3 Best Practices for Hospital Claim Denials Management

May 11, 2017 - Healthcare cost control continued to top hospital priority lists in 2017. But hospital leaders may be leaving millions of dollars on the table because of inefficient claim denials management processes.

Claim denial rates ranged between 0.54 percent and 2.64 percent for major private payers, while Medicare denied close to 5 percent of claims, according to the American Medical Association’s health insurer report card.

For healthcare organizations that contracted with multiple payers this meant that as much as one-quarter of claims were rejected or denied, the consulting firm Protiviti reported.

As a result, claim denials cost healthcare organizations about 5 percent of their net revenue stream.

While claim denials are a normal component of the healthcare system, hospitals may be losing more revenue than anticipated because of inadequate denials follow-up. Healthcare organizations failed to correct and re-submit approximately 65 percent of claim denials, MGMA found.

READ MORE: Top 4 Claims Denial Management Challenges Impacting Revenue

To maximize claims reimbursement revenue in a timely manner, data analytics and a team-based approach are key to improving hospital claim denials management strategies. Hospital leaders should develop claim denials key performance indicators, implement the appropriate technologies, and engage clinicians in the management process.

Using data analytics to go beyond the traditional claim denials KPI

Hospital revenue cycle management staff traditionally calculate a general denials rate for claims submitted to all payers for a specific period. The resulting key performance indicator generally shows how efficient and profitable the hospital system is in terms of claims management.

To determine a denials rate, hospitals should divide the total number of claims denied by the aggregate number of claims remitted for a select timeframe, the Healthcare Financial Management Association (HFMA) stated.

Hospitals should aim to keep claim denial KPIs as low as possible to increase claim denials management efficiency. Although the HFMA reported that the industry standard for denials is around 4 percent.

While the general claim denial rate points to a hospital’s efficiency, more advanced claim denials management KPIs can help hospital leaders analyze denials by type and payer.

READ MORE: How to Maximize Revenue with Improved Claims Denials Management

Hospitals should use business intelligence analytics to develop claim denials KPIs by denial cause, suggested Joncé Smith, Stoltenberg Consulting’s Vice President of Revenue Management.

First, she advised hospitals to track denials that are considered hard because hospital staff cannot prevent the claim from being rejected by the payers. For example, hospitals may receive a hard denial for an annual covered service that was repeated within the same calendar year.

Second, hospitals should create a claim denials management KPI for soft denials. These denials are preventable, such as a claim containing an incorrect beneficiary policy number.

Hospitals should focus on claim denials that are the most likely to result in write-offs, meaning lost revenue.

“Using a business intelligence tool to analyze different denial reason codes and the volume of rejections for each code and department can pinpoint areas for process improvements,” Smith wrote.

READ MORE: After EHR Adoption, Revenue Cycle Technology Modernization Begins

In addition to denial reason, hospitals may want to consider creating claim denial management KPIs for each payer. Knowing which payer denies the most claim submissions is key to identifying claim denial management improvement opportunities.

Each payer has their own claim submission and reimbursement regulations. But hospitals can track which payer requirements challenge their staff the most through a payer-specific claim denial KPI.

The payer-specific KPI can also help hospital leaders prioritize which claim denials to tackle first.

“Being able to accurately produce and graph data on major payers without hours and hours of work is of high strategic value to a well‐planned business decision,” stated DataPlus CEO Frank Trew in an MGMA resource. “It can answer questions about the impact on a practice if a particular payer is dropped, or how those patient slots would be filled.”

Hospitals may want to re-work claim denials from payers that contribute the most claims reimbursement revenue first.

Implementing the right claim denials management technologies

Hospitals cannot effectively calculate claims denials management KPIs without implementing the appropriate IT systems. Yet 31 percent of providers still use a manual claim denials management system, a 2016 HIMSS Analytics survey revealed.

While generally automating claim denials management is a start, hospital leaders should also seek systems that target claim denials management problem areas and integrate with existing medical billing and/or EHR systems.

Upgrading or installing patient scheduling and registration systems is critical to preventing claim denials. About 90 percent of claims denials were preventable, the Advisory Board reported. Common denials reasons, such as incorrect patient demographic information or incomplete insurance verification, can be solved through patient registration systems.

