Facilities with a solid grasp on their revenue cycle process, know how incredibly frustrating and time-consuming addressing denials can be. What’s truly concerning is how much revenue your facility may be losing as a result of denials. Even for the most fine-tuned facilities, denials can be a tremendous hindrance to workflows. Due to the volume of work and the tedious process necessary for resolving denials, some of your denials may be falling through the cracks and are not being resolved in a timely manner.
To put matters into perspective, here are concerning statistics about denials.
- The average staff never gets to process approximately 65% of their denied claims. This translates into an average of 3% net loss in revenue to your facility.
- According to the Healthcare Financial Management Association (HFMA), the average cost to resubmit or revise a claim is $25 per claim. Yet most claims are never resubmitted.
- The national average delay in reviewing denials is around 20%. This has a domino effect on the expected revenue.
What makes these figures all the more concerning is that 60% of all denials are appealable.
What does this all boil down to?
In layman’s terms, your facility is probably suffering from a high rate of denials that potentially results in millions of lost revenue. The good news is that many of these millions can be recovered with the assistance of a solid denials management process.
So then, why do so many claims end up in denials?
Read on to learn about the types of denials, how to successfully appeal denials, and how you can alleviate the stress that denials put on your accounts receivable department and staff.
The Different Types of Denials
While the most obvious denials to catch are the ones that result in a complete non-payment, there are other kinds of “denials” that you also have to be on the lookout for that can affect your bottom line.
For starters, you should be monitoring for payment variance or, in rare cases, you should also be monitoring for many other causes of lost revenue. While technically these issues are not directly defined as “denials,” they can often become apparent while performing audits that identify payment variants that may result in denied claims.
The two main types of denials are soft denials and hard denials. The most significant difference is the additional burden that this will create for your staff.
Soft Denials
This is a temporary denial pending the correction or clarification of some items. These denials don’t require an appeal and can be easily resolved with timely follow-up.
Example causes of soft denials:
- Pending medical records
- Missing or inaccurate documentation
- Inaccurate code assignment or reimbursement claims
- Missing itemized bill for the service(s)
- Missing invoice
Soft denials shouldn’t cause too much of a problem, and so long as you’re keeping up with the status of claims regularly, these should be relatively easy and quick to fix.
Note: If you’re constantly receiving soft denials for the same reasons, there may be an easily correctable error in your administrative process. Vet the average patient’s journey through your system, identify where the ball is constantly being dropped, and address the problem.
Hard Denials
As the name implies, these are the opposite of soft denials. Hard denials are typically much more resource-intensive and always require an appeal for reimbursement.
The most common causes of hard denials are:
- Unauthorized Services
- Experimental service
- Non-Covered Services
- Medical Bundling/Unbundling
- Untimely Claim Submittal
These denials can often be problematic and take the attention and expertise of someone with experience in medical billing.
Now that we’ve covered the two main categories of denials, let’s break down the different kinds of errors that can lead to denials.
This is important because having a strong grasp on the errors that lead to denials will help your hospital or medical practice reduce the frequency of claim denials, ultimately increasing your bottom line and improving A/R workflows.
The Types of Errors That Lead To Denials
Preventable Denials
These denials, similarly to some soft denials, are almost always the result of negligence or error. These appeals can be resolved with enough attention and active correction of in-hospital workflows.
Examples of preventable denials:
- Lack of medical necessity
- Faulty registration
- Ineligibility
- Missing information
- Duplicate claim or service
The common thread among all of these examples is that they are all easily preventable. This can be a source of both hope and frustration because while these errors are easily preventable, they still account for over 90% of all denials [*].
Similarly, the solutions for resolving denials can also be sources of hope or frustration. Preventable denials are largely the result of faulty workflows and require an “all hands on deck” approach to resolve.
Oftentimes, health systems will operate largely independently of each other, especially as the systems grow larger and more complex. This means that the front desk rarely communicates with billing, or vice-versa.
Assuming that your department is keeping track of all denials (which isn’t the case over 60% of the time), they should also be keeping track of the causes for the denial. Feedback between departments should be a constant, built-in process that improves the efficiencies of all departments over time.
