DENIALS AND REVENUE CYCLE MANAGEMENT
The AMA reports that between 1.38% and 5.07% of claims are denied on first submission and that nearly 60% of hospitals never appeal denials. For a 350-bed hospital, this can amount to around $3 million in losses per year and a total loss of $262 billion annually for all hospitals in the United States.
This document serves as a guide to establish robust revenue cycle control points, a review of insurance billing and score cards, includes a step-by-step plan for denials analysis and auditing claims, and provides a blueprint to making the most of reimbursement opportunities.
Revenue Cycle Control Points
Revenue Cycle is the financial process related to a patient encounter. It includes the registration process of a patient where data is gathered and used to financially clear the upcoming service. A mock workflow has been added below: Policies– Create policies that support the process of denials analysis and revenue cycle management, train your team to follow the policy and process and ensure them that you will support sound decisions based upon the policy, and outline a path for escalation if needed.
Insurance Billing and Score Card
- Dispositional Receivables Management
- Dispositional receivables management (DRM) uses the payer score card approach. It is an advanced approach when compared to the typical “High to Low Aging” driven follow-up method. Stratification, or segmentation, is a discipline whereby receivables are grouped with like dispositions for a collective follow up process. DRM shows the story of the A/R and its collectability and allows for more productivity within staff. They are able to touch accounts in the 100’s thereby yielding significant increases in account resolution (cash).
- HFMA Suggests a format like the one below. Creating this type of data table for your top ten payers can help the efficiency of denials analysis:
| Category | Best Practices | Your Number | Variance | Gold Star |
| A/R > 60 Days | ***% | ***% | ***% | ***% |
| 35 Days, No Payment or Response | ***% | ***%
|
***% | ***% |
| Potential Underpayment | ***% | ***% | ***% | ***% |
| Under Appeal | ***% | ***% | ***% | ***% |
| Potential Overpayment | ***% | ***% | ***% | ***% |
- Understanding Your Payer Contracts
- To ensure proper and prompt insurance payments, you must confirm that you have trained your insurance verification staff—not only to request coverage data but to also request quotes of anticipated reimbursement for the planned procedure (get it in writing). You must also identify the data that payers are using to determine your fee schedules by working with the lower paying carriers to ensure they are not misinterpreting your data. Reviewing your reductions is also important. Do they appear to be from fee schedules, reasonable and customary rates, down coding, or audit issues?
- Understanding Your Rights as a Provider
- There are myriad edits, such as pre-bill edits based on experimental data and continual process improvement, that a payer can place in their system which makes it inevitable that you will receive a denial. Be sure to know how to correct the problems on your present claims and future claims! Ask yourself if you feel that the denial was appropriate and where you could have redirected efforts prior to claim submission and/or prior to discharge.
- Follow Up with “Intention” Not Just “Claims” Status
- Denials and under-payments have the most harmful impact on the income statements for your hospital. Understand and educate insurance verification staff on payer contracts. Focus on identifying how to verify coverage, how to appeal coverage determinations, timely filing rules, fee schedules, and special billing requirements. Create a focused payment discrepancy team. Use a cross-functional and holistic approach that is integrated closely with finance on expected reimbursement and related net-revenue topics.
Claims Auditing and Denial Management
Insurance companies are beginning to use claim-checking software that contains sophisticated coding logic. This technology can be very difficult for providers to keep up with. Reduced payments have had a negative impact on providers. Many of these providers are negligent in their duty to protect their payments thinking they have no other option.
Most providers have struggled trying to understand how most insurance companies use the same tactics to delay or deny their claims. Track your denials by payer and by type. Interpret your carrier contracts to ensure that you do not receive incorrect denial reasons. Track the progress of your denials to prevent oversight of a denial. Ensure that overturned denials are reported to leadership for use during contract negotiations.
- Appealing Incorrect Payments and what to include in your appeal:
- Cite ERISA, State statutes/laws that support your position and provide average stats on your anticipated reimbursement amount. Be prepared to challenge their citing of other providers who are out of your region and/or do not provide the same level of care. Stand firm that you only offer discounts to those who pay promptly and request prompt payment. If the denial is upheld, request that they send supporting documentation. Include incorrect payments as well. Request a copy of the fee schedule.
- Integrated Unbilled Receivables Management
- All areas of the Revenue Cycle must view their core activities as a form of A/R management (pre-processing, patient access, care management, charge capture/ revenue integrity, HIM/coding, and patient financial services). Specify suspense periods around financial class and service type and align fatal edits by department and type. Review your hospital’s revenue integrity and service documentation requirements. Ensure that your systems have rigid front-end edits that allow only the cleanest product to flow into the PFS department for cash conversion.
Steps for Denials Analysis
Reimbursement Opportunities
It is difficult to hold staff accountable if the organization has not taken every step to capture all earned revenue. It is much easier to capture lost reimbursement than to identify operational efficiencies. Cost reimbursement does not occur unless the charges are successfully processed.
- Coding– Periodic DRG and CPT code reviews (Medicare is not your only payor) are very beneficial for improving reimbursement opportunities and can lead to increases in prospective payments and decreases in denials. Do not assume that your coders are up to date. A failure for payors to return claims does not mean that the coders are coding properly, as 20-30% error rates are common. Coding should be done by a coding expert prior to sending a final bill to ensure that all services are captured correctly. Regulatory changes and governmental divisions have been created with a strict focus on compliant coding. Ongoing audits become essential to ensure that the process in place is compliant with the government’s policies.
- Charge Capture– Failures occur due to failures in the design of charge capture processes and a lack of understanding of reportable services by nursing staff. A perfect chargemaster means nothing if the charges are not captured properly. Periodic documentation and billing reviews can help with this. Error rates of 30-40% are common and mostly include lost charges (CPT/HCPCS for fee schedule payors and charges for charge-based payors). Suspense times should be communicated and a part of your facility’s policies and procedures. It is important to remember that each day that charges are not entered and fall out of “suspense” can cause negative effects on your days in A/R outstanding as well as cash flow.
- Charge Master– Systematic reviews of your charge master are essential to ensure that you are capturing all revenue correctly and that you are not leaving money on the table. Keep in mind that if you are adjusting your Charge Master that you must think of the downstream effects to your cost reports. Ensure that there is a process in place that will tie your changes to your compliance cost report.
- Pricing– Charges still matter for Critical Access Hospitals. Many CAHs have payor contracts that reimburse based on charges or percentage of charge. Charges must be above published fee schedules or risk reductions in reimbursement. There are two reasons that pricing falls behind the market: (a) there is a failure to understand the true impact of charges or (b) there is perceived pressure on the Board to hold down pricing. Recommend periodic market-based comparisons of pricing by assessing and analyzing Medicare outpatient data and commercial claims data.