For hospitals searching for claim denials management-specific solutions, leaders should consider implementing systems that can handle the hospital’s denials volume in an efficient manner.

“For the person who has to work the denial, technology that can segregate the claims is essential,” Michael Kan, Boston-based Partners Healthcare System’s Revenue Operations and Administration Corporate Director at the time, told HFMA in a roundtable.

“It’s also important to use technology that provides staff with the necessary information at their fingertips to determine whether a claim is able to be appealed,” he continued. “Also, we provide them with data elements and canned appeal letters to make their jobs easier. That’s the key to getting through the volume.”

For other HFMA roundtable participants, bolt-on claim denials management solutions reduced denials.

Former Spectrum Health Director of Patient Financial Services Frank Gless explained that a solution that integrated with the health system’s medical billing system was beneficial. Moving away from the health system’s Microsoft Access database and to a bolt-on solution allowed staff to receive electronic remittance data from payers and create reports based on the information.

Minnesota-based Allina Hospitals and Clinics favored an integrated claim denials management and EHR system approach.

“The system lets us sort by a number of different fields, such as timely filing indicator, date of service, dollar, and payer,” said Kara Carpenter, the health system’s Revenue Cycle Manager at the time. “The system gives us the ability to filter or sort the work queue in a number of different ways to make the processes much more efficient in the business office as well as medical records and other departments at each facility.”

Engaging clinical staff in claim denials management improvement to prevent denials

EHR and ICD-10 implementation allowed providers and payers to add more specificity to medical billing. While the technological changes improved clinical documentation standards, they also threatened providers with more claim denials.

During the ICD-10 transition, many providers feared that claim denials would increase because hospital staff needed more time to learn the coding system. But Baptist Health South Florida avoided clinical documentation and denial issues by engaging clinical staff.

“We actually showed them the ICD-10 code books, which they had never seen before,” stated Lorena Chicoye, MD, Corporate Medical Director at the hospital system. “Physicians don’t usually see coding books. We did show-and-tell with the physicians so they could understand that these books were available to them if they had any real interest in this.”

Some providers at Baptist Health did not see the value in ICD-10 and claim denials management educational sessions. However, Chicoye identified those clinicians and collaborated with them individually to show them how clinical documentation improvements were necessary to avoiding claim denials.

Partnering clinical documentation specialists and clinical staff was also key to preventing an uptick in claim denials after ICD-10 implementation, she explained. Clinical documentation specialists worked with providers one-on-one and were placed on the department floors to answer questions.

“We never stopped educating them on ICD-10, so that they were familiar,” she stated. “But just because you’re familiar doesn’t mean you retain all that information. So, we’re still there on the floors with the physicians and we review those medical records every 24 hours to make sure that the records are documented properly and can be coded out in ICD-10.”

HFMA also recommends that hospitals develop a multidisciplinary team approach to claim denials management. Clinical and revenue cycle management staff should collaborate to understand clinical documentation challenges.

One way to implement the team approach is to create a claim denials management group of nurses or other clinicians, like at University of Pittsburgh Medical Center (UPMC).

“Our hospital’s denials management team is made up entirely of nurses, and they review all clinically related denials, such as medical necessity, noncovered services, and no authorization denials,” a UPMC spokesperson told HFMA. “Because we use an all-RN model, our denials management team can review the clinical judgment and initial documentation at issue and often make the case for an appeal without having to discuss it with the physician, unless the reason for denial is part of a bigger trend that needs addressing.”

Geisinger Health System implemented a different team-based strategy that empowered revenue cycle management staff to work with providers.

“We have revenue management practice consultants who act as liaisons between physicians and the revenue cycle department,” Susan Trewhella, the health system’s Associate Vice President of Revenue Management at the time, explained to HFMA. “The team has a diverse background, made up of a coder, teacher, dentist, nurse, and financial expert. Because of its diversity, the group is quite effective in communicating with physicians and fostering a team approach to addressing revenue cycle issues.”

Claim denials management should remain a staple hospital revenue cycle management process as alternative payment models continue to push claim reimbursement rates down and more advanced health IT systems allow payers to more accurately review claims.

Implementing claim denials management best practices can put hospitals in a more stable financial position to handle changes in the healthcare industry.