Unfortunately, this feedback loop is much easier said than done, and as a result, it’s rarely ever done. This means that facilities will continue to suffer from similar claim denials, potentially costing you millions upon millions of dollars in lost revenue over time.
Clinical Denials
These denials are typically the result of issues surrounding medical necessity, length of stay, or level of care. These types of denials can start as soft denials and over time become hard denials that require an appeal to overturn. Timely handling of these types of denials is of paramount importance to avoid complicated appeal processes.
The more common causes of clinical denials are as follows.
Patient Status
Circumstantially, medical centers are expected to triage patients that come through the emergency room to ensure proper and timely diagnosis and treatment. Usually, triage happens either before or at the time that appropriate services are rendered, and this classification is critical to ensure appropriate claim submission and avoiding denials.
If inadequate coding is present, that either does not fall in line with symptoms or conditions, preauthorization is not obtained, and supporting documentation does not prove medical necessity, then denials will result.
Additionally, denials can happen if the provider fails to classify the necessary services promptly. This is typically the byproduct of patients in extended observation status classification.
In summary, patient status denials are typically the result of one of the following:
- Improper triage classification
- Extended periods of observation classification
- Delayed diagnostic testing or treatments (Necessary to label as an inpatient)
Most often, patient status denials can be avoided by properly classifying incoming patients, performing necessary diagnostic measures promptly, and documenting and communicating with the insurance companies.
Level of Care
Once the patients have officially been classified as inpatient, proper documentation of services rendered is necessary to prevent these types of denials.
There are two main causes for these types of denials: 1) Clerical Errors, and 2) Care Errors.
If the cause for denial is clerical, then it just means that somewhere in the patient’s clinical history, proper documentation for services rendered, such as authorization, was not submitted or obtained. While this is a clerical error level denial, this type of denial can also be considered a preventable denial. Higher levels of consistency when it comes to submitting appropriate documentation can effectively eliminate this cause of denials.
However, if the error lies at the care level, then the solution may not be so simple. The actual cause of this error can vary greatly, but for the most part, if you’re following proper medical best practices and providing the proper rationale for care decisions and documentation, you can avoid most of these denials.
Again, communication with insurance companies is crucial.
If these kinds of errors are occurring frequently at your facility, then a quality audit can be highly effective at preventing these denials, and can also potentially identify much more serious issues that impact the billing department’s ability to obtain reimbursement from insurance companies.
Medical Necessity
This type of denial is when payers do not deem the service rendered as having been necessary or does not meet criteria, or supported with appropriate documentation, for the services rendered to the patient.
This type of denial doesn’t necessarily mean that the care provided was unnecessary, it can be totally the opposite- the accuracy in documentation by the medical staff, including the doctors and Case Management Department, has a direct impact on your revenue. This denial always requires supporting documentation and the appeal process may even require a peer-to-peer review. With some specific services, especially diagnostic tests, payers typically require detailed documentation to validate these services being rendered.
Length of Stay Denials (non-DRG or contracts)
Inpatient services are generally reimbursed based on one of the following:
• DRG, or
• Non-Contracted/Per Diem
Length of stay denials create an additional burden for the revenue cycle department This denial should be monitored closely by your medical staff and case management department.
DRG reimbursement
Hospitals are reimbursed a fixed amount for each claim, determined by multiplying the specific DRG weight by the base rate or conversion factor that is typically hospital-specific. Each DRG weight will vary by acuity and be projected for a reflection of the resource consumption DRG. DRG’s with groups of patients who are expected to consume more resources will have a higher weight.
DRG reimbursement is highly dependent on t CMS payment methodology and guidelines. It is less likely to happen with providers that accept DRGs; reimbursement requires detailed documentation, supporting the services rendered and charges billed. DRG Reimbursement typically covers all charges that are associated with inpatient admissions (diagnostic related group-DRG). As medically necessary services are rendered to patients within the appropriate time frames- according to the DRG assigned during a time of service, denials should be at a minimum.
Non-Contracted /Per-Diem Reimbursement.
