A Complete Guide on Denial Management in Healthcare

Claims Denials Vs. Claims Rejections

There is a difference between claim denial and claim rejection, and it’s important to know from the perspective of a denial management services provider. A claim denial occurs when an insurance provider assesses and refutes a particular claim. On the other hand, a claim rejection happens when a claim submitted to an insurance payer analytics contains inpatient data or medical coding mistakes.  

Custom healthcare software solutions offer a wide range of tailored software to minimize errors in medical coding. These systems help reduce revenue loss due to claim rejections. If we’re talking about denial management, we’ve got to look at some of the most common reasons for claims to be denied.  

Top Reasons for Claim Denials

1. Late Submissions

Many insurance payers stipulate deadlines for claims to be submitted. This is usually a fixed number of days after the medical treatment or service, and it may also include the time taken to work through initial rejections. Several healthcare automation solutions simplify the denial management process by automatically assessing claims to highlight errors while also alerting staff about approaching deadlines.

2. Lack of Coverage by Payers

Different patients have varying degrees of insurance coverage. If a person receives treatment that isn’t included in their coverage plan, then the claim is sure to be denied. It is best avoided by verifying the details of the plans to check for eligibility. Healthcare denial management solutions offer comprehensive, integrated healthcare solutions to help streamline the entire insurance verification workflow. They are integral to healthcare denial management. Automated verification is popular among physicians who integrate it with practice management solutions to improve the efficiency of non-medical administrative tasks.

3. Missing Information

Over 50% of denials are because of missing information about patients. It could be demographic information or anything to do with patient health records. Poor electronic data interchange between different health systems may also lead to inadequate information. Ensuring that the data is entered properly is an integral part of any set of denial management tools.  

4. Coding Mistakes

Medical coding helps healthcare professionals describe and document the conditions of patients and the treatments carried out. Coding information is vital for claiming reimbursement from payers—mistakes in coding account for a significant percentage of denied claims. An important aspect of denial management analytics is preventing or minimizing coding mistakes. Several medical informatics solutions help providers identify problems in coding procedures. Almost every leading service for denial management in medical billing includes provisions for preventing coding errors.  

What Is the Process of Denial Management?

The denials management process can help provide meaningful revenue if it is managed accurately. No doubt, managing denials in healthcare is a cohesive process and involves several steps. Let’s discuss them below:

1. Examine Denial Reasons

Identifying the reasons or leading cause of a denied claim is the first step in the claim denial process. It is important to have clear knowledge of what types of denials are more frequent and which payers are most likely to deny which procedures. Gathering data on what facilities, procedures, providers, and payers not only helps figure out where the error occurred but also where the payers could make mistakes. Pinpointing the root cause helps staff to rectify them promptly.

2. Analyze Reasons Behind Denials

On the provider end, the various reasons for denial may include missing data, coding errors, late submission, lack of authorization, outside care, etc. A robust medical billing denial management software covers all the above-mentioned areas. Once the root causes are identified at this stage, you can develop strategies to prevent similar denials. A denial management system can pinpoint the denial issues and allow for the adjustment of workflow processes to avoid them.

3. Categorize Denials

The next step is categorizing denials to prevent similar future denials. Denials are usually categorized by specific causes, like:

Claim filing delays: Payers define certain time frames during which the claims need to be submitted. If you miss this deadline, the claim can be denied.

Prior authorization: If certain services provided or prescribed require prior authorization and you fail to obtain it, your claim may also be denied.

Coverage: If a claim is submitted for a provided service that is not covered by insurance or the payer agrees that there is a lack of medical necessity, the claim can be denied.

Incomplete information and coding errors: Missing information and incorrect coding can also result in a denial.

The other categories include types of claim denials, like:

Soft denials: It is a temporary denial that does need an appeal. Soft denials may be paid if the healthcare organization makes corrections to the issue.

Hard denial: Such denial requires an appeal and results in lost revenue.

Preventable denial: It is a hard denial caused by avoidable reasons, like insurance ineligibility or medical coding errors.

Clinical denial: It is a hard denial in which a claim goes unpaid due to a lack of medical necessity.

Administrative denial: It is a soft denial in which the payer informs the organization about the exact reason for the denied claim.

After categorizing the denials, you need to assign teams/departments to take corrective actions. Not all denials are equal, so by categorizing them, teams/departments can figure out the most pressing denials. This helps in better resource utilization.

4. Resubmit the Claims

After categorizing claim denials, you can address the issues and resubmit the claim for payment. As many denials are reversible, this can be an important step to increasing your revenue. Remember, appeals can be won. Stats suggest that 65% of denied claims are never submitted. This is because many organizations don’t have enough staff or systems to handle denied claims effectively.

5. Track Results

The next step in the denial management process is to develop a tracking mechanism to monitor the progress of resubmitted claims. This tracking mechanism can help you stay within timelines, ensuring denied claims are not left unaddressed. In case, if the payers miss a deadline, they are subject to penalties.

6. Create a Preventative Mechanism

The last step is focused on how to reduce future denial claims. Here you need to prepare a checklist of the top reasons for claim denials. Now, work with your team and implement strategies and tactics to avoid the occurrence of common denials.

