Denial ManagementCommon Reasons for Denials and

Delayed Account Resolution

Sanjay Patil is a Healthcare IT consultant with top tier consulting experience in successfully delivering large scale custom development projects, application integration, content management, portal solutions and implementation of health care business solutions. He has been actively involved in Meaningful Use and is passionate about creating IT solutions for providers w.r.t different regulatory programs. He has worked in delivering solutions across all product lines such as EMR, EHR ,Care Coordination, Patient Engagement.

Background Reasons for Denials

Technology Solutions Conclusion About Us

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Contents

Background

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Reasons for Denials

Payment hindrances and write-offs triggered by insurance denials represent a serious and growing financial concern for most of the hospitals and health systems. Despite concerted efforts across the industry, below are a few facts that hint at the need to manage denials better

The fight to stem unrelenting losses associated with rejected insurance claims reflects the complex nature of the reimbursement cycle. In a system that requires inputs from multiple points across the care continuum and is subject to frequent rule and policy changes, identifying the primary causes for rejections and building tools to resolve them can be enormously difficult.

Hospital revenue management staff should therefore focus on developing a comprehensive knowledge base around the problems that trigger payment delays, either independently or in partnership with an A/R follow-up vendor. The hospital will then be positioned to systematically address the full range of shortcomings that contribute to payment delays and write-offs.

The average 350-bed hospital saw denial write-offs jump up by 79% between 2011 and 2017, from $3.9 million to $7 million

The administrative costs of reworking denials are now approaching $9 billion annually.

$270 BILLION U.S. hospital claims were initially denied in 2016, that’s approximately 9% of $3 trillion in U.S. hospital claims

Over 35% of payer rejections are reworked and resubmitted.

Utilization This category accounts for denied charges that include the clinical areas of medical necessity, pre-authorization, DRG downgrades and experimental treatments. Insurance companies often challenge whether a specific treatment was medically required, whether the level of care provided corresponded to the underlying morbidity, or whether the length

A closer look at the reasons why hospitals fail to earn what they are entitled to, alludes to simple mistakes rather than complex workflow steps. Below are a few areas where hospitals should look to establish processes and protocols to make their revenue cycle spotless.

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Coverage As the name implies, coverage denials involve real or perceived errors or omissions surrounding health plan coverage limits. One surprisingly frequent problem in this area involves the willingness of many hospitals to ignore patient eligibility rejections flagged by their eligibility verification system. The underlying reason for it could be ignorance or staff concerns about claim submission quotas. Irrespective of that, the net effect is claim rejection, and hospitals often are left with little recourse but to balance-bill the patient.

Issues surrounding the coordination of benefits (COB) or billing the appropriate insurer in cases where the patient has multiple coverage’s, represent another frequent source of denials. COB denials arise when a specific policy is no longer in effect or has been superseded by a replacement policy. A common example is billing to Medicare even when a Medicare Advantage managed care policy is the primary coverage vehicle.

Highlights

• Errors or omissions • Eligibility verification • COB

Contractual Agreements Given the nature of provider/payer contracts, things aren’t always in black and white. Changing reimbursement models, regulations, business context etc. make things worse. Often attrition of key billing staff can spike these further.

Payment delays and rejections stemming from contractual issues make up the third-largest category of denied charges. Payer underpayments for specific services like surgery, ED, lab and radiology, therapies and observations represents another form of rejection albeit partial. Denials also can arise over misinterpretations regarding per diems, bundled payments for multiple procedures and carve-outs. Root causes can be as simple as the inclusion on the claim of the wrong plan code (HMO vs. PPO), or as complex as a miscalculation of a stop-loss limit.

of stay was justified. Failure to obtain a necessary pre-authorization from the carrier for a specific treatment likewise can trigger a utilization denial.

Yet another common utilization denial involves challenges to the provision of emergency care. Experimental treatments, such as PET scans, 3D mammograms and Computer-Aided Detections (CADs), also can result in denials.

Highlights

• Medical necessity • Pre-authorization

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• DRG downgrades• Experimental treatments

The failure to maintain an accurate fee schedule by loading appropriate contract data into the hospital’s contract management application is another common cause of denials. Site liability rejections involve denials stemming from the location where the service was performed. Conflicts can arise over whether the payer or site is ultimately responsible for covering the service. In avoiding contractual-related denials, it is essential that hospital staff be cognizant of, and responsive to, the multiple deadlines associated with the filing and appeals process.

Highlights

• Payer underpayments• Per diems• Bundled payments• Carve-outs

4 Coding and Billing Simple demographic errors are probably the easiest to fix, however currently many providers face delays or loss of dollars due to these. These could include incorrect and/or outdated patient information collected by registration staff before or at the time of service and are a consistent source of denials.

Coding and billing issues result in denied charges. Among the many the common problem involves Reason Code 97 rejections triggered by the failure of the hospital team to turn on National Correct Coding Initiative (NCCI) edits. The edits basically provide a system of checks designed to prevent bundling/unbundling issues due to inappropriate CPT and HCPCS code usage, as well as inappropriate combinations of codes.

Crosswalks, meant to translate specific codes from one code set to another, could also become a source of denials.

