What Is Denial Management in Healthcare?

So, what is denial management in healthcare and how can we improve this situation? Simply put, it is the systematic process of addressing these rejected claims. It involves a comprehensive strategy that spans from prevention to resolution, and even the appeal of denied claims.

Anyone working in the healthcare industry knows that getting paid for services rendered can be complicated. One of the most frustrating roadblocks is the dreaded claim denial.

Now, the good news is that denial management doesn’t have to be an uphill battle. By implementing effective strategies and utilizing available resources, healthcare providers can significantly improve their claims acceptance rates.This blog will show you what is denial management in healthcare and how to improve your RCM processes to reduce denials.

What Is Denial Management In Healthcare?: The Denial Management Process

A robust denial management process in healthcare has several key steps that, when applied diligently, can streamline the claims process and ensure timely reimbursements. These are the stages you need to be thinking about:

Step 1: Identify Denials

The denial management process starts with recognizing which claims have been rejected. Insurance companies are generally required to pay claims within 30-45 days, so practices should keep track of claims exceeding that timeframe. Providers can identify these outstanding claims and see the reason for denial through online payer portals, which many insurance companies make accessible to them.

Additionally, billers should frequently check the EOB (Explanation of Benefits) and the ERA (Electronic Remittance Advice) statements for any denied claims and look at the factors causing the denials. Billers also need to routinely examine payer remittance advice and any zero-payment claims.

They should also check the quality of registration and insurance verification. A 2022 AHIMA article shared that these reviews contribute to improved denials and appeals rates.

Step 2: Analyze Denials

After a claim is identified as rejected, the next step is understanding why. Analyze the reasons for denial by reviewing the provided adjustment reason codes.

A helpful resource for deciphering these codes is the comprehensive list of CARCs (Claim Adjustment Reason Codes) available on x12.org. Once you grasp the common causes, group those claims together. Common reasons include issues like patient eligibility problems, authorization mix-ups, bundling issues, duplicate claims, and incorrect coding.

Other reasons for denials are incorrect patient demographics and failure to get pre-authorization for treatment.

Identifying these trends helps practices and providers recognize the weak points in their claim submission process. This helps them take appropriate corrective actions to minimize the number of recurring claim rejections. By carefully investigating what's going wrong, they can fix it moving forward.

Step 3: Correct and Resubmit Claims

Based on the specific denial reasons identified, it's time to make the necessary corrections and resubmit the denied claims. This may involve tasks such as double-checking insurance coverage and patient data and fixing coding errors. Other corrections might include getting any needed authorizations and sending the resubmissions within the payer's stipulated timelines.

Step 4: Appeal if Needed

If you’ve double-checked the claim and found it to be accurate, you’ll need to make an appeal. This step applies to cases where, despite correcting the errors, the insurance company continues to refuse to reimburse for the provided healthcare service.

Appeals are also needed if you believe the payer should’ve reimbursed you based on their EOB. Medicare appeals operate within a five-tier appeal system as stipulated by the Social Security Act:

1. Redetermination by a Medicare Administrative Contractor
2. Reconsideration by an independent review entity
3. Decision by the Office of Medicare Hearings and Appeals
4. Review by the Medicare Appeals Council
5. Judicial review in a U.S. district court

Dedicated forms from CMS are needed at each of these levels of appeals when working with Medicare. Be sure to stay within any deadlines the insurance company has for appeals. It’s crucial to submit appeals in a timely manner. Any delay beyond the deadlines will further prolong the payment retrieval process.

Step 5: Monitor Denials Trends

Continuously monitor claims denial trends within your healthcare organization to stay proactive and prevent similar errors in the future. Regularly assess your denials data to understand which ones are recurring.

Payers change policies all the time, so ongoing training is a must. This will help staff keep up with new procedures for claims management.

Are claim denials originating more from patient registration errors, incorrect coding, or something else? Identify these denial patterns by looking for trends across various parameters such as claim type, provider, or insurance payer. This proactive approach helps to improve your claims processing, staff training, and potentially the methods used during patient access.

