The success of your medical practice hinges on everyone understanding their role in the revenue cycle.

Physicians need to understand billing and coding within their practices so they can evaluate the efficiency of their revenue cycle processes and, more importantly, improve their revenue through better accounts receivable (AR) practices. Monitoring these functions is necessary for discovering changes in a practice’s income, so the practice can effectively manage its financial operations.
In this article, we’ll review the importance of monitoring denials as a strategy for achieving compliance, reducing billing errors, and improving practice revenues, as well as cite common errors made by the revenue cycle team and best practices for collections.

 

Avoid Denials by Identifying Errors

Frequently, physicians view the handling of claim denials as a back-end process managed by a collections team. This approach is misguided and creates a negative overall effect on collections. The focus should be on avoiding denials, not managing collections.

Denied claims contribute to a negative financial impact in three ways:

• Lost revenue
• Cost of reworking claims (approx. $25 to $117 per claim)
• Delay in receipt of revenue

 

According to the Optum 2024 Revenue Cycle Denials Index, the national average denial rate in 2023 was 12 percent. A staggering 84 percent of those denials were “potentially avoidable,” and 22 percent of those denials were unrecoverable due to lack of prior authorization, referral, eligibility, etc. Front-end oversights made up 44 percent of the denials, with registration and eligibility denials accounting for 24 percent of those denials.

 

Front Desk Errors

 

The goal of any medical practice should be to increase its first pass claims rate. And with front desk errors making up the bulk of denials, the success of achieving a high pass rate depends on a strong denial prevention strategy.

 

Perform audits: Perform prospective audits to catch errors before claims are submitted. Perform retrospective audits to identify gaps and breakdowns in processes and establish corrective action plans to address the deficiencies. Focus retro audits on identifying the root cause of front desk errors and examining patterns in denials.

 

Implement a corrective action plan: Assign responsibilities to members of the revenue cycle collection team such as checking that prior authorizations have been obtained and verifying insurance and benefits at least annually. Your plan should establish a methodical process for working authorizations.

 

Create measurable benchmarks: Track front desk performance and implement best practices for increasing front desk staff productivity:

• Set clear performance expectations. This includes setting goals, targets, and deadlines for completing tasks.
• Provide adequate training. 
• Provide training on pre-authorization, referrals, and insurance copay and deductible requirements.
• Monitor performance. Regularly audit the front desk’s practices to identify areas for improvement. This includes tracking key performance indicators such as percentage of rejected claims and denial rates.

 

Clinical Documentation Errors

Coding accuracy depends on the coordination of physicians and medical coders. Denials are often due to incomplete clinical documentation and/or inaccurate coding. Methods used by coders for abstracting physician encounter notes can be used to educate physicians on how to improve their clinical documentation. The goal is for physicians to adequately document the patient’s conditions they are actively treating, the status of those conditions, and the treatment plan for the patient’s care.

 

Physicians should never rely on coder initiative to determine what is meant in clinical documentation. Common coding errors unwittingly caused by physicians include:

• Failure to recognize that each encounter note is a standalone document and that documentation from a prior encounter cannot be used by a coder to code the current encounter note.
• Failure to use the narrative box to add specificity instead of choosing a default diagnosis from a pull-down menu.
• Using unspecified diagnosis codes when anatomic location and laterality codes would result in a more specific diagnosis.
• Using terms such as “history of,” which has different meanings to physicians and coders.
• Failure to adequately identify the causal relationship between conditions.

 

The role of the medical coder is to accurately and completely code the clinical encounter note and to assign appropriate modifiers to ensure proper payment. Coders must:

• Follow ICD-10-CM guidance to code all supported diagnoses (not incidental findings, conditions integral to the disease process, patient reported, ruled out, or not confirmed).
• Code diagnoses that are actively being treated — including all conditions, comorbidities, complications treated during an encounter — or that may impact patient treatment.
• Code only the services and supplies that are documented in accordance with payer guidelines.
• Stay current with payer policies and bulletins, quarterly payer edits, coverage determinations, and code set updates.

