Claims denials are a major source of revenue loss for hospitals. Jason Williams, vice president of analytics for Change Healthcare, explains how these bad practices translates to dollars: ,

“Payers initially deny about 9% of hospital claims, putting about $5 million in payments per hospital at risk.”

Even for a large corporate hospital, this is a significant chunk of change. That impact is even greater on the little guys like community and rural hospitals that are already struggling to stay in business.

What can hospitals do to improve their claims denials management process? Let’s first review some facts about claims denials, then we will share valuable advice as to how hospitals should address the issue head-on.

How to improve claims denials management.

Your hospital could be losing millions in revenue due to inefficient claims denials management.

Claims Management Process Flow

In order to better understand the unique challenges hospitals and providers face when it comes to claims denials, you must first look at how the claims management work flow transpires. Revenue Cycle Intelligence recently published an article that better explains the back-end process of claims management and how that relates to the overall revenue cycle of a facility:

  1. “After a patient visit, back-end employees perform charge capture responsibilities. Charge capture is the process of translating services and physician time into billable charges.
  2. Healthcare organizations employ a chargemaster that links clinical codes to a price. But inadequate clinical documentation can result in inaccurate charge capture and revenue leakage.
  3. Organizations oftentimes employ several staff members to flag charge capture issues and rework the charges.”

Harriett Johnson, the Assistant Director of Revenue Integrity at Novant Health. encourages hospitals to use revenue cycle management software that trends charge capture data to improve the overall process. As she explains:

“Being able to trend the data, have a conversation with our clinical teams to understand what their workflow was, work with our IT team to understand what potential opportunities we had within the solution itself, and then move that into production really shows that full circle of how trending information has been extremely helpful for us.”

Reduce Denials with High-Quality Clean Claims

The product manager at ZirMed in Louisville, KY, Renee Miller, shared her advice about how organizations can decrease claims denials with Becker’s Hospital Review in a recent interview. In order to reduce the occurrence of denials, hospitals and healthcare organizations need to focus on the submission of quality clean claims that are far less likely to be denied in the first place.

Miller shared her wisdom with Becker’s:

“Inaccurate claims are often a basic yet avoidable cause of denials, which means denials can be reduced significantly by ensuring claims are clean from the start. The statistics tell the story of the lost revenue. The best way to avoid revenue leakage associated with denied claims is to do a better job of submitting clean claims that can be approved on the first pass. In healthcare today, payers have become hyper vigilant with claims.”

Miller goes on to explain that hospitals are now holding providers accountable for being sure that all claims are 100 percent accurate when they are received. In order to pump up the clean claims rate, the first step is to start with claims management technology that provides tools to edit and team with process improvements and tools that streamline workflow and improve the hospital revenue cycle process.

Claim Denial

This graph shows the rates of claims denials by payers.

The Becker’s article also observes that Centers for Medicare and Medicaid Services (CMS) reports the following alarming statistics:

  • Number of claims that are paid the first time they are submitted: 70 percent
  • Number of claims that are denied or lost/ignored: 30 percent
  • Of the 30 percent of denied, lost/ignored claims, the number of those that are never resubmitted (Medicare/Medicaid reimbursement is lost forever): 60 percent

Furthermore, a 2014 Advisory Board study found that 90 percent of claim denials could be prevented, and fixed for payment. However, more than half of those initial denials are never sent back to payers.

Prioritize Claims Denials Management to Prevent Revenue Leakage

Because the medical billing department is busy working on the submission of new claims, they may not place importance or priority on claims denials management explains Michelle Tohill, Director of Revenue Cycle Management at Bonafide Management Systems.

Tohill offers the following advice, “Make it standard procedure for your team to work on denied claims every single day. Just because a claim was denied once does not mean it will be permanently denied. Your billers should be able to make the necessary adjustments and capture the reimbursement with attention and perseverance.”

The Need for a Concise Claims Management Solution

Dustin Hamilton, director of product at ZirMed suggests in a Becker’s article that healthcare organizations should be using just one technology solution that deals with claims management and other steps in the revenue cycle process. The following is the advice he shared in the article:

“Although claims management is the lifeblood of the reimbursement process, it should be addressed as just one element of the full revenue cycle. Claim rejections and denials are often caused by errors further upstream in the revenue cycle, so it’s important to manage claims within that context. Inefficiencies and workflow issues can also become pervasive when disparate technologies are used across the revenue cycle. Having a single system to manage the entire revenue cycle can provide a holistic view to help identify and manage revenue leakage wherever it is occurring.”