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Two Types of Claims Denials

When thinking about "what is denial management in healthcare," understanding the two main types of claim denials can significantly influence your strategy. Recognizing whether a claim adjustment is a soft denial or a hard denial guides the approach healthcare providers will take in dealing with it.

1. Soft Denials

This kind of denial is usually a temporary hurdle in the reimbursement process. Soft denials occur when the submitted claim is incomplete or has inaccurate information, usually something clerical. Think typos in personal information or missing data. They do not require appeals.

The insurance company just needs you to fix the problem. Once the practice corrects the issue, resubmits the claim, and the payer deems the information to be complete and accurate, they will go ahead and process the payment for the provided healthcare services.

2. Hard Denials

Hard denials are, unfortunately, final. It means the payer rejected your claim due to more substantial reasons such as lack of medical necessity for a treatment or procedure. Hard denials ultimately result in revenue loss and often necessitate appeals from healthcare providers.

4 Benefits of Denial Management In Healthcare

What is denial management in healthcare beyond being a burden and a process? If done well, effective denial management strategies go beyond simply addressing denied claims. It improves overall operational efficiency and financial health for healthcare organizations, medical practices, and providers.

Benefit 1: Enhanced Revenue Cycle

Successfully resolving and appealing denials accelerates reimbursement time for the provided medical services, leading to more predictable and faster cash flow for the organization.

For example, MD Clarity’s RevFind addresses patient registration and eligibility, one of the top causes for front-end claim denials. By preventing ineligible patient claim submissions, it ensures that you’re able to recover the revenue you deserve. It also ensures you aren't wasting valuable resources on rework later on.

Benefit 2: Reduced Administrative Expenses

With robust denial management protocols, a healthcare practice can reduce its claim rework volume. It can also reduce the amount of staff time needed for appeals. This frees up employees to focus on other core tasks.

In the long run, this reduces administrative burdens and costs associated with resubmissions. It also boosts staff efficiency. Effective denial management contributes directly to an organization’s profitability and success.

Benefit 3: Higher Patient Satisfaction

Claim denials can be frustrating for patients. This is because it frequently creates confusion regarding their bills and necessitates that patients shoulder larger out-of-pocket expenses than initially anticipated. It can even delay their medical treatment.

Efficient denial management improves the patient billing experience and fosters trust with them. That’s not just a marketing benefit — happy patients tend to refer new patients, contributing to sustained business growth.

Benefit 4: Performance Insights

Denial management enables healthcare practices to look closer at common causes for rejected claims. That lets them make ongoing adjustments to their processes. It may involve additional staff training in claim submission guidelines or closer attention to patient information capture at the front desk during registration.

Consistent analysis of denials allows healthcare organizations to understand the patterns in claim denials. They can then proactively identify potential weaknesses within the claim submission process, which then helps in fixing the problem.

3 Strategies for Better Denial Management

There are many different solutions you can consider when addressing this challenge of "what is denial management in healthcare". Which one makes the most sense depends on an organization’s size and existing resources. Let’s break it down:

1. Low-Tech Options

Several practical low-tech methods exist for effectively addressing claim denials. It starts with building a culture where everyone takes responsibility for proper billing and submission processes.

Ensure everyone from your front-desk staff to coders understands claim filing timelines for various payers. Thorough training programs and detailed procedure documentation reduce human errors. A robust quality control process with double-checks also helps.

2. Denial Management Software

Leveraging dedicated denial management software allows for more automated tools, which ultimately take some burden off the staff. Such software simplifies claims processing workflows, tracks claims statuses, and automates some aspects of appeals processes. A few different providers currently serve this sector.

For example, while Vyne Trellis denial management solutions serve dental practices, larger hospitals can opt for Change Healthcare, which releases annual denial management index reports. Their tools utilize historical data analysis to accurately detect claims at risk of being rejected and highlight patterns, empowering providers to streamline the entire denial management process.

However, it comes at a price – such software comes with recurring monthly fees, something healthcare organizations should account for in their operational budgets.

