This is part one in a three-part series examining denials prevention, including the use of technology, payers’ ever-changing rules, and managing workflows for maximum efficiency.
As hospitals face unprecedented financial challenges, revenue retention will be as critical as revenue growth. More than half and possibly as many as two-thirds of all hospitals are expected to experience negative margins for 2022, based on a recent report from the American Hospital Association (AHA), with a possible decline of as much as 133% below pre-pandemic levels.
AVOIDING COSTLY DENIALS
In the ongoing fight to retain healthy margins, eliminating preventable denials is a key battle strategy. With three out of ten claims (31%) initially denied in 2021, it is clear that more work can be done.
Submitting a clean claim without any errors or other issues that delay timely payment is key to effectively mitigating denials. While some denials can be appealed, the manual processes necessary to work denial queues are time and labor-intensive and often require additional documentation review by the provider.
Preventing 50% of avoidable denials would save ~$2B annually or $48M per hospital.
Today, virtually all health systems use claim scrubbers to identify potential issues before claims are sent to the payer for adjudication. With the volume and complexity of medical coding and billing, these solutions are crucial for identifying and editing diagnosis and procedure code errors.
But if claim scrubbers are so great, why are there still so many denials?
THE NEED FOR ADDITIONAL VALIDATION
Claim scrubbing identifies coding accuracy errors but does not identify charges that will be denied for more complex issues, including medical necessity and those for which more information is needed. These denials represent high-dollar inpatient and outpatient claims.
MDaudit’s analysis of denial data of 13M claims denied in the MDaudit User Community for the denial categories: “Information Needed,” “Informational,” and “Medical Necessity” found that $16 billion was denied in 2021. The average claim amount was $1.2k.
Preventable denial categories not identified by claim scrubbers:
- Drug exceeds charge threshold
- Treatment coverage issues
- Notable off-label use
- Orphan drug use
- Drug – diagnosis combination issues
- DME utilization and pricing
- Bundled implant charges
- Age – diagnosis issues
Payer-side complexities add to the challenges of denial management that claim scrubbers cannot address. Denial rates vary significantly between payers and are constantly changing. Additionally, the vague denial reasons offered by payers often leave healthcare organizations struggling to pinpoint the root causes of the denials, which makes future denial prevention all the more elusive.
Resource-savvy health systems recognize that an additional layer of claims validation is crucial. A more sophisticated system is needed – one that leverages artificial intelligence and payer rules to more accurately predict and prevent denials.
In the fight to retain revenue, creating the cleanest claims is crucial, but not enough. In the next installment of this three-part series, we will explore how payers are investing in advanced technologies and approaches for claims review, and how health systems can leverage predictive analytics to mitigate denials.
Contact us to learn how the Revenue Integrity Suite puts analytics into action to prevent 20% of high-value hospital charges that drive 80% of denials impact.