What Are the Challenges of Medical Denial Management?

Medical denials management faces various challenges, and one of the biggest is payers. Every payer is different and follows its specific rules and processes for claim filing and managing denials, which becomes the biggest hurdle in medical denials management. With this, let’s check out other challenges in the league.

1. Lack of Finances

Finance is another major factor that becomes challenging in hospital billing denials. Not every healthcare provider has exact operational costs as compared to large practices. For example, if the denials cost providers about 5% of their annual revenue, then reworking and resubmitting the initial denials can increase the operational costs by $9 billion. When a healthcare provider is unable to spend on denial management solutions, it is likely that they might not collect enough revenue for the services rendered.

2. Lack of Automation

Many medical practices are still relying on manual processes for managing denial in medical billing. A survey by the Healthcare Information and Management Systems Society (HIMSS) found that almost 1/3 of providers are performing manual denial management processes. This manual process is time-consuming, less efficient, increases the chances of errors, and offers less transparency. Stats suggest approximately 90% of claim denials are preventable and by implementing efficient technology, it can be possible.

3. Lack of Properly Trained Staff

Medical staff often have various roles to fill. They are responsible for managing administrative tasks or must constantly deal with the evolving regulation. With so much on their plate, it becomes obvious that they might place the denial management on the back burner. Stats suggest that almost 30% to 40% of claims denials are a result of registration and pre-service-related challenges, which can be easily prevented by implementing denial management services for hospitals. Also, if the medical staff are not properly trained on the complexities of claim denial in medical billing, then it can impact the RCM denial management.

4. Lack of Standardization

Lack of standardization refers to the absence of uniform processes and guidelines between providers and payers for managing claim denial in healthcare. Every payer sets and follows their own rules for denying claims and communicating denial reasons to the provider. For example, consider a situation where two different payers are denying the same claim. So, they both might use two different codes and communication methods to inform the practice about the reason for denials. This inconsistency triggers confusion and efficiency in resolving the denials. As a result, it becomes difficult for practices to track their denials, unpaid claims, and their reasons. It creates difficulties in preventing future denials.

5. Missing or Incorrect Patient Information

The last and the most common challenge in denials in healthcare can be missing or incorrect patient information like patient demographics or other technical errors. These errors can be effectively prevented by introducing software for denial management in healthcare. But, in the healthcare industry, the medical billing denial management process is reactive, not proactive. Hence, it is important that staff work proactively with the revenue cycle denial management team and understand how to eliminate such errors and services that are covered in the patient’s plan.

Benefits of Denial Management System

Introducing software for denial management in healthcare can bring many benefits. Let’s discuss a few below:

1. Higher ROI

In today’s healthcare industry, healthcare denial management software has become a must-have solution for organizations of every size. The reasons for denials can vary from patient to patient, but the costs for all the providers are the same. Hence, the healthcare denial management systems are an investment that pays off in the long run and helps avoid losses or delays in reimbursement.

2. Supports Automation

The denial process in medical billing requires assessing the claims and addressing the problems so that the claims aren’t denied or rejected. Introducing hospital denial management software can automate many processes, such as claims scrubbing and other denial management activities. Hence, it reduces errors and boosts RCM at lower overhead.

3. Increase Net Revenue Collection

Medical denial management software can proactively manage denials and help increase the net revenue. It aids providers in identifying and resolving denied claims more efficiently and improves the financial health of the organization.

4. Enhance Patient Experience and Loyalty

Other than financial benefits, the proactive system for denial management in healthcare can improve patient experience and loyalty. When claims are denied, patients become anxious to get the care they need. Only satisfied patients can spread the word-of-mouth referrals that contribute to increasing your patient base.

5. Provides Valuable Insights

Software for denial management in healthcare can provide valuable insights into the causes of denials. It enables providers to identify trends, patterns, and areas for improvement in the claim submission process. This can ultimately improve organizational workflow and contribute to reducing future denials.

Best Ways to Prevent Denials

Healthcare claim denials cost billions of dollars to the healthcare industry. Most denial management companies recommend a few basic steps to reduce them –   

1. Analytics

Smart analytics solutions have helped several industries optimize their performance and improve productivity. In healthcare denial management systems, analytics can play a central role in filtering out claims that are more likely to be denied.

Furthermore, those claims can later be corrected before submission, thereby reducing the possibility of a denial. Hospitals and practices need not even install healthcare denial management software to analyze claims on-premises. Healthcare cloud solutions have enabled them to be hosted remotely and accessed from any authorized device. It would go a long way in implementing best practices in denial management medical billing.

2. Staff Training

A well-trained staff is a cornerstone of efficient business operations. An adept team of healthcare professionals must be adequately trained to ensure that there won’t be any reasons for claims to be denied. However, an established protocol to deal with denials will boost the denial management workflow and ensure timely reimbursements even if it does happen.  

3. Denial Management Solutions

Denial management in healthcare has grown to become a sub-industry that requires dedicated professionals. But when dealing with something as complicated as billing and reimbursements, it is better to have a dedicated revenue cycle denial management solution or medical billing solutions.

