Published: Mar 27, 2023
Updated:
Revenue Cycle Management

Denial Management in Healthcare: Benefits, Strategies & Key Trends

Rex H.
Rex H.
8 minute read
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Healthcare organizations face significant challenges when it comes to managing denials. The amount of time, effort, and money that goes into resubmitting denied claims and lost revenue adds up by the year's end and can cause significant economic damage. That's why denial management is vital to your organization. This article will explore the importance of denial management in healthcare, best practices, and solutions to optimizing your revenue cycle management.

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What is denial management in medical billing and RCM?

Denial management, which is the process of investigating, analyzing, and resolving denied insurance claims, is a crucial aspect of medical billing and revenue cycle management (RCM). RCM is used to optimize the administrative and clinical processes in a revenue cycle to improve financial performance and efficiency.

Physicians lose a significant amount of money every year because of denied healthcare claims that may have been prevented with strong denial management processes. Even though many of these denials are recoverable, 65% of claims are never resubmitted. This makes denial management an essential RCM strategy to reduce the number of denied claims and improve cash flow.

The denial management process

While many healthcare organizations do not resubmit claims, the denial management process can be straightforward if handled correctly. Effective denial management involves several steps, including identifying and analyzing denials, categorizing denials, resubmitting claims, tracking claim status, building a preventative mechanism, and monitoring future claims before submission.

Identifying denial reasons

The first step in the denial management process is to identify the root cause of your claim denials, including coding errors, missing data, late submissions, out-of-network care, lack of prior authorization, and lack of medical necessity. By identifying the causes, you can develop strategies to prevent similar denials.

Categorizing denials

The next step in the denial management process is categorizing denials to develop targeted strategies for preventing future denials of a similar nature. Denials can be categorized by specific causes, such as:

  • Prior authorization: If prior authorization is required for the services given or prescribed, a claim may be denied without it.
  • Incomplete information and coding errors: Missing information and incorrect coding can result in a denial.
  • Claim filing delays: Payers have time frames for submitting claims. If you miss this deadline, the claim can be denied.
  • Coverage: If a claim is submitted for a service not covered by insurance or the payer determines that there is a lack of medical necessity, it can result in a denial.

Other categories to consider are the types of claim denials, such as:

  • Soft denials: A temporary denial that does not require an appeal and that may be paid if your healthcare organization corrects the issue
  • Hard denial: A denial that results in lost revenue and requires an appeal
  • Preventable denial: A hard denial caused by avoidable reasons, such as code errors or insurance ineligibility
  • Clinical denial: A hard denial in which a claim is not paid due to a lack of medical necessity
  • Administrative denial: A soft denial in which your organization is told by the payer precisely why the claim was denied

After categorizing the denials, you'll need to assign departments/teams for corrective actions. Not all denials are equal, and categorizing denials can help teams determine which are most pressing. No team has unlimited resources, so this step can also help you use your staff and resources wisely.

Resubmitting claims

The third step in the denial management process is to resubmit denied claims upon receiving the corrected form. After identifying the reasons for the denial and categorizing it, you can correct the errors or address the issues that caused the denial in the first place and then resubmit the claim for payment. Because so many denials are reversible, this step is critical to increasing revenue rather than losing money that may rightfully be owed to your organization.

Developing a tracking mechanism

The fourth step in the denial management process is to develop a tracking mechanism to monitor the progress of resubmitted claims. Setting up a system to track the resubmitted claims can prevent inaction from addressing the denial. Tracking mechanisms can also help you ensure that claims are resubmitted and processed on time so that denied claims are not forgotten or overlooked.

Building a preventative mechanism

The denial management process includes a fifth step for creating a preventive mechanism to reduce the number of future claim denials. You'll start by preparing a handy checklist of the top reasons for denials. Once the checklist has been prepared, you can implement strategies to prevent these common denials from occurring. These denials can stem from fairly small issues.

Monitoring future claims before submission

The final step in the denial management process is to monitor future claims before submission. You can use the checklist in the previous step to make sure everything is in order. Because of the work and the cost that goes into the denial claims resubmission process, prevention is the preferable route. Every claim that needs to be reworked can cost around $30 to $117.

Best practices and strategies for denial management

With the increasing complexity of healthcare reimbursement and coding requirements, healthcare organizations face new challenges in managing denials. To effectively manage denials, you must follow best practices and create strategies that align with the overall process.

Perform audits

What was working before may not work forever. According to suggestions from AHIMA, continually performing audits on things like remittance advice reviews, zero payment claims, registration, and insurance verification quality can significantly improve performance.

