If you run a healthcare facility or any other health organization, claim denials must be the tough nut to crack. According to a recent analysis for the past four years, the claim denial rate has increased by 24%. The situation is quite alarming, and we need a firm strategy to deal with this gigantic problem. This blog has successfully demonstrated every single aspect of denial management. Starting with a basic understanding, the blog will take you through the hot waters of the denial management process, its types, key players, root causes and prevention, denial management technology, key performance indicators, financial impact, and future trends.
Understanding Denial Management
Denial management comes to life when an insurance company denies any submitted claim for an authentic reason. The reason includes incomplete documentation, coding errors, or any other issue related to medical necessity. Every insurance company has a set guideline to be followed by any healthcare provider. Denial occurs if the provider doesn’t meet the specific criteria of the payer. The process involves identifying,categorizing,and finding the root cause behind the denial.
The Denial Management Process
Denials can be managed through a process of identifying, resolving, and preventing them. Here is a step-by-step guide to elaborate on every single step.
Step 1 Claim Submission
The provider submits the claim to the insurance company for the services provided to the patients. Each of the patient has taken some specific insurance plans. Claims must be submitted according to the guidelines of the regulatory bodies. Claims are submitted electronically or through paper work.
Step 2 Denial Identification
Providers are notified about the claims that are denied or rejected by the insurance companies. The team is informed about the reason behind the denial. All the details are then fetched into the tracking software.
Step 3 Denial Categorization
All the denials are categorized according to the types of denials. These types include clinical denial, technical denial, and administrative denial. The denial issues are then properly analyzed to find out the root cause.
Step 4 Denial Resolution
Providers can appeal the decision of claim denial. An additional file of documents is submitted to support the case. This file contains information that favors the provider. A specific timeframe is given to submit the documents, codes, or any other information. A follow-up is important to check the status of the appeal.
Step 5 Room for Improvement
An analysis is conducted to identify areas for improvement. Reports are then sent to the revenue cycle management department to avoid any chance of error. Preventive measures can be taken for the future.
Step 6 Tracking and Monitoring
Denials are properly tracked for financial analysis and performance factors. Denials that can’t be denied or rejected are monitored. Key performance indicators (KPIs) that directly impact the financial aspects are also monitored.
Types of Denials
Denials are categorized into multiple types, such as technical, administrative, and clinical. Understanding these types helps the billers address and prevent denials firsthand.
Technical Denials
Technical denials are due to any technical fault, such as missing information, coding errors, or any other formatting fault. They have no direct relation to medical necessity, but rather to administrative errors.
Examples include:
- Patient’s data, such as name, address, date of birth, and insurance coverage, isn’t accurate.
- Incorrect CPT (current procedural terminology) or ICD (international classification of disease).
- Claims are submitted more than once.
Administrative Denials
Administrative denials, also known as front-end denials, are due to any issue related to billing or coding procedures. It can occur at any point, such as during charge entry, claim submission, eligibility verification, or patient registration.
Examples include:
- Incorrect CPT and ICD codes were used for procedures and services rendered.
- Late submission of the claims.
- Coordination of benefit issues.
Clinical Denials
Clinical denial is the rejection of the claim due to any clinical reason, such as treatments without pre-authorization. It is directly related to medical necessity, such as determining whether a specific service is necessary.
Examples include:
- Treatments without pre-authorization from the insurance company
- Treatments that were not medically necessary
- Treatments that are not considered standard medical practice
Key Players in Denial Management
Effective denial management demands effective collaboration among different key players, such as the provider, insurance company, revenue cycle team, and patients. Each player plays a vital role in denial prevention and denial resolution.