Such solutions streamline the entire medical billing denial management process to eliminate human errors. A beneficial side-effect of this is an improvement in revenue cycles for providers. The COVID-19 pandemic moved physician consultations online. As a result, telemedicine platforms gained popularity as travel restrictions gripped the country. This was an opportunity for denial management solution vendors to advance telehealth solutions by integrating their applications into telehealth software.

4. Automation

As mentioned earlier, automated solutions for denial management in healthcare eliminate human errors, a major cause for rejections and denials. Mistakes in coding, data entry, or missed deadlines make up most denied claims. So, it makes sense to automate activities within medical billing denial management. You can include medical coding solutions for better results. Such a solution not only helps providers but also indirectly helps patients. That’s because automated solutions for administrative activities allow providers more time for patient care.

Key Features to Include in Healthcare Denial Management Solution

1. Integration

The technological advancements in the medical sector make integration an important feature to include in the software for denial management in healthcare. Your denial management solutions should seamlessly integrate with EHRs and other healthcare systems. EHR integration allows providers from different departments to easily access patients’ health records. Further, integration supports real-time data synchronization, accelerates the denial management process, and automates the billing process. It can also boost the process of medical claims management and healthcare payment systems to improve revenue cycle management. 

2. Clean Claim

Clean claim plays a vital role in medical practice denial management. The potentially high cost of denial appeals emphasizes the importance of including effective healthcare denial management systems that can streamline the claim submission process. Including a clean claim feature in the medical denials management software prevents any manual work or correction before submitting the claims to the payers. This feature can simplify the transactional complexities by creating a smooth, error-free claim submission process between providers and payers. 

3. Analysis and Categorization

Root Cause Analysis (RCA) plays a vital role in investigating the underlying causes of claim denials in healthcare denial management systems. Stats suggest more than 50% of hospitals do not leverage denial management analytics and eventually fail to reduce the denial ratio. Analysis can provide real-time analytics and help providers understand the denial data and make it meaningful for the users. This feature can contribute to identifying the responsible factors, systemic issues impacting claim adjudication, process deficiencies, etc., and help avoid recurrence and minimize future denials. The software for claim denial management can visualize the highly common denial trends and create action plans with alert parameters.

4. Claim Status Updates and Reporting

For effective claim denial management, tracking the progress of submitted claims, and creating insightful reports plays a vital role. The healthcare denial management software can be customized to have easy-to-use dashboards for monitoring denial management in real time. It can track whether a claim is pending, paid, or denied. This feature can automate data collection and reporting by offering real-time visibility into productive metrics, denial patterns, and success rates. Reporting features can help analyze performance metrics, denial trends, and financial impacts. Custom hospital denial management software helps in proactively addressing claim denials, streamlining workflows, and maximizing revenue.

5. Customizable

The customizable feature in medical billing denial management software allows providers to tailor the software to meet the unique requirements of their healthcare organization. This feature offers flexibility which is required for different providers as they might have unique reporting requirements, processes, and focus areas when managing claim denials. It enables organizations to configure the system to align with their unique policies, workflows, and procedures. Further, this feature allows users to adjust various aspects of their system like access controls to implement role-based access, reporting and analytics, denial code libraries, etc. It provides access to various data enabling organizations to identify improvement areas and take suitable action to reduce and improve future revenue.

What Are the Best Practices and Strategies for Denial Management?

Denial management in healthcare is a crucial process for providers to ensure that they get timely reimbursed for their claims and boost their revenue. Hence, by introducing healthcare denial management software, you can deal with the evolving complexity of healthcare billing and reimbursement. Below discussed are the best practices:

1. Prevention

As we already know, “prevention is better than cure”. Similarly, in revenue cycle and denial management, proactive preventive action can reduce claim denials. Make sure to implement these actions during pre-registration, admission, scheduling, and billing. You can include clinical denial management software to streamline the workflow.

2. Analysis

Whenever denials occur, try to analyze them to understand the reason for denial. Once the analysis is done implement strategies to prevent them from reoccurring. RCM denial management software can help in effective analysis as it can also provide insight reports.

3. Tracking

Denial management in healthcare is successful when effective monitoring happens. You can use denial tracking software to monitor patterns and pinpoint any deviation in claims. It can help get the reasons for claim denials and enhance efficiency while minimizing revenue losses.

Now, let’s check out the best strategies for effective denial management in healthcare below:

• Automate the denial management process.
• Establish a denial management team.
• Track and analyze denial data.
• Monitor compliance.
• Implement an effective appeals process.
• Provide staff training.

Conclusion

Technology solutions for denial management in healthcare improve revenues for providers. Moreover, as they automate and optimize non-medical administration, they also reduce waiting times for patients. Integrating a platform for denial assessment with EMR systems and third-party medical applications like patient engagement systems, remote patient monitoring and remote health monitoring systems results in a consolidated healthcare system. A system like this will improve the quality of care, increase provider revenues, and reduce payers’ bottlenecks. To sum it up, a good, reliable, and integration-compatible solution for denial management in healthcare would benefit all the stakeholders.