Collaboration is key

Your denial management team should not be a one-person endeavor. Establishing a multidisciplinary team of key members from various departments such as registration, patient financial services, nursing, health information management, and information technology can help you put solutions in place and track developments to alleviate bottlenecks in the processes and identify the root causes of these denials. Collaborating with payers to resolve denial claims can also ensure a more efficient process.

Another form of necessary collaboration is staff training. Training staff to stay current on best practices will help ensure that you are mitigating denials as much as possible.

Be mindful of statistics and trends

Knowing initial denial rates, the rate of appeals, and the win/loss ratio of denials can help you understand the reasons for denials and help reduce problems. The best practices are tracking, assessing, and documenting trends to quantify and categorize denials. However, another important aspect is proper analytic and workflow tools to increase efficiency. According to HFMA, 31% of hospitals still use manual tools like spreadsheets to track denials. Prioritizing the use of data and analytics and even leveraging the knowledge of third-party service providers can help to understand and mitigate denials.

Stay on time

When it comes to denial claims, time is of the essence. It's crucial to comply with the deadlines set by insurance companies to ensure the timely filing of claims. You should follow an established and validated process, with the aim of resolving them within a week.

Why denied claims are increasing and why it's becoming more important to manage them

Denied claims have been on the rise. According to an Experian report, some of the reasons for the increase given by the health professionals surveyed are that there is a lack of advanced data and analytics technology preventing the detection of submission issues, limited staff training, and a shortage of staff in general. Respondents cited authorizations, provider eligibility, and coding inaccuracies among their top reasons for claim denials. Some have also blamed the pandemic for creating the upheaval in the healthcare industry that led to increased denials.

In that Experian report, 200 revenue cycle decision-makers said denials are their priority. And according to a HealthLeaders article, 2023 has been deemed "the year of reducing denials" because of the rate increase. Denials are clearly at the forefront of concerns for many healthcare organizations. Many statistics were referenced in the article, including how denials rose to 11% of all claims in 2022, which is up nearly 8% from the previous year. Additionally, the cost of denials increased by 67% from January 2021 to August 2022, partly due to prior authorization denials on inpatient accounts. Although an estimated 85% of denials are avoidable, many health organizations are not utilizing proper denial management strategies to curb the high rates of denials.

The above reports show that denials present significant revenue leakage for practices. Recognizing this gap creates a massive opportunity for you to recover payments from denied reimbursements and improve your revenue cycle and financial performance by effectively managing and addressing claim denials.

Benefits of managing denials in a healthcare organization

Managing denials is crucial to achieving revenue cycle management goals, so there are tremendous benefits to managing denials in your healthcare organization. Some of these key advantages include improved clean claims rate, increased net revenue collection, and enhanced patient experience and loyalty.

Improved clean claims rate

One of the most significant benefits of denial management is improved clean claims rates. A clean claim is a claim that contains no errors or missing information, is processed and paid on the first submission, and is not rejected or denied due to preventable reasons.

Every time a claim is denied, it costs you significantly due to increased administrative costs, staff working hours, and payment delays. If you can implement strategies to discover the root cause of denials, your clean claims rate can increase exponentially and decrease the headache and cost of submitting a claim.

Increased net revenue collection

Another advantage of managing denials is the increase in net revenue collection. When denials occur, you may miss out on revenue that you may be entitled to receive or, at the very least, experience a delay in payment. By implementing proper denial management processes, you can identify and correct issues that lead to denials or even prevent them altogether, resulting in increased profitability.

Enhanced patient experience and loyalty

In addition to the financial benefits, managing denials can enhance patient experience and loyalty. Denied claims can lead to less satisfied patients because they may become frustrated with your healthcare organization. Patients are far more likely to drive word-of-mouth referrals if they are satisfied with their care, which can lead to new patients.

Solutions to denial management when your staff is constrained

Managing denials can become complex and time-consuming, particularly when staff resources are constrained. In these situations, exploring solutions that can help streamline and optimize the denial management process is crucial.

Denial management software

One potential solution to denial management when staff resources are constrained is denial management software. Denial management software is designed to help you properly code your claims and understand the meaning of a denial code if a claim is denied. Because multiple code systems are used in the claims process, there are many opportunities for mistakes. Even a single typo can result in a claim being denied.

Denial management software can proactively prevent many errors, which is vital to the denial management process if you are short on staff. By leveraging technology to automate tasks within the denial management process, your organization can streamline your work, reducing the burden on staff and freeing up time for other critical tasks.

MD Clarity's RevFind

MD Clarity is a social impact-driven software company aiming to help ensure that healthcare professionals are properly reimbursed for work and that patients have full transparency about how much they will need to pay for care. Their denial management software, RevFind, is designed to simplify the denial management process and underpayment detection, allowing you to focus on delivering high-quality patient care.