| Stakeholder | Denial Prevention Roles | Denial Resolution Roles |
| Providers | Accurate Documentation: Providers have a responsibility to accurately document all the information related to the patient’s diagnosis, procedure, and treatments in the medical record. | Appeals in Medical Necessity: If the claims are denied, the provider has the responsibility to submit appeals and additional documentation to support the case. |
| Compliance with regulatory bodies: providers must ensure that they are compliant with regulatory bodies such as insurance companies, HIPAA, etc | Communication with the Payer: The provider needs to communicate with insurance companies to resolve the issues, especially clinical denials. | |
| Medical Necessity: Providers have the responsibility to check whether the procedures and treatments are medically necessary or not. | ||
| Insurance Company | Verification: Payers determine whether the procedure demands pre-authorization. If it is not necessary, they are denied firsthand. | Conduct Denial Reviews: payers find out the reasons for denial and inform providers about it. They provide all the information asked by healthcare professionals. |
| Clear stance on guidelines: Insurance companies have a clear policy on their guidelines and they communicate with providers on billing and coding procedures. | Make a decision on appeals: Payers make a decision on appeal and inform the providers about it. | |
| Claims Processing: Payers process the claims and reject it if there is any issue, mostly technical. | ||
| Team for Revenue Cycle | Review claims before submission: the revenue cycle team has a responsibility to effectively review all the claims before their submission. This ensures accuracy. | Analyze the root cause of claim denial: The team checks the whole claim submission process and analyzes the loopholes that could lead to claim denial. |
| Meet deadlines for filing: The team makes sure that the claims are filed well before time. If claims are not submitted within the specific timeframe, they are denied by the insurance company. | Manages all the appeals: The documentation required for appeals is handled by the revenue team. They follow the whole process of appeal. | |
| Trained the staff: The revenue cycle team trains the staff about medical billing and the coding process. Proper training reduces the margin of error. | ||
| Patients | Accurate Information: Patients need to provide accurate demographic information such as name, date of birth, address, and insurance coverage to avoid administrative denials. | Communicate with healthcare providers and insurance companies: In order to avoid denials, patients need to actively participate in clear communication with providers as well as payers. |
| Compliance with the regulatory bodies: Patients need to be compliant with the insurance company’s guidelines and follow them at any cost. |
Denial Root Causes and Preventive Measures
Common root causes of denials, along with preventive measures, are listed below:
Coding errors
Root cause: Incorrect ICD and CPT codes used for procedures and treatments. This is the most common reason for claim denial.
Preventive Measure: Double check the claims before submission. Regular coding audits are essential, along with training sessions for the coders. Coding software tools are used to prevent coding errors.
Insurance Coverage Issue
Root Cause: The specific insurance coverage for a patient wasn’t checked at the time of the appointment with the provider.
Preventive Measure: Robust insurance eligibility verification is a must-have to prevent any claim denial. Healthcare staff must verify before providing services.
Pre-Authorization failure
Root Cause: The insurance companies did not approve of the procedures that require pre-authorization.
Preventive Measures: A dedicated team is required to ask for pre-authorization before rendering services to the patients.
Claim Filing Deadlines
Root Cause: The revenue cycle team is not able to file the claims within the specific time frame of the insurance company.
Preventive Measure: Medical billers must have a calendar set for every deadline. An effective claim submission process ensures timely claim filing.
Coordination of Benefit (COB) Errors
Root Cause: The issue arises when the healthcare staff is not able to identify the primary and secondary payers. The probable reason could be the patient’s multiple insurance plans.
Preventive Measures: The billing and coding processing teams need to maintain a clear distinction between primary and secondary payers. Proper communication with both payers helps improve the accuracy of the COB.
Duplicate claim submission
Root Cause: This error is purely unintentional. The same claim is submitted multiple times.
Preventive Measures: A claim tracking system can avoid this error.
Denial Management Technology
Technology plays a vital role in giving pace to the denial management process. It helps to enhance the overall efficiency and accuracy.
Use of Denial Management Software
All the information about claim denial is directly fetched into the denial management software. This makes it easy for the providers to track the data. The reasons for denial, appeal status, insurance company guidelines, and other records are properly maintained.
The denial resolution process is streamlined as most of the tasks are automated, such as appeal submission and follow-ups. These technological tools help healthcare facilities find out the root causes behind any denials and identify trends in claim denials.
Use of AI and Machine Learning
AI and machine learning predict future trends in claim denials. This helps the healthcare provider address all the errors before they appear in the near future. Artificial intelligence reduces the chance of technical errors as all the processes are automated.
Coding errors are also minimized, as machines have shown 100% efficiency. AI suggests more accurate codes for clinical documentation. Procedures that are medically necessary have their own criteria set by the insurance companies. Machines easily follow the guidelines of regulatory bodies.
Metrics and Key Performance Indicators (KPIs) for tracking denial management success.
