Denials are an ongoing issue that present significant challenges for healthcare organizations, creating substantial barriers to financial stability and operational efficiency that can ultimately impact the patient experience. RevCycle Intelligence reports that hospital denial rates have increased by 20% over the last five years. Additionally, payers have adopted Artificial Intelligence (AI) more quickly than providers, enabling them to deny more claims at a faster rate. This complicates the revenue cycle management (RCM) process and underscores the need for healthcare organizations to implement robust denial management strategies.
While outright claim denials are easily identifiable, the denial management process must also monitor potential adjustments and missed revenue opportunities. Revenue leaks caused by undetected mistakes in billing, prior authorization errors or missing services can silently drain revenue. Often, these issues go unresolved unless actively reviewed and discussed with a broader denial management committee spanning the full revenue cycle. True denial management involves understanding denial trends, conducting root cause analyses and enacting remediation strategies.
Healthcare providers can clearly benefit from a comprehensive understanding of denial remediation, including the impact of denials and how to proactively address them to navigate the complexities of denial management and prevention.
Impact of Denials
For providers, denials have adverse financial implications that can result in final write-offs and create operational burdens that can affect staff productivity. For patients, in some cases, denials may result in being billed more than they anticipated.
On average, one in five medical claims is denied or delayed, causing significant financial challenges that can impact overall net revenue. This is particularly frustrating in cases where payment should have been made promptly on accurate and clean claims. Delayed reimbursements further intensify financial strains by increasing accounts receivable (A/R), which affect cash flow and overall financial stability and require providers to be more aggressive in collection efforts.
The Medical Group Management Association (MGMA) reports that approximately 65% of denials are never reworked, resulting in a revenue loss as well as creating a significant financial opportunity for providers. Overturning denials also involves excessive operational costs, as the average cost to rework a claim is $25 for physician bills and up to $180 for hospital bills, requiring providers to explore more cost-effective ways to manage denials and the rework cost.
Beyond financial implications, denials also have a considerable operational impact. The process of investigating and appealing denials is time-consuming and labor-intensive, contributing to the staff’s administrative tasks. The additional workload and burden can result in decreased efficiency and a decline in staff morale, as employees may feel demotivated by the constant battle against denials.
The increased costs and staff time to overturn denials has led many forward-thinking providers to explore global strategies to manage denials, including providing coverage to keep up with increased denial volumes, including peak times, evenings, weekends and holidays. A global staffing strategy can also provide support for healthcare organizations that need additional resources to conduct thorough denial investigations. Outsourcing teams can review denial details to track and analyze the impact to ensure future processes are accurate and complete. Additionally, vendors like AGS Health employ onshore project management office (PMO) resources with US central billing office (CBO) experience to complete deep dive analyses to identify denial root causes and help create actionable steps for preventing future denials.
Denials can also negatively impact the patient journey. Patients may experience confusion and stress because of billing issues that mistakenly shift the burden of payment to them. These challenges not only create financial barriers for patients, but they can also erode trust and satisfaction with their healthcare experience.
Denial Defense: Equipping Yourself to Combat Common Denial Types
Understanding the various types of denial that can occur in the medical billing process is crucial for healthcare providers to effectively manage their revenue cycle. Common denial types include:
Soft Denial: This claim requires further information or correction to be approved, such as requests for additional information or medical records. Effective follow-up can lead to successful payment.
Hard Denial:A claim denial leading to unrecovered revenue and potential financial losses due to issues with prior authorizations, untimely filings, or services that are not covered.
Avoidable Denial:Payment denial caused by service provider oversight or non-compliance, such as issues with registration, eligibility, or credentialing.
Clinical Denial:Denial based on questions about the medical necessity, appropriate length of stay, or required level of care.
Technical Denial:A claim denied due to errors such as missing or incorrect information, coding errors, or formatting issues. These non-clinical denials highlight administrative errors in the billing process.
Lack of coverage:Claim denial due to provision of services not covered by the insurance plan.
Unpreventable:Payment denials for medically necessary emergency care delivered under time-sensitive circumstances.
A comprehensive denial management committee plays a pivotal role in identifying, analyzing, and addressing the root causes of denials. This specialized group leverages a blend of expertise from various departments, including billing, coding, and clinical operations to help ensure a multidisciplinary approach to problem-solving that enhances the efficiency of resolving denial trends while also helping prevent future occurrences. Regular review and adaptation of strategies based on evolving payer policies and regulations can help optimize the revenue cycle. Incorporating a denial management committee into the revenue cycle framework enables healthcare organizations to safeguard their revenue integrity, improve cash flow, and maintain a high level of financial health.
Contact us to discuss how we can help support denial management and recoup funds, utilize certified coders and clinicians to handle coding and clinical denials, leverage PMO resources to provide additional structure to denial management, and incorporate automation for repetitive tasks to enable staff to focus on more complex denials. Watch for our next article in this series, where we will explore proactive strategies for preventing denials to help safeguard revenue.
Matthew Bridge
Ryan Chapin
