This episode from the Texas Medical Association features a discussion on building an effective denial management program.
Hi, I’m Heather Bettridge, Associate Vice President of the Texas Medical Association’s practice information services, one of the benefits that TMA provides to its members is staff working alongside payers, advocating for practices when dealing with claim denials. Premier Inc recently conducted a survey of more than 500 organizations, and responses reveal that nearly 15% of all medical claims submitted to private payers was initially denied. So I asked, as practice leaders, do you know which payers your staff find it most difficult to work with, and why do you know from which health plan your practice gets the most denials? Answering these questions is a good first step to setting up processes and checks and balances that will help reduce and manage claim denials. My guest today is Sabrina Skeldon, an experienced healthcare attorney who is also certified in medical coding, auditing and risk adjustment coding. Sabrina is skilled in streamlining practices revenue cycle from front desk procedures to the business activities of billers and coders. Her company places heavy emphasis on the development of a robust and systematic denial management program. Sabrina, welcome.
Thank you, Heather.
To start us off today, describe for us, please, the conceptual differences between denial management and denial prevention programs.
Well, there’s a tendency to view a denial management program as a fix it day to day approach to be addressed at the back end.Practices handle denial management by sorting and working denials by age, dollar, amount and payer.A conceptually different approach is to develop a denial prevention program, to create procedures to avoid denials, track patterns and develop KPIs to measure the effectiveness of revenue cycle processes. A practice’s goal should be to increase its first pass rates and reduce denials. The denial prevention approach targets that goal and helps achieve it better.
Okay, thank you for that. That makes sense. It’s very helpful to differentiate between the program options. Sabrina, talk to me a bit about the financial impact that claim denial has on a practice’s revenue stream?
Well, there are three aspects to the financial impact of a denied claim, the loss of revenue, the costs of reworking the claims, and the delay in receipt of revenue, the number of times a denied claim has to be touched, increases the FTE labor costs and makes a greater cost in reworking claims. Appeals also can be lengthy, increase the delay in the receipt of revenue, even if the appeals are successful, it doesn’t take into account the expenses that are required to bill the patients so that the remaining amounts can be collected. There are two metrics for evaluating the practice of success in managing denied claims. The first is called the clean claim ratio. A clean claim is one having no errors that can be processed without additional verification, and that does not have to be filed more than once. Since clean claims mean that physicians are paid faster, they’ll want to identify those claims so that they can gauge the time spent in reworking denied claims and pinpoint reasons for the denials.The opposite of a clean claim ratio is days in AR, and that includes the time spent and reworking claims and the delay in receiving revenue.
Gosh, those aspects added together can definitely be costly and time consuming. Do we have any data indicating what percentage of claim denials are actually avoidable and what percentage cannot be appealed?
Yes, there is a 2022 Change Healthcare Revenue Cycle Index that indicated that 82% of all denials are avoidable. However of that percent, 22% of those avoidable denials are non appealable, such as the lack of a prior authorization, lapse in insurance coverage, the absence of a referral, the highest percentage of denials, 41% are due to poor front desk policies. Registration and eligibility make up 22% of the highest percentage of front desk denials, and 13% were due to lack of prior authorization. Front Desk errors are avoidable. Typically, they are due to human error in the input of information, the demographic information, the insurance information, they also can be attributed to unfamiliarity with payer requirements or failures to check for changes in insurance coverage.
Wow, I am. I’m so glad to hear that such a large percentage is avoidable. So all things considered, what is the true cost of reworking claims?
Well, according to that same index, a clean claim costs $6 in labor costs to process with each reworking of the claim, the cost increases. It can range from $25 a claim, but it may as high as $117 to rework the claim. It all has to do with a number of times the claim has to be touched. To put that in context, assume a practice has 2000 denied claims a month, and it costs $25 to rework the claim. That’s $50,000 and that doesn’t take into account the dollar value of the denied claims or the delay in payment. And it is also assuming that the practice succeeds on its first try in recovering the lost revenue. To the extent multiple appeals are required, the potential for recovery decreases significantly.
So it sounds like regular billing audits would help bring to the forefront the challenges associated with denials and claims in general. Or what are the other benefits of billing audits?
Well billing audits and denial reports are used to identify the root cause of denials and the specific nature of the denial itself. They can identify for the provider the gap in his revenue cycle. For example, denials that are attributable to lapse in coverage, eligibility, lack of prior authorization, incorrect or inadequate information are typically attributable to weaknesses in front desk procedures, denials that are based on MUE and NCCI edits that result in bundling denials, incorrect coding, improper use of modifiers are attributable to the coding function. Issues with timely filing of claims, claims that do not met the clean claim requirements, claims that are submitted to the incorrect payer, are all issues related to the performance of the biller. The biller’s role is also critical, because they are the party that pursues collection of denied claims. Once the gaps and processes are determined, corrective action can be taken, such as increased staffing for. The creation of additional procedures and processes that clearly define the roles and responsibilities of employees, additional training, or even retrospective audits, billing audits that provide continuous monitoring of the revenue cycle processes.
