A case for better claims management
Processing medical claims can be a daunting task. Still, it is an intrinsic part of the healthcare revenue management cycle. While most claims are accepted and processed without exception, denials are rising. Claims denials have various causes; once received, if mishandled, they could spell disaster for providers and healthcare organizations. Therefore, a prevention-focused denial-management strategy may reduce unpaid claims significantly.
While debated, many argue that current in-house healthcare workflow processes, including billing and coding procedures, are minimally effective. Furthermore, there is some support for that assumption. The healthcare industry has seen a 20% increase in claim denial rates in the past five years, with a 23% increase in 2020 alone. These increases leave many healthcare providers perplexed. Considering the recent Public Health Emergency (PHE), some confusion about claims processing is expected. However, there is more to the substantial increase in denial rates than a defined medical crisis.
Current national denial rates average between 6% and 13%.
HealthCare.gov's commercial plans report denying about 17% of in-network claims for 2020. These for-profit health plans denied claims through post-payment audits, partial or line-item denials, and down-coding to a less expensive procedure or service. However, reports indicate that issues surrounding prior authorizations were the most troublesome.
In fact, according to a public report from the Centers for Medicare and Medicaid Services (CMS), almost 30% of Medicare claims in 2020 were either rejected, lost, or denied. Additionally, Medicare's Comprehensive Error Rate Testing Program (CERT) found that the improper payment rate averaged slightly over 6% for the same period. CMS classifies improper payments as claims paid without supporting documentation or sufficient medical necessity. This revenue will be re-cooped, adding to the management staff's burden and requiring a lengthy appeal process to recover revenue.
According to recent research into $3 trillion in total claims submitted by healthcare organizations, $262 billion were denied -- averaging nearly $5 million in denials per provider.
The data also showed that the cost to rework a denied claim ranges from $25 to $31.50 for each claim. For complex denials requiring medical record review, the cost escalates to over $5,000 per denial.
Even more impactful, an incomprehensible 50% to 65% of first-round denied claims go unchallenged due to a lack of understanding, perceived time restraints, or inadequate procedural training. This inefficient process results in permanently unrecoverable revenue.
According to all current statistics, the increase in claim denials continues, suggesting a growing potential for adverse conditions throughout the healthcare market.
With today's challenges, hospitals must be proactive in developing strategies to improve revenue cycle management (RCM).
Common Areas of Claims Denial
Analysis of a survey by Change Healthcare suggests that "86% of claims denials processed between July 2019 and June 2020 were potentially avoidable." Moreover, the highest percentage of denials involved improper front-end processing, including intake, registration, and eligibility.
Proper registration of patients is mandatory. Front-line staff is considered the cornerstone of the claims management process, and data accuracy at this initial stage can avert downstream denials. However, increased burdens on staff can negatively affect the initial patient contact.
Pre-authorization is both a bane and a blessing. An ongoing cycle, once received, the pre-authorization process requires due diligence. Physicians' orders are only one part of the medical record, and keeping up with medical prerequisites requires comprehensive staff knowledge and time. Furthermore, unexpected mid-cycle regulatory changes can create chaos within the revenue cycle department, affecting patient care.
Medical coding is another foundation of the revenue cycle. However, procedural coding changes impede an accurate and thoroughly supported healthcare record, or a claim denial is imminent.
Missing or invalid claim data or non-covered services make up a surprising percentage of claim denials. At a minimum, staff should ensure that identifiers, procedure codes, diagnosis codes, and service dates are accurate - minimizing claim denials.
Overwhelming? Yes, but accurate and consistent healthcare claims submission and data collection are an integral part of medicine, and the 'whys' are just as crucial to quality patient care as the 'hows' or 'costs.'
Why are denials increasing?
In most cases, the revenue cycle management team lacks the clinical experience to support appeals or manage clinical denials. While over 67% of healthcare providers use electronic health record systems (EHR), it is not enough. An ever-evolving regulatory climate and the complexity of clinical denials require continuous training. Even basic errors, without the proper procedural understanding, affect filing deadlines and challenge revenue recovery.
Consider the bigger picture.
Inadequate workflow automation, insufficient clinical documentation, a lack of communication between the revenue team and medical professionals, and increasing denial backlogs equate to lost revenue.
Claim denials impact hospital revenue. Moreover, rising denial rates also affect patient care, quality, staff morale, and practitioner credibility, according to the American Hospital Association (AHA).
Enhancing claim denials management strategies helps providers recoup lost healthcare revenue and maximize reimbursements.
Many hospitals were overwhelmed during the pandemic. While unquestionably a debilitating healthcare challenge, for many, the PHE provided valuable insight into their healthcare organization -- highlighting numerous improvement opportunities within the medical coding and billing process.
An established best practice in determining and implementing claim denials management requires developing a comprehensive approach to improve claims acceptance rates. However, when asked, many providers see this strategy as perceptively out of reach.
The conversion process evokes a sense of apprehension, anticipating significant time requirements and human resources. Thus, it frequently goes unaddressed. However, these beliefs are changing.
Rather than doing everything internally, 31% of providers have recognized the need to ally with a healthcare solutions company. This partnership establishes a revenue cycle management strategy, simplifies the workflow process, and reverses revenue loss by minimizing claims denials.
An Ounce of Prevention
Interested in implementing a prevention-focused claim denial management program, thereby reducing claim denials effectively, but unsure where to start? Consider outsourcing or partnering with a comprehensive healthcare solutions company.