Success in Proactive Denials Management and Prevention
Tackling the causes of claim denials from the front end can help healthcare
organizations reduce denials and increase the success rate of claims appeals.
Despite changes in payment methodologies, claim denials cause sizeable revenue leakage for
healthcare providers across the United States. According to recent research into denial rates
reported in February, out of $3 trillion in total claims submitted by healthcare organizations, $262
billion were denied, translating to nearly $5 million in denials, on average, per provider. a
Providers typically do nothing at all to address more than half of denials. Up to 65 percent of
denied claims are never resubmitted. bIncluded in this percentage are denials stemming from
commercial health plans, which—according to the previously cited research—constituted 58
percent of all denials in 2017, up from 54 percent in 2016. This is money left on the table, and
the industry is still looking for solutions to tackle the issue.
Some consequences of denials are expected, including increased days in accounts receivable
(A/R), growth in write-off rates, increase the cost to collect, and stagnant cash flow. But there
are unexpected consequences too. Productivity standards may be perceived as unattainable;
patient access, clinical, health information management (HIM), and patient financial service
teams may argue about which group is responsible for the denials; supervisors and managers
could ask for more staff, even though metrics do not indicate a need; and staff morale ultimately
can decline.
Instead of playing the blame game, teams must collaborate to identify the root causes of the
provider’s denials. Providers are trying to identify, manage, and ultimately avoid denials to
protect their revenue. Identifying root causes has been proven to help mitigate denials,
confirming that issues can be reversed.
Denials prevention requires all hands on deck. It requires cooperation and corrective actions at
every point in the revenue cycle—patient access in the front, clinical services and HIM in the
middle, and patient financial services in the back. Yet providers miss opportunities to mitigate
denial risk from the beginning to the end of the revenue cycle—in scheduling, patient access,
patient care, HIM, charge capture, coding, billing, and collections. Communication between the
back and front ends of the revenue cycle also is a factor; often, poor communication increases
the potential for denials. In the middle, special attention to documentation and medical coding
can increase the likelihood of an approved claim.
A healthcare organization’s efforts to mitigate denials should focus initially on identifying root
causes with the goal of simplifying the appeals process and implementing effective preventive
measures. Before entering a discussion of specific strategic steps and remedies, it can be
helpful to explore key considerations associated with these three elements—i.e., root causes,
appeals, and prevention.
Root Causes
Healthcare organizations first should pay close attention to and seek to correct some of the
common hidden causes of denials.
Disparate systems and processes. Having multiple disjointed systems, processes, and
workflows within a provider organization promotes inefficiency, and it can lead to the untimely
filing of denials and increased cost to collect. Such disjointedness associated with patient
accounting systems (PAS) or electronic health record (EHR) system upgrades, mergers, or
changes can cause a backlog in A/R. Denials pile up because the IT systems can’t talk to each
other. Until data are merged from different systems into one centralized system, claims will likely
be inaccurate or incomplete.
Complex claims processing. Two significant factors have caused claims processing to become
increasingly more complex: the advent of the insurance marketplaces, which increased the
number of insurance plans and products; and the proliferation of high deductible health plans,
which have shifted a greater portion of financial responsibility to patients. The American Medical
Association (AMA) estimates claims processing inefficiencies cost between $21 billion and $210
billion per year. cThe reality is, as margins shrink, it is more difficult for health systems to absorb
the cost of denials simply as a cost of doing business. Providers need to ensure that they collect
on every dollar owed.
Culprits hidden in plain sight. There also are common problems that contribute to denials. Many