Sounds like there’s a lot of moving parts with this and various steps that can be undertaken to address them. What are the key issues of a denial management program that should address to correct front desk performance problems?
”It’s a three pronged approach. First, you assess the gaps in the front desk’s performance. You define a corrective action plan, and you create KPIs for the gauging and monitoring of how effective the front desk’s performance is. The most common denials resulting from poor performance by the front desk are denials for prior authorizations, absence of referrals, eligibility and incorrect information. A corrective action plan that would be effective would cross train the front desk with the biller, and that would achieve creating more awareness on the part of the front desk as to their impact on revenue. A second way that corrective action could be developed would be to educate the front desk as to payer requirements. Payer requirements are specifically important as to prior authorization requirements and payer coverage of certain services to be provided to patients. Additionally, because front desk personnel have high turnover, it’s important to have good policies and procedures so that there’s consistency and approach to the duties of the front desk. The best metric for looking at the performance of the front desk would be the rejection report, because it measures denials based on incorrect demographic and insurance information, as well as missing information.
So in your experience, do you see this as a real problem, that denials are often created because of problems with coding or coding staff or billing staff?
Yes, again, the same approach. First, you assess the gaps in the coder performance. Create a corrective action plan and metrics to gauge the overall performance of the coders. If you look at their most common denials, it relates to the coding not aligning with a clinical note that can cause a medical necessity, denial, lack of specificity, in the coding incorrect coding, incorrect use of modifiers. A corrective action for coders would be to perform prospective audits. Prospective audits are audits that occur prior to the submission of the claim to correct any errors prior to the submission, and the only constraint upon performance is the timely filing deadline. But coders also need to remain current on payer policies, because payer policies are used to establish medical necessity, they define the covered indications for procedures. The metric that you would use to evaluate coder performance, there’s several. First you’d look at the denial rate, obviously, but several metrics sort of key off of the cost of reworking claims, such as the average number of claims that are required to be resubmitted, or the percentage of claims appealed.
So along the same lines, then, what about problems with billing staff?
Well, the most common denials relating to biller performance are a failure to the meet the timely filing deadlines both at the claim level and at the reconsideration and appeals level. They also involve a failure to meet the clean claim requirements. The clean claim requirements require all information on the claim to be correct, all procedures to have a supporting diagnosis that insurance coverage was in place at the time of date of service, and that medical necessity for services is clear. The corrective action that would best improve biller performance would be retrospective audits, because they go to identifying the root cause of the denials, and they provide monitoring of trends of denials. The best KPI for evaluating biller performance over a period of time would be either the denial report or days in AR, which is actually measuring the number of days it takes to recover revenue on the deny claim.
Thank you. This information is so helpful, and we all know that the revenue cycle is is critical to a practice’s viability. To summarize what we’ve talked about today, what would you say is the overall benefit? Of a denial prevention program as opposed to a denial management program.
Well, first, I think it is that it changes the perspective that the physician has as to his unpaid AR and the action plans he expects to be put in place by his revenue cycle team. Denial prevention program identifies the root cause of denials, and by doing that, it helps avoid future denials, because it identifies patterns where the revenue cycle has broken down and allows for corrective action. It also can establish best practices for the revenue cycle staff, and through continuous monitoring, can improve processes and identify trends and denials. Also, part of what is embedded in the idea of a denial prevention program is that you create awareness among physicians as to the importance of improving their revenue cycle processes. Through the creation of KPIs, they become aware and have a better overview of their unpaid accounts receivable. And a KPI provide a basis for evaluating whether the processes in place or handling of claims are effective. The key KPIs that most practices would use would be days and eight are rejected claims, claims denial rate, clean claim ratio, all of that from the continuous monitoring through audits. And you know, the creation of policies and procedures and and the KPIs should lead to an improved effectiveness in the physicians procedure, and that will be reflected in an increase in their first pass rates and a decrease in denials. There’s a statistic from a 2023 HFMA study that speaks to this point. Specifically, the HFMA stated that 65% of all denials are not worked. There’s no challenge to the denied claim, and the loss of revenue is accepted, and that could only be attributed to physicians lack of awareness of the loss of revenue from the failure to denials.
The reality of losing such large percentage of dollars is astounding. Sabrina, thank you again for joining us. This wraps up the time we have for today, for more help on this topic, check the episode description for links to the TMA Education Center, to get CME for this episode and to access more on Demand education and resources, or go to [www.txmed.org](http://www.txmed.org) forward slash education, remember to like and follow to receive every episode From TMA practice well until next time, stay well.
