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Claim Denied: Best Practices for Prevention and Recovery

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Finding solutions to a nagging (and growing) problem for hospitals.

Written By Rod Moore

Despite efforts to streamline the claims management process, hospitals still struggle with third-party payers denying claims for reimbursement for care provided.

The cost to hospitals of denied claims is more than $260 billion a year, according to a Change Healthcare Healthy Hospital Revenue Cycle Index report. This represents approximately 9 percent of total claims nationally.

Why claims are denied isn’t as much of a mystery to hospitals since hospitals are alerted when administrators inadvertently use incorrect codes, provide insufficient documentation or lack preauthorization approval. But the threat of denied claims is alarming for hospitals and other care providers. And, because appeals of denied claims can take up to 60 days, delays can impede cash flow for hospitals.

With mounting pressures on margins, many hospitals are increasing their focus on identifying and preventing lost net revenue. Although the percentage of denied claims varies by hospital, the amount often is enough to warrant implementation of best practices for claims management.

The two potential ways to recoup lost revenue from claims denials are prevention first and recovery second.

PREVENTION BEST PRACTICES

Best practices around prevention often begin with analyzing past denial patterns by looking at claims by payer, facility and service to understand where the trouble originates. This initial step is followed by putting teams in place to fix the processes, provide training and document standard operating procedures to make improvements.


Franklin

Determining the volume and source of the denials is a logical first step, said David Franklin, chief operating officer at Connance, a provider of revenue cycle analytics.

“Some of that (evaluation) will go back into a process fix that hospitals need to do earlier,” Franklin said. “That could be training or system actions such as changing some of their edits. But there are a range of things that hospitals could be doing once you have the data to figure out how to stem the bleeding earlier.”

“One of the beliefs among providers is that payers change the rules of the game on them quite frequently,” Franklin said. “This is where utilizing predictive analytics on the back end to better understand denial patterns and denial recovery patterns can help. Through predictive analytics, you not only drive workflow efficiency from the point you have a denial, but also help you pinpoint (why) claims are getting denied.”

By identifying denial patterns, Connance works with hospital teams to revise claims submissions processes and workflows, eliminating issues that previously caused denials.

AUTOMATION ADDS EFFICIENCY

Automation also is high on the list of denials prevention strategies.

“Another best practice is to take advantage of automated claim status solutions,” Franklin said. “They can continually monitor the payer portal using technology, not with people. That gives you early detection of claims that will be denied.”

“Almost nobody feels that they have sufficient native reporting tools to help them truly understand the root cause (of denials) built into their patient accounting system,” Franklin said. “(Providers) don't generally feel that they have a handle on where denials are coming from and how to get after that in an integrated way, which looks at both the prevention opportunities as well as the productivity opportunities around recovery.”


Thompson

After Irving-based CHRISTUS Health consolidated its five business offices into one four years ago, it made a concerted effort to address denials with better workflows. Ryan Thompson, vice president, revenue cycle at CHRISTUS, partnered with Connance to design an exception-based workflow, which relies on a predictive analytics tool to automatically check the status of claims.

“The (Connance) tool really allowed us to be able to see at a greater level of detail where all our people were working and how effectively we were touching accounts,” Thompson said.

Predictive analytics allows staff to focus on the claims with potentially the highest yield and those likely to be paid rather than those that are less likely to be paid. This approach optimizes efficiency by allowing staff to focus on claims with a higher probability of being collected.

However, changing workflows can be costly and require a significant adjustment period for revenue cycle staff. For instance, one of the biggest hurdles to implementation of the solution at CHRISTUS was getting staff to trust the new system in part because less experienced collectors struggled with adopting the new workflow. Some staff actually worked around the solution during their first year of adoption, Thompson said.

To increase odds of success, any workflow transition process should begin with creating new documentation and issuing standard operating procedures, Franklin said.

“The change management component of how you bring along, whether it's 10 people, 50, or in the case of CHRISTUS, hundreds of people, to understand ‘Here's a new way that we're going to work, here's why this is better than what we were doing before,’ and have them buy into that is hugely important,” Franklin said.

While the work to change a revenue cycle team’s process can be a major undertaking, it can make a big dent in reducing denied claims and ultimately have a substantial impact on a hospital’s bottom line.

“We’ve reduced our technical denials by 75 percent over the last three years,” Thompson said. “That’s through having better mechanisms and processes to track and work our accounts.”

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THA HealthShare Solutions magazine