Increasing Revenue by Denial Management Process
Claim Denial
Denial of a claim is the refusal of an insurance company or carrier to honor a request by an individual, or his or her provider, to pay for health care services obtained from a health care professional. Many practices do not make the effort to appeal denied claims. As per AMA, the most common reason is that doctors do not believe they will recoup enough from appeals to justify the administrative expenses a denial management process will impose on the practice. All the practice needed to do is audit and appeal the denials.
Denials in Numbers
- According to the Healthcare Financial Management Association (HFMA), the average cost to rework a claim is $25.00.
- Gross charges denied by payers are 15 to 20 percent of all claims submitted.
- 65 percent of claims denials are never worked resulting in an estimated 3 percent loss of net revenue.
- Roughly 67 percent of all denials are appealable.
Denial Type
Soft Denial: A temporary or interim denial that has the potential to be paid if the provider takes effective follow-up action.
- Pending receipt medical records
- Denied due to missing or inaccurate information
- Coding or charge issues
- Pending itemized bill
- Pending receipt of invoice
Hard Denial: A denial that results in lost or written-off revenue.
- No pre-authorization
- Not a covered service
- Bundling
- Untimely filing
Preventable/Avoidable Denial: A hard denial resulting from action or inaction on the part of the provider of services. It accounts for about 90 percent of denial.
- Registration inaccuracies
- Ineligible for insurance
- Invalid codes
- Medical necessity
- Credentialing
Top Claims Adjustment Reason Codes
- 16: Claim lacks information or has billing/submission errors
- 96: Non-covered charge(s)
- 204: This service/equipment/drug is not covered under the patient’s current benefit plan
- 197: Precertification/authorization/notification absent
Denial Management Process
The purpose of a Denial Management Process is to investigate every unpaid claim, uncover a trend by one or several insurance carriers, and appeal the rejection appropriately as per the appeals process in the provider contract. In many cases, the rejection code used on a claim and the actual reason for rejection are not related. The Denial Management Process seeks the root cause for the denial as well as the coded cause.
Understand Denials
Before we can do anything to manage and prevent future denials we first need to understand the types and volumes of denials currently occurring. You can track denials automatically through ERA or EOB. But automated tracking of denials does not always work effectively. You can use manual spreadsheet which allows more detailed data collection like payer; reason for denial; ability to appeal; date of denial; billing date; amount denied; and amount recovered.
Analyze Denials
You can review data and categorize top payers and reasons for denials in terms of both volume of denials and dollar amount. You can use the 80/20 rule to prioritize and focus efforts on denial reduction and elimination. As a rule of thumb 80 percent of issues are caused by 20 percent of the potential problems. Map out current clean claim process to identify any vulnerabilities in the process.
Zero Tolerance Strategy
Develop a Zero Tolerance strategy for preventable or avoidable denials. Process improvement efforts should focus on breakdowns in denials prevention processes like verification of patient information and insurance, or inaccurate or missing documentation, or communication issues. Ensure staff is familiar with payer contract requirements. Non-emergent services scheduled at least a day in advance to allow time to obtain prior authorization.
Addressing denials is an extremely large project consuming a lot of resources. You can expect significant time and resource commitment at the start. A significant return on investment may be achieved if you start tracking denials as soon as possible. If you do not have the resources to handle Denied Claims Management in your medical billing department or are not achieving satisfactory results, call E2E Medical Billing Services now at 888-552-1290 to learn how we can help.