 

 

Clinical coding and charting must align, and the treatment plan must fall within payer-covered indications. Things that could lead to coding errors and improper payments: Confusion as to what is an acute or chronic condition; lack of specificity as to anatomic location or laterality of condition; misidentification as to whether a visit is an initial encounter, subsequent, or sequelae; and incomplete documentation of all conditions, comorbidities, and complications.

Modifier Errors

Medically unlikely edits (MUEs) and National Correct Coding Initiative (NCCI) edits are used by payers during claims processing to catch certain errors:

• MUEs set a maximum number of units that a provider may bill under most circumstances for a single beneficiary on a single date. Date of service MUEs apply to multiple procedures that are extremely unlikely to be performed on the same date. Drugs administered are a separate MUE category, where the HCPCS Level II code determines the number of units administered. A code modifier may be appropriate to distinguish repeat services from maximum number of services or indicate anatomic differences.
• NCCI edits prevent improper payment when unallowed code combinations are reported together. They are intended to prevent unbundling of component codes. Bundling edits occur when Medicare deems a procedure integral to another primary procedure.

If your practice sees frequent MUE and NCCI denials, the physician and biller must review the reasons for the denials. Check to make sure the correct CPT® codes were reported, the number of units were counted correctly, appropriate modifiers were used, and the number of services reported were medically reasonable and necessary.

 

Avoid Denials by Identifying Billing Errors

While errors at every stage of the revenue cycle may slow the collection of revenue or limit collections, the biller controls the process. The biller manages the claim submission, resubmission, and filing of appeals from denied claims.

The biller provides a final review as to whether the following information on the claim is correct:

• The patient’s insurance coverage was in effect on the date of service.
• The patient’s insurance covers the service provided.
• The claim is submitted to the primary insurer.
• The claim submission includes all the required patient information (e.g., full name, correct spelling of name, mailing address, and date of birth).
• The claim identifies the correct payer identification number, group number, and mailing address.
• All required information is in the correct fields.
• The claim is submitted within the timely filing window.

A claim with incorrect information will be rejected or denied by the payer, slowing collection.

 

Establish Benchmarks

It’s important for the medical practice to establish performance benchmarks for the biller/AR department.

Monitor number of days in AR. Days in AR is a metric for measuring the number of days it takes to collect accounts receivable. The industry performance metric is 40-50 days. Anything greater than 60 days indicates a below average revenue cycle process. It indicates that claims are requiring more than one touch to move them through the revenue cycle process. A deeper dive is required to identify where the bottleneck in the process lies.

Monitor the percentage of rejected claims. Rejected claims are an indicator of errors by the front desk but also indicate a breakdown in the clean claim review the biller is responsible for performing.

Monitor the percentage of denied claims. This is an indicator of a breakdown of many aspects of the revenue cycle, but the biller is the only member of the revenue cycle team able to improve revenue by filing clean claims, corrected claims, and appeals. The speed with which accounts receivable are collected is directly tied to their role — they are the collection arm of the practice.

Set internal deadlines for daily performance targets:

• Set a 24- to 48-hour turnaround time for rejected claims.
• Run a daily report of rejected and denied claims.
• Establish a process to prioritize the working of claims, identifying and working those approaching the timely filing deadlines and/or that have the highest dollar amount.
• Run a claim status report to identify activity in the collection cycle. This provides the biller with a roadmap as to where their focus should be.
• Perform a line-item review of explanation of benefits to detect denials at the line-item level (partial payments) that should be addressed with a corrected claim or that require an appeal.

Each payer has its own deadlines for filing claims and appeals. Failure to meet the timely filing deadlines results in denials that are not appealable. Rejected claims that are not resubmitted to the payers may also be time barred under the timely filing rules.

 

Financial Reporting Is Key

The improved effectiveness of your procedures should be reflected in an increase in first pass rates and a decrease in denials. Financial reporting will assist you in identifying the root cause of a pattern or increase in denials. Financial reports provide a basis for evaluating whether the processes in place for the handling of corrected claims, requests for reconsideration, and appeals are effective. Reports should capture the average number of claims resubmitted, the percentage of claims appealed, and the percentage of claims never collected. This provides the physician with an overview of their AR and the effectiveness of their revenue cycle team.