MD Clarity tackles one of the major causes of front-end denials: eligibility and registration. The denial management software can ensure that claims are only submitted if they are eligible, preventing a costly claim denial.

As denials come in, already time-strapped healthcare professionals often struggle to find the time to address these issues, which is why so many denied claims are never resubmitted. MD Clarity's RevFind can help your team determine which denials have the largest reimbursement opportunities for the minimum amount of effort.

Another key feature of RevFind is assistance with identifying payer trends. Since not all insurers use the same codes, manually figuring out the reasons for denial is tremendously burdensome for denial management teams. However, this denial management software can monitor the denial trends by the payer for you. This is vital to the denial management process as one of the most important steps is determining the root causes of denials so that they do not happen again or at least far less often.

In the same Experian survey referenced earlier, the 200 revenue-cycle decision-makers reported that automating denial management in healthcare is a critical concern. RevFind has automation features that streamline the submission and resubmission process, such as monitoring claims, flagging old accounts, or submitting claims that are due.

Outsourced denial management services

Another denial management solution that may be helpful when you have limited staff resources is to outsource denial management tasks to third-party providers. Many healthcare organizations go this route, and you can use the outsourced party's expertise and resources to identify and address issues quickly and effectively when you do not have a team in-house.

TruBridge

TruBridge is a healthcare revenue cycle management company that provides a comprehensive suite of services, including outsourced denial management services. The company's denial management program is designed to identify and eliminate the causes of denials in order to increase reimbursements.

With this outsourced program, TruBridge's denial management experts first work with you to analyze your claims data and then categorize and prioritize your denials. Then TruBridge performs an on-site assessment and remediation of your organization to determine the root causes of your denials, review your workflows, and implement best practices to prevent denials.

TruBridge also offers ongoing tracking and surveillance of your systems and workflows to fine-tune processes and ensure everything works as intended.

Savista

Another company that provides outsourced denial management services is Savista. Savista is a healthcare technology and services company specializing in revenue cycle management services. The company's denial management program is an outsourcing option that also aims to simplify the denial management process for healthcare organizations. Savista's denial management experts use a combination of technology and human expertise to identify the root causes of denials, develop processes within the company to avoid denials, and create an effective appeal process. According to their website, Savista was even able to recover $20 million for their client, Southwestern Health System.

Companies that focus on healthcare denial management

To address the rising concern regarding claim denials and their challenges, a growing number of companies are focusing on healthcare denial management and providing specialized services and solutions designed to help you manage denials effectively.

Change Healthcare

One company that has established itself as an authority in healthcare denial management is Change Healthcare. Change Healthcare is a company focused on developing insights and technology to better the healthcare system. The company is widely recognized as an authority on denial management and publishes The Change Healthcare Denial Index annually.

The Denial Index is a valuable resource for healthcare organizations looking to decrease their denial rates as the report provides insights into denial trends, denial causes, and avoidable denials. The Denial Index also provides best practices on proactively managing denials and answers frequently asked questions from the healthcare community about denials. Change Healthcare offers a lot of value for the continual development of the denial management process.

Vyne Trellis

Another company that is focused on healthcare denial management is Vyne Trellis. While Change Healthcare provides relevant insights for a range of healthcare providers, Vyne Trellis is focused specifically on dental practices. The company provides a suite of denial management solutions designed to help dental practices manage denials more effectively, such as their eligibility tool that allows dental professionals to verify patient benefits quickly and in real time. They also offer claim denial support to help with rejection reasons and status updates.

The cost of these solutions for managing denied claims

When it comes to denial management solutions, the costs can vary depending on the provider. According to Dental Claim Support, Vyne Trellis denial management services, for example, charge $99 per month per practice location, which adds up to nearly $1,200 per year.

However, TruBridge, Savista, and Change Healthcare have not disclosed their pricing information for their denial management services, which is a common practice among software sellers and service providers. In general, denial management software is priced on specific features needed and patient encounter volume.

If you're interested in obtaining current pricing for those solutions, you will need to contact each company directly.

Automate denied claims management and payer underpayment detection in one place

Claim denials are a huge burden for healthcare organizations. Denial management offers a solution, and RCM software can do most of the work for you.

MD Clarity's RevFind is an advanced software solution that can automate processes in the denial management cycle to streamline your revenue cycle management by identifying patterns of denials and underpayments from payers. RevFind is a far more effective way to increase reimbursement than the outdated manual processes that are so common. Schedule a demo today.

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