3. Outsourced Denial Management Services

Healthcare practices struggling with insufficient staffing and increasing workloads may consider outsourcing some tasks to a denial management team. When considering denial management, two major players are TruBridge and Savista. This entails engaging third-party services with specialized teams, which:

• Analyze claims data
• Determine denial root causes
• Review current practices
• And help the organization establish a robust in-house system.

These specialized service providers bring a great deal of expertise and understanding of ever-changing payer policies, coding rules, and requirements, enabling them to optimize the entire denial management workflow. It also allows for efficient tracking of claims statuses, preparation and submission of appeals within deadlines, and can be quite impactful when an appeal process necessitates extensive documentation.

Navigating Challenges

Healthcare organizations face many challenges when it comes to denial management. Here’s a look at how to anticipate and mitigate some of those challenges.

1. Increased Claims Denial Rates

The healthcare sector has observed a concerning upward trend in claim denials in recent times, with recent figures pointing to an average of 15–17% of medical claims resulting in denial, which ends up costing over $48.3 million annually to the entire industry.

Furthermore, over the last five years, denials have gone up by 20%. Many hospital executives in a 2021 Harmony Healthcare survey shared that their claim denials exceeded 10%. Addressing the root causes through careful analysis of denial reasons and implementing strategies is a priority.

2. Limited Resources

Many healthcare practices operate with limited budgets and staff. Engaging a consultant or outsourcing providers may make more sense financially than trying to do it all in-house, although many prefer upgrading their claims technologies as a June 2022 survey of revenue cycle decision-makers highlighted.

3. Complex Appeal Processes

Navigating appeals can feel like maneuvering through a bureaucratic maze. They involve multiple levels with unique processes, timelines, and documentation needs. Especially for smaller practices lacking dedicated resources, denial management becomes incredibly demanding.

In cases where a higher volume of appeals requires more manpower and expertise, engaging the services of denial management companies to streamline the process might prove to be more effective and yield a higher return on investment.

Importance of Accuracy

Mistakes during registration and eligibility verification are leading factors behind high claims rejection rates, contributing to 26.6% of rejected claims according to a Change Healthcare report. Small things, like typos during data entry, or missing information when verifying insurance details, have the potential to delay payment and impact the organization's revenue cycle.

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Healthcare providers need to place greater emphasis on accurate information capture to avoid claims rejection due to missing information. This will also help avoid increasing their overall administrative costs. For instance, double-checking to confirm if a treatment requires prior authorization, and making sure such details are available, could greatly impact the success rate for claim submissions.

Prior Authorization Requirements

Prior authorizations play a major role in denial management. You may see denials arise simply because the provider neglected to get authorization for a particular service, medication, or procedure beforehand. Moreover, the type of insurance plan can further contribute to disparities in the denial rates.

This is precisely why an American Hospital Association report emphasized this problem when addressing denial rate disparity linked with different health plan types. One illustration highlighted that in-network denial rates averaged 17% for Affordable Care Act (ACA) Marketplace plans back in 2021. Clearly, this can have a significant impact on those participating within ACA Marketplace.

It’s vital for healthcare organizations to carefully evaluate whether a treatment needs prior authorization and get it done. It is also important to account for specific requirements from individual insurance payers, since guidelines tend to vary across the industry. This proactive step eliminates one significant roadblock to successfully navigating the claim submission process.

What Is Denial Management In Healthcare: Final Thoughts

So, what is denial management in healthcare, and why does it matter so much? It's about creating a comprehensive approach for handling denied medical claims. This approach encompasses identification, resolution, appeals, and analysis of rejection causes and patterns.

Given how many denials stem from preventable errors, it emphasizes the importance of consistent training and thoroughness in information gathering and input. It also highlights the importance of adherence to procedural guidelines across a practice or organization.

For some, utilizing specialized denial management solutions from third-party service providers might prove beneficial. Regardless of the chosen path, embracing an integrated denial management strategy can significantly reduce your claims rejection rates and increase reimbursement success.

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