In our previous article, “Denial Remediation: The Road to Revenue Recovery”, we highlighted the significant impact of denials on healthcare organizations. The encouraging news is 85% of denials are preventable and 67% of the denials are recoverable. Furthermore, 41% of appealed denials get reversed, underscoring the importance of addressing denials. A strong “prevention and denial management program” can yield as much as $5 million in additional revenue that otherwise wouldn’t be recognized for a typical hospital.
It is much more cost-effective to run preventive programs that span the entire revenue cycle than to spend time investigating and reworking claims in a silo or having a reactionary program. Hospitals with better controls to manage and prevent denials will see reductions in their cost to collect percentage as first pass pay rate increases and denial rework decreases.
Proactive Strategies for Denial Prevention
To combat the adverse effects of denials, healthcare organizations should adopt a multi-faceted approach. This proactive pathway includes:
Measure
- Utilize analytics. Implementing advanced analytics tools enables health systems to systematically and proactively monitor and track denials. This is the key foundational piece that enables a successful denial prevention strategy for all providers.
Analyze
- Engagement from executive-sponsored denial steering committee. Assemble a specialized denial committee that spans the full RCM to address denials and conduct thorough analyses to identify denial root causes. This implements a strong feedback loop and allows for the development of targeted strategies for prevention and remediation at the source to enable the appropriate departments to understand errors and take corrective action to prevent them in the future.
- Utilize expert denial management teams. Support the denial steering committee with experts well versed in reviewing denials. They can review trends to help identify root causes, measure the effectiveness of denial management strategies, and make data-driven decisions to improve claim approval rates, thus enhancing overall revenue recovery efforts.
Improve
- Empower with knowledge. Understanding the types and causes of denials is the first step to effective management. Educate staff on common reasons for denial and ensure they are informed about changes in payer policies and regulations.
- Foster continuous improvement. Stay informed about denial trends and adopt a culture of continuous improvement. Regular review of processes and procedures can reduce denial rates and mitigate their impact.
- Conduct regular audits. Incorporate systematic audits to ensure compliance and accuracy in medical coding and billing. This not only reduces the occurrence of denials but also ensures a smoother billing process, which can ultimately lead to enhanced patient satisfaction.
Implement Automation
- Leverage technology and human expertise. Integrating technology such as artificial intelligence (AI) with human insight can streamline the denial management process. AI can identify patterns and predict potential denials before they happen, enhancing efficiency and accuracy in claims processing.
- Automate and track appeals. Ensure appeals are submitted promptly and monitor their progress to ensure timely follow up. Use automated appeal letters and track the progress of overturned denials to ensure new processes and root cause remediation efforts.
Tracking Denial Key Performance Indicators
When implementing denial Key Performance Indicators (KPIs), it’s essential to focus on both the volume and value of denials to identify trends and take corrective actions to improve cash flow and operational efficiency. Metrics include:
- Initial denial rate is calculated by dividing the total number of denied claims by the total volume of claims over a specific period of time. This metric provides insights into how frequently claims are denied and the financial impact of those denials.
- Denial write-offs as a percentage of net patient revenue measures the net revenue written off due to denials divided by the average monthly net patient revenue, tracking providers ability to comply with payer requirements and the payer’s ability to pay the claim accurately.
- Time from initial denial to appeal tracks the number of days between initial denial remittance and appeal submission date, enabling providers to track internal team processing efficiency.
- Time from initial denial to claim resolution tracks the number of days between the initial denial remittance and final claim resolution (zero balance with or without payment) to provide insight into payer appeal turnaround times.
- Percentage of initial denials overturned is calculated as the number of initial denials overturned divided by total initial denials, which helps understand denial appeal efficiency and effectiveness.
By proactively addressing potential issues across the revenue cycle to minimize the impact of denials, healthcare providers can safeguard their financial health, optimize operational efficiency, and improve the patient experience. With the right team, systems, and a culture of accountability and celebration, you can turn denials into dollars and lower your cost to collect. Download the white paper "Redefining ROI in Denials Management" to learn more about effective denial prevention strategies.
Matthew Bridge
Ryan Chapin
