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How to Win with Denied Claims

By Dan Schulte, Senior Vice President, Sagility

For many hospitals and health systems, denied claims are just the price of doing business. You wouldn’t be wrong to detect a note of fatalism in that sentence. According to the Becker’s Hospital CFO Report, denied claims in 2016 had an estimated value of $262 billion. Digging deeper, the research found that these denied claims could cost hospitals an average of 1.5-5% of net revenue per year.

Time for Triage It’s a simple fact: Today’s claims denial management strategies implemented by many health systems may be seriously flawed, or non-existent. This isn’t a knock against the claims denial team who are working hard on fixing the problems. The complexity and scope of denials is one of the biggest problems providers face with claims denial management.  The number of health plans they work with—sometimes as many as 150 health plans, presents a daunting task to control. The problem grows when each plan has its own rules for denied claims, including the reasons behind the denial and how it is communicated to the provider. It’s difficult to develop a consistently successful claims denial strategy based on so many variables. Lack of automation also hinders a health system’s ability to check claims for errors or missing information before they are submitted for reimbursement. According to a 2016 HIMSS Analytics survey, 44% of providers use a vendor for claims denial management solutions or services, while 49% use either an in-house or manual process, while 7% are unsure if they do anything at all. In short, the reimbursement process—as currently designed and regardless of outcome—costs an unacceptable amount of time, money, and resources. This inevitably leads to greater inefficiencies and administrative burdens and lower reimbursement.

From Reactive to Proactive According to the American Medical Association National Health Insurer Report Card, claims are most often denied by payers due to:

  • Missing information—authorizations, required medical records, and so on
  • Duplicate claim submission, which requires time-consuming efforts to resolve
  • Service already adjudicated, indicative of either payment misdirection or misposting, and additional rework
  • Services not covered by payer, encompassing all matter of clinical review for medical necessity appeals, as well as resubmission after nurse and other clinician review
  • Time limit for claim submission already passed, requiring proof of original submission to appeal the denial

In other words, most denied claims are the result of errors, oversights, and the inefficiencies of manual claims processing. Automation and the implementation of best practices can positively impact the rate of denied claims as well as the rate of successfully appealed denials. Employing technology and services that improve a provider’s clean-claim rate by eliminating manual functions, identifying claim issues—such as eligibility and authorizations—and capturing plan-specific rules prior to submission can save hospitals and health systems millions of dollars in claim adjudication costs and delayed or deferred payments. Automation can also help with bundled-payment programs, which aggregate payments into a single fee. Effective automation relies on good business process design, with multiple factors to consider, including systems used, business impact, data touchpoints, ROI of labor, and investment. And the ROI—from the front office and the back office—is significant. For example, robotic process automation (RPA) reduces or can even eliminate the manual effort required for many activities or tasks. RPA doesn’t require back-office integration through application programming interfaces (APIs) and seamlessly works with end-user interfaces and enterprise applications. These system-agnostic solutions work well with data-intensive processes, across multiple domains and industry verticals. In addition to automation, outsourcing services may also help. Appeals teams, auditors, root cause analytics experts, and investigators don’t go it alone—they have key resources in all relevant aspects of care to ensure that the hospital claims are paid according to the payer-provider contractual terms. Using an outsourcer to assemble, train, and deploy a dedicated denial prevention team can not only appeal denied claims in a cost-effective and efficient manner, but reduce the number of denied claims. A strategically minded outsourcing partner will be invested in root cause analytics, determining the source of the health system’s denied claims by denial reason, by payer, by owner—admitting office, business office, HIM, clinician, or hospital service. Claims denials will never fall to 0%—and it may be a while before the entire process becomes less byzantine. However, health systems can align with an outsourcing partner equipped with staff and tools necessary to recoup the dollars denied by payers—and contribute to your financial sustainability.

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