Typically, healthcare organizations have strong denial management programs in place, yet one in five service claims generated by them get rejected or denied. According to research, these denials result in the loss of an estimated 3% of the overall net revenue for a healthcare provider. Additionally, healthcare providers also have to factor in the cost of reworking individual claims, which comes to around USD 25 per denied claim. There is a notable loss of resources, which could be utilized in other critical areas of the organization.
A positive side to this scenario is that two-thirds of the denied claims are recoverable and almost 90% of them are preventable. A critical challenge in this area is that healthcare organizations continue to view denial management as a back-office problem alone. But numerous studies have revealed that more than 30% of denials are a result of front-end inefficiencies. Another issue is that denials are identified as administrative issues whereas, clinical factors are equally involved in its management.
If healthcare providers shift their focus to improving procedures and addressing negative areas which continue to impact the denial management programs, they can effectively reduce the claim denial rates for their respective centers. Below are some of the main reasons behind denials and how they can be mitigated:-
- Eligibility and Authorization
Billing a non-covered or ineligible service marks one of the primary reasons for claim denials. In fact, a survey concurs that ineligibility itself accounts for almost 75% of claim denials. One of the reasons that contribute to this high percentage is the complex rules associated with individual payers. Additional healthcare systems are often linked with multiple payers and plans, and each of them has its own set of clauses and rules, making the process rather complex. Many a time, a medical service that is covered under one plan may not be incorporated by the others.
But thankfully, almost every eligibility-related denial can be eliminated through patient eligibility and insurance verification solutions. Even if all the information isn’t verified before the patient arrives, it can be effectively collected as a part of the check-in process once the patient is present to avail of the medical treatment. This ensures that patients are well-informed and know exactly what to expect. Additionally, for a healthcare provider, it would assure that only accurate and up-to-date information is forwarded for the billing process.
- Incomplete Demographic Information
Small errors often give rise to bigger mayhems, and inaccurate demographic data perfectly justifies this notion. Something as simple as getting the wrong address can result in claim denials and pile up the backlog. This is one of the main reasons why specialists advise healthcare organizations to submit claims electronically via revenue cycle management software that comes with integrated automation and edits. Automation tools precisely auto-populate important information, thereby eliminating duplication of work and reducing the chances of human errors.
Moreover, in case of any differences, the tool will automatically correct outdated information. With the help of such advanced software, healthcare centers can also highlight missing data and prevent claims from being submitted until all the necessary measures have been taken. Furthermore, these tools will allow them to compare their claims to an extensive database of similar claims that have been denied and help avoid setbacks by recommending better alternatives.
- Lack of Demonstrated Medical Necessities
While at the first glance, a service may seem covered, there could be veiled clauses that restrict coverage only to cases where there is a demonstrated medical necessity. There could be a requirement for particular documentation, the documented attempt of more conservative therapy first, or coverage only under limited clinical scenarios. There could also be a limitation in the number of times a service can be rendered. It is important to clearly comprehend all the aforementioned aspects along with terms and conditions that qualify the service as a medical necessity and approved course of care.
- Services Covered by Another Payer
Allocating claims to multiple payers has become a challenging task. Patients who have supplemented health insurance, differences in payer’s response, etc. are some of the problems that healthcare organizations deal with in this area.
Incorporating the right technology can help in determining which patients have multiple coverage’s and also highlighting the right order in which the providers must submit their claims to receive maximum reimbursement.
- Claim Not Included As Bundled Payment of Managed Care Programs
It would be a highly effective scenario if healthcare organizations were reimbursed in the form of bundled payments, managed care, and other shared-risk models. However presently, that is not the scenario.
So it is highly recommended that providers must be well-acquainted with the kind of shared-risk agreements that they are dealing with and how it will impact the billing and reimbursement processes. As every contract is different from another, the process of verifying information for each contract and patient individually is a time-consuming task. This arduous procedure can be overcome by using claim management tools that automatically compare various services and coverage to determine whether they are included in organizations’ contracts or should be submitted separately.
90% of denials can be still avoided today, and healthcare centers can put effective measures in place to further reduce these denial rates. It is important to include both, the front and backend teams in the emendation process to ensure that every step is accurately performed in order to harness maximum claim benefits.