The ‘Knows’ of Denial Management
The emergence of value-based reimbursement in healthcare over the last decade has placed an increased emphasis on organizations to improve operational and financial efficiency. Staying competitive is now comprised of not only a system’s ability to deliver quality care, but also delivering care at a lower cost, all while securing timely and accurate reimbursement. As health insurers have improved algorithms and systems for determining payment, healthcare organizations need to improve processes and technology to match. One critical component is a vigorous denial management and improvement program to ensure that rigorous standards for payment are met.
Approximately 60% of data on a claim comes from upstream departments such as patient access, clinical departments, HIM/Coding while the remainder comes from core technical configuration and automated rules. Decoding the opaque insertion points of such data items is important for key decision-makers of an organization as preventing denials prior to occurrence needs to be an ongoing practice. Below are some tips for developing a tangible and attainable program to understand and alleviate the pervasive denials affecting payment of claims:
1. Know the Codes
The complexity of Adjustment Reason Codes and Remittance Advice Codes commonly referred to as CARC and RARC codes, and the lack of required uniformity across various payers serve to wreak havoc on any hospital or provider reimbursement monitoring and denial management initiatives. On any electronic reimbursement advice, combinations of CARCs and RARCs are sent to indicate adjustments, either contractual or denial, and provide additional information on adjustment reasons. The problem: the variance amongst payer remittances is quite large, meaning that developing an understanding of these code combinations can prove quite difficult.
The only and effective way to begin decoding the labyrinth of remittance denials is to map individual code combinations into specific denial categories by the payer. In doing so, the organization and personnel can begin to understand denials based on category rather than payer-specific code combinations. This will provide an organization individualized standardization of denials across payers for easier identification. This is a tedious process; however, it will create familiarity and expertise in the denial management and insurance follow-up departments and proves to be critical in setting up a successful set of guidelines to integrate with evolving and robust denial management technology.
The next iteration of this process is to begin parsing denied remittance advice into these categories, as close to real-time as possible. The timely appeal is essential for optimizing additional reimbursement and accelerating cash collection. Employment of specialty healthcare financial reporting and analytics software can be extremely helpful and beneficial in streamlining and expediting this process. The 835 ERA data should then be married with the denied 837 data and mapped back into the host EMR and Revenue Cycle system. As detailed below, most denials will originate upstream, so swift, reliable detection of root cause and responsible department or personnel is the first step to remedy.
2. Know the Numbers
Looking at both high-level and granular type denial data is extremely helpful for an organization’s key players in understanding reimbursement patterns. Solutions to provide functional, digestible, and understandable data based on specific parameters and filters allow easy evaluation of the breadth of an organization as well as idiosyncratic trends unique to the payer, department, service line, etc.
– Initial Denial Rate — this is the percentage of denied claims upon the first submission to the payer. This is important to calculate on both a claim and a dollar basis. Relativity is essential for understanding, denied high dollar claims are much more impactful on cash collection and metrics than a lower dollar claim. However, a large volume of lower dollar claims can bottleneck an appeals process creating chaos and inefficiency in obtaining proper reimbursement. This metric will serve as the barometer of how efficient Revenue Cycle processes are in securing accurate claim payment in the most accelerated manner.
– Successful Appeals Rate or Overturn Rate — this is the percentage of additional payment on appealed claims. This is also important to calculate on a claim and dollar basis. Claim trending can indicate consistent trends by hospital department, service line, payer, and patient type. For example, if a medical service is being consistently denied by Medicare, however, successful payment is consistently made upon appeal, this highlights a potential systemic issue upstream in operations. Dollar trending of appeals will place relative weight on each appeal by dollar and highlight the success or failure of high dollar appeals. Using both in tandem is important, claim basis trending can highlight pervasive issues, which if corrected, can allow appeals efforts to focus on more valuable appeals identified through dollar basis trending.
3. Know the Problem (…and if it is worth appealing)
The primary objective is denial prevention. Although appeals are a necessary evil in insurance billing, data shows that AR aged greater than 90 days is increasingly difficult to recover, so decreasing the denial rate is the most reliable way of improving reimbursement. Claim data is derived from every aspect of the revenue cycle process and clinical workflow stream. This means that assembling a multi-disciplinary team comprised of individuals with specialized knowledge spanning the entire cycle is crucially important. Grouping denials on whether they derive from a workflow or technical factors will lead to either educational or technical growth to conform to payer requirements. Identify trends of high frequency to determine if the problem can be corrected by the host source. Small-dollar denials, when pervasive can lead to large gaps in cash collections.
The secondary objective is to develop a targeted appeals process. Use the analytics and appeal trends provided to target claims with a high percentage of a successful appeal. If there is little evidence to suggest that additional cash can be recovered, a follow-up personnel’s efforts can best be spent elsewhere. Prioritize high dollar denials, the value in an effort to gain payment on a high dollar claim is greater than the effort to gain additional payment on a lower dollar claim.
