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The 6 Fundamentals to Prevent Denials

Insight Article - April 30, 2018

Financial Management

Operations Management

Billing & Collections

The 6 Fundamentals to Prevent Denials

The keyword to focus on is prevent or prevention. By the time a claim reaches a denied status you’ve already lost at least 15 days if not more. In healthcare, time is money – while you may perform a service on the first of the month it will take approximately 30 days for that money to hit your accounts receivable (A/R), and that’s when everything goes right.

Very few industries have a 30-day lag from receipt of the product or service to payment. When you go into a grocery store, they expect payment before you leave. Even other service providers such as your cable company provides the service in advance, but if you don’t pay, they shut off your cable. Healthcare providers cannot cut-off a service that was previously performed; therefore, getting claims out the door in a timely and accurate manner is critical to the survival of practices.

The “I’ll fix it later” Mindset

If you are like many practices, you and your staff are buried in administrative tasks that range from scheduling patients, remaining compliant with regulations, talking with payers to verify coverage, and so on and so forth. Coders and billers have limited time to question documentation or services performed. Rather it’s common for staff to get claims sent to payers and then cross their fingers and move on to the next stack of tasks. 

Does this sound familiar? 

While the overburdened practice struggles to just stay on top of the day-to-day operations, the ramifications can be financially devastating. The average denial rate for most practices ranges from 5% to 10%. For a small practice of two providers that submit 2,000 claims a month with an 8% denial rate, this results in 160 denied claims a month. Even at a charge of $100 per claim this equates to $16,000 a month in denied charges – not to mention any rework costs on average $25 per claim. 

The Shift from a Reactive to Proactive Process

Data has shown that 90% of denials are preventable.  Doctors ask their patients to get vaccines or wear sunscreen or eat more vegetables to prevent disease and sickness in the future; however, many practices do not subscribe to this rhetoric when dealing with their own financial future. While it seems overwhelming at first, setting up proper operational processes upfront will save both time and money.  

But how to prevent denials and where to start is often the challenge. Below are six best practices to prevent denials.
  1. Educate and communicate
  2. Verify insurance prior to service
  3. Know your payers
  4. Document appropriately
  5. Take advantage of technology
  6. Monitor, analyze, revise
Educate and Communicate
This is often the key to success in any business and in healthcare specifically you must educate and communicate both internally and externally. It’s essential that your front office staff, doctors, and back office staff all know their role in your practice and operations. Each plays a critical component from checking in patients to documenting the services provided to collecting patient payments. 

In addition, everyone must know the insurances you accept, the services you provide and the services you do not provide. If you are a practicing cardiologist that offers flu shots, your staff needs to remember to code this service to receive reimbursement. 

Communication is key. In addition, continuing education and updated certifications will keep your practice operating at par with the latest changes in healthcare.

Verify Insurance Prior to Service

It’s been said before, but one of the main reasons for denials is due to eligibility. While the patient may have been coming to your practice for over 10 years, this does not mean they have the same insurance. People change jobs and insurance companies require yearly enrollment. 

Many plans now have more financial responsibility being placed on the patient. Whether it’s a raise in deductible or increased copayment, you need to check each patient’s insurance benefits prior to every single visit. This is especially true of Medicaid and Medicare programs as well. A fluctuation in income can result in a patient having Medicaid for a period of months and then having commercial insurance the next. 

Know Your Payers

Most providers will accept anywhere from 15-20 different insurance plans. Each of these payers have various rules for what services they allow and what they will reimburse. In addition, they require each provider to enroll in their plan before they will reimburse them. 

It takes time – and often patience – to learn which services are considered medically necessary, which require prior-authorizations, which require referrals, and so on. Having a relationship with your key payers helps you resolve issues faster. “It’s all about who you know” holds true in healthcare. Being on a first name basis with your local representative can help you get the answers you need in a timely manner. 

Accurate Documentation

While short-hand notes are faster, they can result in miscommunication that has huge financial repercussions. What the doctor meant in the documentation or transcription versus what the biller codes may be different. Clear documentation, especially when electronic, helps ensure proper coding is completed the first time. 

With the introduction of ICD-10, coding must be even more specific to get claims approved and paid correctly.   

Take Advantage of Technology

Investing in a practice management system, EHR or EMR is expensive and time consuming. Unfortunately, many practices do not take full advantage of what their technology offers. At minimum, having a database to refer to is faster than having to pull patient folders from a filing cabinet. If everyone from the front office to care team to back office utilize the same system, then there is less possibility that crucial information gets lost in translation. 

In addition, many systems now provide built in edits that review claims before they get sent to the payer. These will flag your staff to review the claim information before sending the final claim to the payer. This immediate notification prevents denials by pushing the edit and review tasks earlier in the revenue cycle process – saving days and even weeks.

Monitor, Analyze, Revise

Perhaps one of the most important steps in preventing denials is learning from past mistakes. While this step is the most important it is often the most overlooked. It’s difficult to take time out of your busy day to review what’s already been done; however, if you don’t look at why you are getting denials you will keep making the same mistake. 

As fast as healthcare changes, revisions are commonplace. By changing an incorrect modifier or correcting an inaccurate birthdate before a claim leaves the office, a provider not only gets paid faster but avoids unnecessary denials. 

Implementing Changes

Change is hard. And in healthcare – it’s frequent. It requires the entire practice be onboard and working together. Analyzing the revenue cycle process and moving key components further up in the process can ultimately be the deciding factor of whether a practice keeps its doors open or closes. 

To affect real change requires true leadership. If the leader embraces change, then the organization will naturally follow. Providers have taken different strategies in preventing denials and ultimately affecting change. While the answer can be as easy as educating current staff, others choose to augment their staff by utilizing external certified coders and billers. The solution you pick for your office will depend on your current financial and operational stability.

If your practice is at a 5% denial rate or less, you are within the range for a thriving practice. A denial rate greater than 5% requires further analysis and future revenue cycle improvements

  1. Haines, Morgan, An Ounce of Prevention Pays Off, The Advisory Board, December 2014

Advantum Health

Advantum Health helps healthcare providers and hospitals maximize revenues and practice medicine without administrative burden. Advantum offers full-service revenue cycle solutions – including billing, credentialing, prior-authorization, consulting services, and intuitive analytic dashboards. 


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