Non–contracted facilities are those with whom the payors do not have a contract. Payment for these claims is what is known as out-of-network, and should be closely monitored. Services provided by a non-participating provider must be authorized by the third-party payor, if not you risk denial of claims.
Per diem reimbursement is the payment of a fixed amount per day. Per diem contracts typically utilize medical, surgical, and ICU/CCU per diems, with the remaining charges consisting combination of case rates and percentage of charge amounts.
Per diems reimbursement is slowly but surely fading out. This method was the payors’ attempt to keep reimbursement low by reducing lengths of stay. This would be very time-consuming for case managers, by having to query doctors, nurses, and payors to ensure lengths of stay are monitored and properly documented. The cost associated with hiring case managers and nurses often offsets any savings the payor would achieve through utilization management. Therefore, a number of formerly per diem based carriers have quietly migrated to fixed pricing in recent years.
Whichever the reimbursement method may be, DRG,non-participating, per-diem, case rate out-patient diagnostic just to mention a few; all have one thing in common-to monitor any risk of denials. They require solid communication and cooperation between all members of the billing process.
However, if you experience a high volume of denials, consider these tips to minimize their frequency.
Tips To Avoid Medical Denials
Focus On Patient Status. Assigning appropriate “patient status” from the beginning is of utmost importance. Constant monitoring and timely updates provided to third-party payers regarding patient status from observation to inpatient can be critical.
Build Strong Cases. Documentation is crucial to avoid denials. Make sure to provide appropriate documentation as to the rationale for all decisions. The stronger the case, the lower the chance for denials.
Optimize workflows along the patient journey. This one is obvious, but not so easy to do. These corrections require cooperation and effort from members at all levels of the facility. Analyze the process, what are the most common mistakes and how they can be avoided, and what corrections need to be made to avoid denials.
Technical or Administrative Denials
These types of denials are typically the easiest to identify because they involve receiving specific information from the payer that identifies the cause for the denial.
The good news about technical denials is that they’ll always be accompanied by a direct code from the payer as to the reason for denial. This gives clear, actionable direction on how to proceed in approval and reimbursement of such claims.
Now, the specific steps for overturning these denials can vary greatly from payer to payer. For example, United Healthcare allows for quick, online corrections, depending on the reasoning for the denial. On the flip side, some insurances require more complicated, multi-step appeal processes that have time-sensitive guidelines and limit the number of times the claim can be resubmitted for appeal.
As far as the remittance denial codes, insurance carriers follow the same process by providing denial codes next to the line of service that has been denied and on the lower end of the EOB or on the last page you will be provided with a description page outlining the denial code and their meaning, so reading and interpreting these codes is fairly straightforward.
You can always cross-reference the codes if necessary: click here to see codes.
Overturning Denials
The difficulty of overturning denials can vary greatly, depending on the claim and whether they fall under the soft or hard denial category.
Overturning Soft Denials/Insurance Rejections
For soft denials, there is a minor distinction that you should be aware of when it comes to overturning these claims. Sometimes, a payer will outright reject your claim, which means it’s never actually accepted and submitted for adjudication.
While this may seem a bit more definite than denial, it’s much easier to deal with than an official denial.
Since these claims aren’t denied, it means that your claim is not registered in the payer’s systems.
In these cases, just review the claim for any basic errors like the patient’s personal information and eligibility. In some cases, the reason for rejection is a bit more nuanced than just patient information, and some additional documentation or further information may be necessary. For example, some claims will receive a rejection if the payer requires additional documentation. Once you’ve corrected the error, simply resubmit the claim as usual, or follow the payer’s instructions if they’ve provided any.
Note: Remember to approach soft denials with as much urgency as you would an official hard denial. Delaying corrections can result in a soft denial turning into a hard denial and placing an additional burden on your billing department.
Overturning Hard Denials
If your claim has been outright denied, then an appeal process should be followed.
If you’re facing a hard denial, then your facility has a specific time frame to rebut the denial. If your facility is not responding to denials in a timely manner, you may as well consider those claims as lost revenue.