Finally, filing errors, including mistakes in value and occurrence codes and National Drug Code (NDC) application, account for a significant portion of code-related denials. The failure to designate the patient responsibility portion of the claim, for example, can cause the entire claim to be rejected.

Highlights

• NCCI edits• Crosswalks

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• Stop-loss limit• Inaccurate fee schedule• Incorrect APC applications

• Demographic errors• Filing errors

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Submission / Re-billing Failure to include the primary EOB, crossovers between supplemental and primary insurance and missing medical records are common rejection reasons often imply denied charges.

These could be due to bugs in the hospital’s electronic claims submission software or issues at the clearinghouse.

Some clearinghouses, for example, are not properly equipped to efficiently process paper claims. As a result, the claim can often sit for an inordinate length of time. Continual communication with the clearinghouse is therefore important to ensure no reoccurring log jams or hidden delays.

Highlights

• Primary EOB • Crossovers

Cash Posting This category of issues produces minimal denial charges but involves determining the appropriate allocation of unapplied cash. For example, assessing the differences between recoupments, or refunds for overpayments, and offsets, which involve allocating unspecified funds to existing claims, requires careful analysis of policy language and covered services previously paid for. While these issues may not imply a denial of the current claim, it may do so for future claims or create an illusion of denial for a different claim. Either way, it attracts considerable time of billers to straighten things out.

Highlights

• Unapplied cash• Overpayment & refund• Unspecified fund

Process Delays Process issues also accounts for minimalistic denied charges and usually involve payers taking an excessive amount of time to process a claim for reasons unrelated to the claim itself. It is therefore important for hospitals to identify and isolate payment delay patterns involving specific payers. This enables prompt follow-up with the carrier to ensure payments are made in accordance with the terms of the existing contract.

• Missing records • Software bugs

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Technology Solutions

For many hospitals, denials are an infested financial wound that refuses to heal. Some organizations have resigned themselves to living with write-offs associated with denials, but as the economics of the business grows tighter, a solution needs to be arrived at. There is no panacea for these but well-defined, disciplined processes aided with streamlined technology levers.

Utilization can always be increased by improving processes, building a robust alerting mechanism and by introducing analytical capabilities at possible stages in the workflows which providers / clinical staff perform daily.

Identifying the medical necessity is very important aspect for avoiding denials. Medical Necessity should be prudent for medical judgement based on the standards followed which should be a general approach in medical practice, appropriate clinically, not for the comfort of patient / provider, cost of service w.r.t alternates available. One suggestive approach is to perform Initial Assessment, then compare the services covered by patient’s plan before finalizing the treatment. System should have the capability to display the coverage across services while the provider performs assessments.

Certain medical services need prior-authorization before performing them to avoid denials. Systems should have the capability to get prior-auth. With Robotic Process Automation, bots can do these activities by collating information from multiple places and uploading forms to payer portals in no time and with no human interventions.

Integrating RCM strategies into the provider systems, such as admissions, eligibility, patient payment, contract management, claims and accounts receivable management, into a single platform helps providers to get a holistic picture.

Robust Rules Engine with AI which compares clinical documentation, coding and the services rendered w.r.t to the contracts should improve outcomes.

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Ongoing update of rules based on NCCI edits will help RCM systems to identify the errors that are performed while bundling / unbundling services and the corresponding charges that are submitted.

Building crosswalks within the provider workflows, will help the providers’ choose the right diagnosis while drafting the encounter notes or the patient chart, which in turn sends the right codes to billing, avoiding denials.Eligibility verification prior to appointments identifies gaps w.r.t demographics and helps the staff to quickly correct patient data in the system avoiding similar denials in future. Also this can be automated with a bot to verify eligibilities for more accuracy, efficiency and to reduce manual interventions

RCM solution should have the capability where a biller can quickly refer to the respective Assessments, encounter notes, EOBs, Contracts and should be able to quickly attach them to the claims. This helps billers to quickly decide on the edits required and make sure denials are reduced.

Business Intelligence tools empowering physicians and hospitals can help identify, segregate and categorize denials highlighting the probable root causes. Providers need to define KPIs for their business spanning across quality, cost, performance and financials. While the list is limitless here, a few of these could be:

Denial Management reporting including summary Dashboards and detailed reports – examples below:

Ability to create report filters by Denial Types, Payers, Provider, Procedure Patient type: Inpatient, Outpatient and site location

YTD & MTD Denial Metrics and Trends by payor, procedure and provider.

Reports and graphs with analytics on denials by Types, Payers, Provider, Procedure

YTD & MTD Denial reason codes (CARC, RARC) by payor, procedure and provider.

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InConclusion

While claim denials are a chief source of aggravation for billing department, and it is also the jugular of your organization’s cash flow. By proactively striving to identify, manage and prevent denials using automation and business intelligence, there can be drastic change in educating employees, streamline work flows, improve internal processes, and get paid what the healthcare organization deserves.

YTD & MTD HCPCS, Revenue Code, DRG by payor, procedure and provider.

YTD & MTD Actual Reimbursement vs. Expected reimbursement by payor, procedure, provider

YTD & MTD Payment reports by time duration – average time from claim submission to payment by payor, procedure and provider.

YTD & MTD Appeal success – number of denials, number of appeals submitted, number of appeals approved by payor, procedure and provider.

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