Rethinking Denials Management

Most organizations take an administrative approach to managing denials. Maybe that’s why they’re not collecting as much as they should.

The Denials Challenge
Few hospitals would admit to not having a denials management program, yet one in five claims for services already rendered are denied or delayed.1

Denials erode the provider organization’s bottom line, resulting in an estimated 3% loss of net revenue.2 Add to that the cost of reworking claims–an average of $25 per claim–and the opportunity cost of resources that could be focused on other activities. 3 

The good news is that about two-thirds of denials are recoverable, and 90% are preventable.4 The problem is that many provider organizations view denials as a back-of-the-house, patient handling problem, although studies reveal that 30-40% of denials are attributed to registration errors.5 Another problem is that denials are often addressed as administrative issues when there are often clinical factors involved.

By focusing more attention on the front end of the revenue cycle and addressing denials from a holistic, organization-wide approach that includes financial and clinical factors, organizations can close the gap on those 90% of preventable denials.

Analysis Enables Strategic Action
Today, any good denial prevention/resolution process should be grounded in core analytics—using data analysis to determine where the problems lie. Root causes can originate anywhere—from patient access and registration, insufficient documentation, and coding/ billing errors to payer behavior and utilization/case management. Once the cause is identified, it must be analyzed to determine which has the greatest impact: a certain physician, service line, or payer, a certain type of code, or a process in need of redesign in both the clinical and revenue cycle areas. Reducing denials takes an organization-wide effort that must include multiple disciplines.

Let’s look at some of the most prevalent denial causes…

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