Most of the time, these denials come with clear reasoning for the denials, and the appeal process can be pretty straightforward, but still, incredibly time-consuming.
However, if the payer has not provided any reason, such as claim corrections, or given any guidance on the status of your claim or denial, then these claims have no apparent denial and upon follow-up, you will be advised there’s no claim on file. This can be a separate issue altogether, and you’re going to have to analyze your process to understand where the error began.
Typically, with most hard denials you will find denial reasons on EOB (Explanation of Benefits) such as there’s no pre-authorization, the services rendered are not covered by the insurance, services are bundled together (bundling), or the claims are filed in an untimely manner.
There are also some rare cases where the denials are referred to as “unpreventable,” given the medical emergency status of the patient. For example, if you have a patient come in with a condition that is life-threatening, then services or procedures cannot be delayed. Solving these types of denials can be a tedious task; it requires a group of professionals with thorough knowledge of the insurance industry and years of experience handling claims and denials.
When it comes to the appeal process, the steps and outcome can vary greatly from case to case. The only concrete advice that applies to almost all hard denials is to thoroughly check the claim and to make sure to submit an appeal in a timely manner, with additional supporting information to validate reimbursement.
The best revenue cycle management solution to help control denials is to pay close attention to credentialing, eligibility verification, charge entry, coding, and claim submission requirements (the journey) before you push the “Send” button.
We recommend that you triple-check everything until you can see a consistent reduction in your denials
How to Avoid and Deal with Denials
If you’ve read this far, one thing should be incredibly clear: Most of your denials are easily preventable.
With all claim resubmissions and appeals, one thing is certain, TIME is of the essence.
If you’re serious about reducing the frequency of denials in your facility, you’re going to have to make it a priority to implement methods and processes into your daily operations that are not only efficient and consistent, but that also serve as points of reference within different departments in order to verify or cross-reference their work.
Insurance verification, authorization, documentation, and the patient’s demographics are all the most obvious first steps to take. It’s also incredibly important that your departments, especially the revenue cycle department, become very familiar with third-party requirements.
Attention to detail is the best way to make sure denials are kept at a minimum.
However, when it comes to dealing with denials, there’s almost no better way to make sure you recover potentially lost revenue than hiring a professional, highly experienced team to assist you. Let’s face it, your staff is always busy handling day-to-day processes, insurance verification, provider requests, registration, billing, collections, and the list goes on and on.
The last thing that they need is another time-consuming task, especially not one that’s as time-sensitive and critical as handling denials.
If you’re serious about recovering your lost revenue, then you need to consider professionals with a track record of winning in the industry.
How Excel Can Help You Recover Lost Revenue
Handling denials requires serious time, attention, and expertise. After all, making any more mistakes at this point can result in claims being completely lost and potential revenue turned into loss write-offs.
The best way to make sure denials are overturned is to hire a team of professionals with years of experience, and success, overturning all types of denials.
At Excel HealthCare Receivable & Consulting Corp., that’s exactly what we do.
With over 25 years of experience in the industry, we have a track record that speaks for itself.
We’ve helped over 60 clients recover over 200 million dollars in revenue from claim denials.
Our secret? Simple.
We’ve built a team of professionals with experience and expertise handling all aspects of the insurance claim process. On top of that, we have professionals on staff with experience looking at billing from the service provider’s perspective, so we have insights into medical workflows that can confuse the payer.
All in all, we’ve built a team of people with expertise in all aspects of denial overturning, and we’ve perfected our process to get some of the highest overturning rates in the industry.
If you’re looking for a solution to your denial problem, look no further. Excel will address your denials expeditiously so that you and your staff can take care of your-day-to day business.
Plus, our billing rates are simple: We don’t get paid unless you recover revenue.
We don’t have flat fees, up-front costs, hidden fees, services fees, anything. We charge solely based on the success of our work.
We look at your specific claims and put our system to work overturning your denials — all for free.
If we’re successful, then we’ve proven our worth. If we’re not, then you have nothing to worry about because it cost you exactly $0.
Give us a call at (305) 821-4137 for a free consultation today!
