iPatientCare Blog - Know the Repercussions of Denied Claims

Know the Repercussions of Denied Claims

It is the process where every unpaid claim is investigated. Denial Management is a critical element for successful revenue cycle management. It helps practices and hospitals to quickly and easily determine the causes of denials, know the future risks and to be paid faster. Each patient is unique when it comes to the care provided by the practice, and therefore, each denied claim should be unique too.

Challenges faced in Denial Management

  1. Patient responsibility is increasing – there is pressure on the patients due to high deductible health plans, to share the responsibility of the payment. These increasing patient payments are getting harder to collect on time. There are resolution programs that are escalating to attain revenue cycle vitality.
  2. Outdated denial management strategies – Many rely on outdated paper-based processes or databases that are developed in-house. This lacks automation and decision support to help optimize denial management.
  3. Value-based care affects overall profitability in the revenue cycle – certain service lines may not be profitable, resulting in standardizing cost and payments; though value-based care has positive implications.
  4. Due to complexity, denials are rising – most insurance companies are adding complex requirements, and so practices are facing initial denials. These rework on denials and appeals inhibits revenue cycle improvement initiatives.

How to overcome these challenges?

The providers transmit thousands of claims to insurers; even the best practices are experiencing denials. Many employees spend numerous hours managing and trying to solve the gaps in denied claims as many medical practices lack an organized strategy for denial management. These denied claims represent lost and delayed revenue to the practices. Following are some strategies to follow:

Firstly, recognize and identify the initial denial rates. Analyze and research the best course of action to be taken. Using data analytics, root caused should be found i.e. patient access and registration, or insufficient documentation and coding, or billing errors. As soon as the cause is identified, it should be known that who it is going to affect the most – payor or the provider, followed by redesigning the clinical and revenue cycle areas.

Secondly, look into registration and pre-service related mishaps. Usually, when a payor is no longer responsible for the coverage, eligibility denials occur. The front desk staff has to be attentive and confirm the eligibility of the patients beforehand; only for the emergency patient, there is an exception of checking it at point of service. Proper tools should be utilized to enable these multi-point eligibility checks.

Pre-authorization starts with specific procedures that are managed by payor, plan, and providers. The nursing staff spends lots of hours per week on prior authorization. This pre-authorization and other medical denial accounts relate to some percentage of all denials that are the cause of failure because of not authorizing in advance. Even the decentralization of the pre-authorization in hospitals and some large practices is an issue.

The information should flow from the provider to the payor and back to the provider. This efficiency can be improved by providers through receiving clinical guidance and evidence-based support; thus solving complex cases. The practices can:

  • Automate the screening process for pre-authorization, so that staff can easily verify it in place. – Have a designated team to ensure a reliable and stable approach
  • Automate payor policy maintenance in all the locations and increase accuracy, reducing administrative work.

The staff must ensure that all the operational reports from the finance and revenue cycle are regularly circulated and reviewed so that there is a clear path to focus. The data should be updated and maintained by the team for improving the health of the practice and preventing future denials. There should always be suggestions for process improvements.

How to improve Denial Management?

As we observed above, effective denial management is of utmost importance for every healthcare practice, as it requires every organization to prevent – focus on the actions that are taken to prevent healthcare claim denials. These actions can be incorporated into process anytime, during registration, scheduling, pre-admit or billing. It is important that the experts check the progress and inform their clients about the changes regularly.

Then comes analyzing the denials, trying to find and categorize the similar denials that can assist healthcare providers in understanding the root cause of the denial management process. Critical business decisions can be made by analyzing data gathered by the denial management team for future denial prevention.

The final step is to monitor the healthcare claim payment patterns of different payors and setup mechanism to alert whenever there is a deviation from the normal trend. It is important to monitor these patterns to enhance long-term efficiency while drastically reducing the revenue lost in claim denials. Some other tips in improving denial management include:

  • Educate all the patients who are not aware of the insurance denial system. Helping patients on time is fruitful for the practice as a whole.
  • Streamline the denial management process, as losing track of the claims can lead to piling up of denials with passing time. The new tools and technologies help to keep an eye on denied claims.
  • A strong workflow for the denied claims helps establish a strong denial strategy. Everything about denial claims should be documented. There should always be a process in place to ensure that the denial is processed within a week, whenever there is a denial sent from an insurance company.

Each type of denial may seem like a small problem. As the practice continues to break it down, it will be put to light that the majority of the problem lies within the practice. Identifying the types of denials is the most crucial task for the practices, for which there should be an effective denial management process.

Incentive programs are used to motivate the staff and promote healthy competition. All the employees in the practices should be given incentives to appeal to the claim and to successfully identifying the trends.

What are the Key Benefits?

  • Management being exposed to timely and accurate reports will prevent future denials.
  • There will be an increase in recovery amount by collecting information on denial appeals, including status, escalation, and correspondence with payors. As the causes are identified, the cash flow increases.
  • Denial management process helps in prioritizing and appealing denials based on federal and states, favoring the medical provider’s appeal.
  • The effectiveness of denial resolutions must be analyzed and avoid future denials by identifying business process improvements.

Effectively managing your claim denials can increase your organization’s revenue and collection rate, at the same time improving patient satisfaction. The financial stability of the practice depends on the way it manages denials.


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