news is 86% of denials are potentially avoidable. Preventing denials before they occur is key and quickly becoming a strategic imperative for health systems. We asked denials management experts to share best practices for today’s denial-heavy environment. Below are four strategies to help healthcare organizations reduce denial rates, increase the success rate of claims appeals, and plug revenue leaks.

April Kooiman
April Kooiman

1. Analyze Your Denials

Look at claims that have been denied in the last one to three months. Are they coming from a particular department or denied by a common insurance plan? What trends can be uncovered? Cloudmed’s April Kooiman, Executive Vice President, Denials and Accounts Receivable Recovery recommends working with a revenue cycle management partner that offers a good pilot program.

“This is a perfect way to dip your toe in the water and get expert help without burdening already overworked staff,” says April, who cited a recent example of a large, multi-department hospital that took advantage of a denials recovery pilot program to recover nearly $300,000 from just 25 cases it would have otherwise closed.

Sarah Mendiola

2. Focus on Root Causes

Identify problem areas in your healthcare organization’s processes and workflows found due to analyzing denied claims. Sarah Mendiola, Esq., Senior Vice President, Denials at Cloudmed, advises paying particular attention to patient access and registration, insufficient documentation, coding and billing errors, payer behavior, and case management. 

“Once you’ve identified where problems are occurring,” says Sarah, “prioritize areas that have the greatest impact on your bottom line. It’s worth it to establish benchmarks and re-design or streamline workflows in these high-priority areas.” 

3. Verify Eligibility Prior to Service

Erika Via Gordon

Nearly 27% of denials are due to registration and eligibility errors.

“Never assume,” is the advice of Erika Via Gordon, Director, Medicare Review, Cloudmed. “Even the most established patient could have experienced a recent life event that will affect coverage.”

Qualifying for Medicare, going on and off Medicaid, changes to commercial insurance ID, and group numbers are just a few reasons why verifying a patient’s insurance and demographics are essential before every single visit.

4. Leverage Technology

Revenue cycle management technology is the key to proactive versus reactive denials management and prevention. A seamless flow of information among departments, real-time analytics with data-based insights, robust reporting with root cause analysis are all possible – and necessary – to prevent errors, streamline processes, and determine where to focus denial prevention and management efforts. Robotic Process Automation (RPA) is proving invaluable to front-end denials management processes, with 59% of adopters using it for eligibility verification and 57% using it for authorization, according to recent Becker’s Healthcare research.   

Expected Outcomes From Optimized Denials Management 

Denied healthcare claims are preventable. Building a successful and sustainable denials management program that boosts the bottom line requires the right mix of robust analytics, integrated technology, workflow automation, education, services, and expert support.

For a deeper dive into denials management, check out this AAHAM on-demand webinar, “Best Practices: Denials Management to Optimize Reimbursement.”  Learn more about RPA in healthcare, including denials use cases. Discover how Cloudmed denials experts and technology can help your healthcare organization prevent denials for faster recovery and increased revenue. 

Cloudmed is now a member of the R1 RCM family

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