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6 keys to addressing denials in your medical practice’s revenue cycle

MGMA Stat - March 18, 2021

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MGMA Staff Members

The Medical Group Management Association’s most recent MGMA Stat poll asked healthcare leaders, “Has your organization seen denials increase in 2021?”
  • 69% said “yes.”
  • 31% said “no.”

Common responses from respondents included payers not reimbursing for codes related to COVID-19 supplies, critical care claims and imaging CTs.
 
For those healthcare leaders who reported an increase in denials, the average increase in denials was 17%.
  • Half responded that they increased by 1% to 10%.
  • 34% said 11% to 20%.
  • 12% who stated 21% to 30%.

The poll was conducted March 16, 2021, with 576 applicable responses.

Denials trending upward, especially at the front end

According to Change Healthcare’s 2020 Revenue Cycle Denials Index, the average denial rate has risen 23% since 2016 and a sizable 11% just since the start of the COVID-19 pandemic.1 Although the pandemic has exacerbated the issue, the primary causes and origin of denials have remained the same since 2016.

“What we found is that at nearly 27%, registration and eligibility remains the top reason for denials and continues to shine a spotlight on the need for innovative solutions that drive greater intelligence and automation into the front end of the revenue cycle,”2 says Nick Raup, associate vice president, product management, revenue cycle solutions, Change Healthcare.

In fact, the Change Healthcare survey found that three of the top four causes occur at the front end of the revenue cycle, with authorization/pre-certification (11.6%) and service not covered (10.6%) also figuring prominently. In total, half of denials are caused by front-end issues. 

Access Change Healthcare’s 2020 Revenue Cycle Denials Index

This increase during COVID-19 was reflected in a recent Change Healthcare webinar poll in which more than 77% of respondents noted that they experienced an increase in denials during the second half of 2020.

Front-end strategies

Most denials are preventable if practices are proactive in addressing front-end issues, according to Giliane Poole, performance improvement consultant, Change Healthcare. Those tactics include:
  • Ensuring patient information is correct at pre-registration and registration
  • Making certain the chargemaster is up to date and correct charges are being utilized
  • Confirming that billing software and claim edits are current
  • Regularly communicating rejections received on rejection reports to guarantee timely implementation of corrections and avoidance of additional claim delays.
 
Poole also asserts that you “don’t want to assume that errors or missing information will be fixed on the back end or you're going to get the information later.”3 In addition, she notes that you don’t want to ignore any bypass edit warnings or delay rejection report reviews.

Why are denials increasing?

According to Poole, practices face four internal challenges that lead to more denials:
  • Lack of resources: The revenue cycle management team does not have clinical experience to support appeals or manage clinical denials.
  • Staff attrition and training: Today’s competitive market makes it challenging to hire and retain qualified staff. Complex and increasing clinical denials necessitate comprehensive education and training.
  • Increasing denial backlog: The above staffing challenges increase denial backlogs and affect filing deadlines. In turn, the absence of denial prevention strategies and only addressing denial symptoms, not causes, results in continuous denial challenges.
  • Substandard technology: The lack of workflow optimization and automation for clinical documentation, along with inadequate investment in analytics and artificial intelligence (AI) compared to payers, compounds the issues related to evolving regulatory changes.

Avoiding denials to preempt recovery

The good news for practices is that most denials can be avoided if the above challenges are addressed. The bad news is that if claims are not addressed, the average cost to rework a claim is $25.20, which quickly adds up.

“As we looked at the data around this, we came to some pretty stark revelations regarding just how true that is,” says Raup of the burden claims can present. “First we found that 86% of denials are potentially avoidable. … Just think about the dollars and time and savings that represents.”4

Furthermore, Raup states that Change Healthcare has determined through its research that 48% of avoidable denials are not recoverable. “Nearly half of those denials that never should have happened, those dollars are gone,”5 says Raup of practices essentially throwing money out the window. For all denials, Change Healthcare found that 24% of them are not recoverable. And of that 24%, a staggering 95% of those denials are potentially avoidable.
By taking steps to address issues at the beginning of the revenue cycle, practices can potentially prevent lost revenue and save staff hours.

