Claims denials pose a serious issue for hospitals amid an already complicated reimbursement landscape.
“Denials are a huge obstacle to timely and complete reimbursement,” said Carmen Sessoms, associate vice president of the revenue cycle management advisory services program at Nashville, Tenn.-based Change Healthcare.
In 2016, Change Healthcare managed 1.8 billion transactions with a value of more than $3 trillion. Leveraging this data, analysts determined approximately 9 percent of claims with a value of $262 billion were denied. These denials impacted about 3.3 percent of net patient revenue, translating to an average of $4.9 million per hospital.
Denials are not only highly prevalent in the healthcare environment, but also very costly to appeal. While 63 percent of denied claims are recoverable on first appeal, additional labor and manpower associated with the appeal process equals an average of $118 per claim, or $8.6 billion overall for U.S. hospitals, according to Ms. Sessoms.
“Even though denials happen across the entire revenue cycle, a large percentage are associated with front-end processes like registration, authorization and eligibility,” she said.
During a Nov. 1 webinar sponsored by Change Healthcare and hosted by Becker’s Hospital Review, Ms. Sessoms joined Rick Childs, vice president of revenue cycle management at Rome, Ga.-based Floyd Medical Center, and Tony Rinkenberger, director of RCM at Waconia, Minn.-based Ridgeview Medical Center and Clinics, to share seven strategies hospitals can use to prevent denials.
- Root cause determination. Hospital leaders should first identify why they are having denials, according to Ms. Sessoms. She recommended using available data to analyze revenue cycle management processes to see where denials are occurring, paying special attention to the following:
- Patient access and registration
- Insufficient documentation
- Coding and billing errors
- Payer behavior
- Utilization/case management
“When you are trying to look for root cause, key questions to ask yourself are: ‘Do I have this data?’, ‘Is it accessible in a timely manner?’ and ‘Can I trust it in my decision making?'” Ms. Sessoms said.
- Prioritization. Once leaders identify where problems are occurring, they should prioritize areas that will have the greatest impact on their hospital’s bottom line. “Can you drill down the problem to a specific payer, service line, department or physician and understand the dollar impact of inefficient processes or errors in these areas?” said Ms. Sessoms, adding that some of the high-priority issues may require a process redesign.
- Eligibility. Registration and eligibility accounts for 23.9 percent of all denials in the U.S., and service not covered accounts for 10.1 percent, according to Ms. Sessoms. She said hospitals should consistently check eligibility throughout the entire care process, from the time of scheduling all the way through submitting the claim.
“If the procedure is not eligible or covered, hospitals must have a process in place to inform patients of their financial responsibility and other payment options,” said Ms. Sessoms.
Ridgeview Medical Center improved its eligibility verification process by revamping employee education, according to Mr. Rinkenberger. Three years ago, the hospital conducted point-of-service collection training, along with insurance and preregistration education for all preregistration, registration and admitting staff members. “We wanted our employees to be able to answer more difficult questions about insurance and [properly complete] verifications,” he said. By boosting employee education and using analytics to track verification levels, the hospital successfully increased eligibility verifications to between 20,000 and 25,000 verifications per month. Ridgeview also reduced denials by 10 percent within the first 3 months following the project.
- Registration data quality. Hospitals should also implement business rules for examining registration data to ensure it’s accurate, complete and consistent. Ms. Sessoms said it’s wise to have an alert system in place to identify potential data quality issues and establish workflows to correct errors in real time.
Mr. Rinkenberger said Ridgeview Medical Center was able to increase its registration accuracy from 90 to 99 percent in about a year by using report cards to give staff members feedback on their registration accuracy. “By giving them that report card and monitoring how well they’re doing, we’re able to get really good accuracy on their registrations,” he said.
- Prior authorization and medical necessity. Authorization and precertification issues account for 18.2 percent of denials in the U.S., according to Ms. Sessoms. Because these issues account for such a high amount of denials, hospitals must make sure they understand the real reason claims are denied for authorization. “Was it obtained? Expired? Filed for the wrong procedure?” she said, adding that hospitals need appropriate medical necessity business rules to better inform the billing process and prevent authorization mistakes.
“It’s so important to make sure you’re getting authorization up front,” said Mr. Childs. After receiving payer approval, the hospital must proactively identify changes with a scheduled procedure or the insurance plan that could cause a claim denial. At Floyd Medical Center, employees double-check authorization a few days before the procedure and on the day of service, according to Mr. Childs. The hospital also relies on an authorization team to verify payers’ authorization requirements, double-check the accuracy of authorizations from affiliated physician groups, and record calls or electronically capture proof of authorizations for the hospital’s records.
- Effective claims processing. Hospitals should review claims both midcycle and before the claim is sent to the payer to look for errors and make appropriate edits, according to Mr. Childs. He said edits should be very customizable to the payer, since each payer has different requirements and formatting preferences for claim forms. Oftentimes, a revenue cycle service provider can work with hospitals to build in these custom edits and author new rules based on learned payer behavior. This partner should also update payer rules frequently and before the effective date, according to Mr. Childs.
He recommended reviewing edits on an annual basis to look for inefficiencies. “You can’t just build them and forget about them,” he said. “You need to keep monitoring what those edits are doing for you.”
Ms. Sessoms agreed on the importance of visibility in the claims process to catch any errors.
“You need proactive visibility to resolve any issues, sometimes even before they’re going to happen,” she said. “If you do have issues, you want to appeal those denied claims to help recover potential revenue. So you need a mechanism to identify, submit and monitor.”
- Ongoing analysis across the revenue cycle. Regular analysis is key to consistently improving denial rates, according to Ms. Sessoms. Hospitals must regularly seek facts and implement changes throughout every step of the revenue cycle. By monitoring internal processes, employees’ skill sets and the benefits of implemented technologies, hospital leaders can gain a holistic view of the entire revenue cycle to make sure they are optimizing all denial prevention strategies.