Analyzing the success of denial management is essential for the improvement of the revenue cycle and reduces denial rates. Following are the metrics and key performance indicators (KPIs) to monitor the efficiency of denial management:
| KPIs | Importance |
| 1) Denial Rate | The denial rate has an indirect relationship with denial management. A lower denial rate means a more accurate denial management process.Formula= Number of denied claims/total number of claims submitted x 100 |
| 2) Denial Dollars | This KPI shows the financial impact of denials on the healthcare facility. |
| 3) Aging of Denials Report | The report on the aging of denials helps the revenue team decide what claims are priorities and need immediate resolution.Aging can be categorized as follows:Under 30 daysUnder 31–60 daysUnder 61–90 days. |
| 4) Days in A/R (Accounts Receivable) | A shorter life span of account receivable means an efficient revenue cycle management. |
| 5) Clean Claim Rate | A clean claim rate has a direct relationship with successful claim submission. Higher rate means less denials. Formula= (Number of Clean Claims / Total Number of Claims Submitted) x 100 |
| 6) Appeal Success Rate | A higher appeal success rate signifies the success of the appeal process.Formula= (Number of Successful Appeals / Total Number of Appeals) x 100 |
| 7) Cash Collection Rate | This metric indicates the rate at which a revenue team converts the bills into cash. Thus, a higher rate improves the cash flow and helps the healthcare organization financially. Formula: (Cash Collections / Total Billed Amount) x 100 |
| 8) Cost to Collect | This calculates the cost used for denial management. Through this calculation, the facility can control its expenses.it includes all the resources such as staff training and education, software used for revenue cycle management.Formula: (Total Cost of Denial Management / Total Collections) x 100 |
Financial Impact of Denial Management
Due to claim denials and rejections, the healthcare facility faces a lot of financial losses. The financial impact of denial management is quite significant. Here are some reports from the past that highlight the significance of financial impact.
| Reports | Details |
| Report 1 : Denial Rate Trends Over Time | A regular interval of time over the past 2 years is recorded in this report. This quarterly report highlights that the denial rate has decreased from 12% to 8%. This positive graph shows the reduction of the denial rate which helps to increase the net revenue by approximately $1.5 million. |
| Report 2: Revenue Recovered through Appeals | This report highlights the additional revenue recovered through appeals for healthcare providers. For the past year, the gross revenue has been $2.2 million. This report shows the significance of successful appeals. |
| Report 3: Denial Categories and Financial Impact | This report helps the revenue cycle team find out the root cause of the claim denial. All the denials are categorized according to the errors in the revenue process. These categories include coding errors, insurance coverage issues, and lack of documentation. Only the coding errors account for 40% of the denials and result in $1.8 million in losses. |
| Report 4: Clean Claim Rate and Impact on Cash Flow | This report basically shows the impact of a clean claim rate on cash flow. Effective claim submission without any errors is the key to success. The report mentions that the 90% clean claim rate results in a 15-day reduction in account receivable days. This directly boosts the financial status by $500,000 per month. |
Future Trends in Denial Management
Technological advancements and regulatory changes always have an impact on emerging fields. Denial management is not vaccinated against it. Here are some evolving trends that directly affect revenue cycle management:
Predictive Modeling and Advanced Analytics
Healthcare organizations are using predictive modeling and advanced analytics. These models help the facility analyze past trends and predict future denials. By doing this,one can prevent financial loss. Machine learning and AI algorithms help to find out the patterns and root causes of the denials and rejections.
Automation and Artificial Intelligence
Robotic Process Automation can make the process easy by automating the basic steps such as claim scrubbing,appeals,and follow-ups. AI chatbots also help the facility with patient handling.
Telehealth and Virtual Care
Virtual health is the new way of treating the patients. And denial management is adapting to the new challenges in remote areas. Healthcare providers will need to make sure that telehealth is properly maintained without any errors in documentation or medical coding. It is expanding, and denial management must ensure compliance with the regulatory bodies of different states.
Healthcare facilities that keep up with these evolving trends can definitely increase revenues, reduce denial rates, and enhance the overall productivity of the organization.
Final Words
In conclusion, it is safe to say that denial management is a crucial aspect of revenue cycle management. It ensures that the healthcare provider receives reimbursement for the services provided to the patient. The process involves identifying, categorizing, and finding the root cause behind the denial. Effective denial management is the key to the successful financial health of the healthcare facility.
About Medheave
Choose Medheave as your trusted partner for the journey of denial management. Medheave’s innovative approach to the management of denials is what makes it stand out. With a focus on predictive models, advanced analytics, automation, AI, and virtual care, Medheave can prevent any denials in the future and reduce financial losses to the organization. Sign us today for further updates.