Denials prevention action steps

The first step in preventing denials is analysis, which helps practices “find out where those errors are and the slowdowns that are occurring,” Pope explains. This enables practices to “fix denial root causes and see where the biggest impact”6 is in the revenue cycle. Armed with this knowledge, practices can begin to prevent and manage denials in a more strategic way. This can be done by focusing on six key areas:

Registration/eligibility

As Poole points out, oftentimes patients don’t fully understand their health insurance coverage or they don’t supply necessary details about their coverage. That’s why it’s important for front office staff to be trained to inquire about additional coverage. They should also confirm eligibility through the use of technology, prior to service, at the time of service and before submitting a claim. Registration data should be examined for accuracy, completeness and consistency, and any mistakes should be remedied as part of the normal workflow to avert downstream denials.

Authorization/pre-certification

Staff should routinely assess and compare ordered and performed services against authorization before the service. If authorizations need to be updated, it’s imperative that staff communicate with physicians and payers, which includes recording authorization verification calls and cataloging authorizations with digital images. Finally, peer-to-peer meetings can be set up between practice physicians and physicians who work for payers to obtain prior authorization approval. Similarly, second-level reviews of medical necessity by physicians can be scheduled.

Medical necessity

To meet the criteria of medical necessity, staff should engage in peer-to-peer meetings and verify that all clinical documentation is submitted for continued stays. Likewise, they should confirm that contracts include an option for administrative days to cover extended stays caused by difficult placement. To support the physician’s decision, staff should also make sure the severity of the patient’s situation is clearly documented. Finally, staff should have a clear understanding of the practice’s overturn rates and when it’s prudent to act on a denial.

Medical coding

With medical coding, staff should focus on the accuracy of discharge status coding and admit/discharge rates, and also confirm that the chargemaster is up to date and accurate. In addition, based on the provider’s assessment of the patient’s health status at the time of admission, staff should make sure the patient care situation is well documented.

Missing or invalid claim data

So many factors can contribute to claims denials, but staff should focus on ensuring that:
  • The practice does not submit duplicate claims
  • There are no missing payer IDs and/or procedure codes
  • Diagnosis codes are valid and effective on date of service
  • Billed procedure codes are correct for date of service.

Moreover, practices should check that their claim scrubber is capable of high-quality edits, new edits are clear to billers, and that issues are resolved proactively. Finally, to ensure there’s no duplication of denials or rejections, staff should observe proper follow-up processes.

Service not covered

Uncovered service can be particularly challenging for practices as providers and patients often know that the service will be denied at the time of presentation. Thus, it’s important to collect the payment upfront. For Medicare patients, it’s vital to collect signed Advance Beneficiary Notice (ABN) of non-coverage forms before performing these procedures.
 
With denial rates on the rise, practices need to be vigilant in taking steps to prevent them. The good news is that the majority of denials are preventable if resources are deployed to address them.

Do you have any best practices or success stories to share on this topic? Please let us know by emailing us at connection@mgma.com.

JOIN MGMA STAT

Our ability at MGMA to provide great resources, education and advocacy depends on a strong feedback loop with healthcare leaders. To be part of this effort, sign up for MGMA Stat and make your voice heard in our weekly polls. Sign up by texting “STAT” to 33550 or visit mgma.com/stat. Polls will be sent to your phone via text message.

Additional resources

 
This poll was conducted in collaboration with Change Healthcare.

Notes:

  1. Data based on The Change Healthcare 2020 Revenue Cycle Denials Index, an internal analysis of 102 million inpatient/outpatient claims processed between July 2019 and June 2020 by Change Healthcare, representing more than 1,500 hospitals and $407 billion in total charges.
  2. “National denials trends and key strategies to prepare for 2021.” Change Healthcare webinar. Available from: bit.ly/3eGXrAX.
  3. Ibid.
  4. Ibid.
  5. Ibid.
  6. Ibid.
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