Building an effective denial prevention team to reduce revenue loss

Providers spend more than $10 billion annually reviewing and managing denials for claims that should have been paid when they were first submitted. Medicare Advantage (MA) plans are particularly problematic because more than half of their denials are ultimately overturned, meaning they should have been paid in the first place. The time and money spent investigating and appealing these claims costs providers much-needed revenue, especially since they often don’t have the time to appeal every denial.

According to a recent study, the average cost to appeal a denial is now $43.84. The study also found that providers “engage in an average of three rounds of review with payers to ultimately receive payment for initial claim denials,” with each round taking up to 60 days. It’s easy to see how devastating denials are to a provider’s revenue cycle.

Of all refusals, clinical refusals, which are based on medical necessity, level of care and length of stay, are becoming increasingly problematic.

Choosing What to Focus On: Prevention vs. Management

Given the current constraints on staff and funding, providers would be wise to do what they can right away to prevent rejections. Increasingly, organizations are setting up a dedicated team to do just that. It’s a smart move that can yield significant benefits.

Denial management, which is working on a denial after it has occurred, is a resource-intensive, expensive process. It requires extensive research and conversations with payers to identify the root cause. Then comes the tedious process of assembling supporting documentation and drafting an appeal. Meanwhile, the money owed to the provider sits in the payer’s bank account, contributing to their cash flow instead of the provider’s.

Prevention, on the other hand, focuses on identifying systemic trends in the revenue cycle that are problematic for the organization. A dedicated team can dig deep to investigate these issues, identify a solution, and then implement workflow improvements and education to address the issues. They are also tasked with monitoring the intervention over time to ensure that sustainable improvements are made.

The highest priority for a denial management team is to successfully reverse a denial. The highest priority for a denial prevention team is to identify and implement solutions that prevent denials from happening in the first place.

Functions of a Denial Prevention Team

The first priority for a prevention team is to examine first-pass data to identify the highest volume and highest dollar refusals. Within this examination, outpatient refusals, particularly for chemotherapy, biologics, and hyperbaric procedures, should be at the top of the list. Next should be labs and physical and occupational therapy. Although labs are low dollar, they have a very high volume. Preventing them is the only way to prevent revenue loss. Finally, inpatient refusals should be examined, with special attention to levels of care and downgrades of inpatients to OBS.

When analyzing data, it is essential to look for commonalities such as payer, provider, location, or diagnosis. By looking at these denials one by one, you can determine which areas require further investigation and action.

Once problems have been identified, the next step is to educate providers about those problems and what they can do to prevent them in the future. In many cases, providers are unaware that their actions are resulting in denied claims. As part of this education, providers should be informed or reminded of the importance of following National Coverage Determination (NDC) and Local Coverage Determination (LCD) policies.

Track and measure success

The only way to know if an intervention is working is to track its success. This includes the changes implemented and the dollars saved. In addition, it is critical to identify and track what the success — or failure — can be attributed to. This allows for course corrections if necessary. Follow-up should be conducted every three months to allow for proactive interventions.

Of course, it can be difficult to monitor whether or not those involved in process improvement, such as suppliers, are adhering to new workflows. By keeping a detailed progress report, they can better understand their role in success.

Preventing denial is a long-term initiative that cannot be accomplished overnight. Therefore, dedication and perseverance are the keys to success.

Collaboration and continuous improvement

In addition to tracking and measuring success, it is also vital to work with managed care contracting teams to ensure that any issues related to the payer are resolved. The goal should be to use data from findings to hold the payer accountable for noncompliance with policies, guidelines, or contract terms.

Leveraging the lessons learned from the denial prevention team can be used to support future contractual language that proactively addresses these issues. These often include appeal periods and audit limits.

It may also be helpful to involve the organization’s Joint Operations Committee in the denial prevention initiative. The committee should review the insights from the denial prevention studies, as well as any other key data that may be useful.

Calculating ROI on Refusal Prevention

The most effective way to determine the return on denial prevention efforts is to look at the improvement percentage as a percentage of additional compensation over a specific period. The cost savings from avoiding rework should be included in this calculation. This will provide a reasonable estimate of what has been saved as a result of denial prevention efforts.

Adding it all up

Sluggish margins and high costs have created a challenging environment for healthcare providers. As the number of denied claims has increased significantly in recent years, so has the time and resources required to manage these denials. A better approach is to establish a denial prevention team to identify opportunities to implement process improvements and proactively prevent denials from happening. This can lead to lasting improvements in the revenue cycle and long-term financial sustainability.

Photo: Mironov Konstantin, Getty Images

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