Rick Leach
Mary Daymont
Julie Roby
Linda Metro
Sandra Walter

A children's hospital was able to protect revenue by bringing staff from throughout the facility together to respond to denials and manage audits efficiently and effectively.

At a Glance

Children's National Medical Center's approach to preventing denials and managing response to audits includes the following:

  • Mapping out problem areas in the claims submission process and developing solutions with the help of a multidisciplinary team  
  • Using case managers to help prevent denials and assist in the appeal of rejected claims  
  • Requesting oral reconsideration of pended claims and supporting attending physicians in orally responding to the payer's medical team regarding the case  

In May 2004, Children's National Medical Center in Washington, D.C., underwent 21 audits that put $2.3 million in payment at risk. Just six years later, in June 2010, 153 claims were targeted for audit-with $38.6 million in payment at risk. Today, claims audits recorded by the hospital in one month range in number from 120 to 160, with millions of dollars in revenue at stake.

Over time, Children's National has developed processes that have helped the hospital win a significant percentage of its appeals. More important, it has developed a multidisciplinary approach that helps the hospital prevent denials and protect revenue.

Developing a Team Approach to Denials Prevention

Prevention of denials is an enterprisewide responsibility, but there can be challenges in tearing down silos to bring departments together in tackling this challenge. It's not uncommon for some departments to have a "throw it over the wall" mindset: "This problem belongs to your department. You fix it."

Children's National's approach was to bring all of the departments whose actions have an impact on whether claims are accepted or denied to map out problem areas in the claims submission process and develop solutions. In this way, each department shares ownership of the problems related to submission of claims and worked together to resolve them.

Children's National's multidisciplinary team recommended that an audit coordinator be designated to coordinate the collaborative work that would be required to help prevent denials and respond to denials and audits efficiently and effectively. The position would be overseen by the hospital's health information management department, because this department most often produces and stores the documents needed to respond to an audit.

This cross-departmental collaborative approach became a team-building exercise wherein the team focused its efforts on protecting the organization's revenue stream. Children's National highlighted the importance of the team's efforts throughout the organization. Not surprisingly, the team touted enterprisewide education and communication as critical to its success: Clinicians became better informed about the ways in which their actions have an impact on the denials prevention and reversal processes, and they considered the ways in which they could make a difference.

Two initiatives were critical to the team's efforts: an in-depth work analysis that allowed the team to map out the revenue stream, and the use of case managers to help prevent denials and assist in the appeal of rejected claims.

Exhibit 1


Mapping out the revenue stream. Collaborative efforts to protect revenue require that each department understand its role and the roles of other departments in the hospital revenue stream. Children's National conducted an in-depth workflow analysis that allowed the organization to map out in detail the hospital's clinical processes as they relate to the revenue stream. From there, the hospital developed predefined workflows for each type of denial and audit request.

Revenue cycle workflow analysis and mapping is a commonsense approach to engaging stakeholders in the prevention and appeal of denials and responding to audits of claims. It's also a process that requires a considerable amount of time and insight from those involved in the revenue cycle.

Children's National pulled diverse groups together to analyze and map out revenue cycle workflows. In doing so, Children's National identified the need for a new technology solution that could overlay these workflows, as the hospital's existing release-of-information systems did not have the capacity to handle the volume and types of audits the hospital had begun to receive.

Children's National developed criteria for audit management technology that would best serve the hospital's needs. It chose a system that could meet the following demands:

  • The need for flexibility in accommodating unique workflow pathways
  • Support from the technology provider in tailoring training according to individual department needs
  • The ability to track cases and results and separate them according to the dollar amount at risk
  • A robust reporting function that could sort claims, denials, and audit requests by any variable

Use of clinicians in denials prevention and management. Because it is a children's hospital, Children's National does not face Medicare audits. Rather, audit requests come from a multitude of Medicaid managed care organizations and commercial payers. Besides DRGs and fee-for-service methodologies, a multitude of per diems drive authorization processes on a daily basis.

At Children's National, case managers handle the large clinical review/utilization review burden. They oversee a rigorous review procedure established by the hospital to reverse denials and obtain the clinical information necessary to move "pending" claims forward toward resolution.

For example, once an authorization is pended, Children's National requests an immediate verbal reconsideration. This first step is essentially a physician-to-physician peer review of the claim. A clinical resource management medical director employed by the hospital reviews denials and works with the utilization management directors of insurance companies to determine why an authorization has been pended. Then, case managers collect the medical information needed to justify medical necessity and brief the attending physicians on the reasons why the payer has indicated it will deny authorization. With the support of the clinical resource management medical director, the attending physician speaks by phone with the payer's medical team and orally justifies the case. Frequently, this leads to reconsideration of claims by the payer and results in oral authorization. Children's National tracks all pended days and cases that are orally approved.

If oral approval is not granted and the Children's National team believes the case is medically justified, the team moves on to the written appeal process. The team creates a written appeal based on the letter from the payer that specified the criteria for the denial, Once appealed, the case goes through a primary and sometimes secondary appeal process that may or may not include an outside party. Many reversals occur at this higher level of appeal. Because appeals slow down payment-providers may have up to 180 days to appeal, and the payer has 30 days to respond to the appeal-a provider must proceed quickly through the appeal process.

Tracking Results

Children's National tracks all denials and appeals in detail and is able to sort them by dollar amount, type, payer, and more. As part of its denials prevention process, the organization carefully reviews all managed care contracts and tracks the constraints placed on these contracts by each payer. Further, a team at Children's National regularly reviews the regulatory requirements relating to payers and clinical review to try to mitigate unnecessary audit activity.

Children's National's approach to denials prevention and response and to mitigating unnecessary audits has been successful. In 2010, the hospital prepared 327 written appeals. Of these appeals, 77 percent were reversed; by February 2011, only 31 were outstanding. The status of each is easily accessible through a centralized system. Each auditor is tracked and benchmarked against the other auditors. If Children's National finds that it is receiving numerous requests from an auditor and most are being reversed, the hospital asks to sit down with the auditor and negotiate a more reasonable approach and process. The tracking system gives the hospital the ammunition to strengthen its negotiating position.

Children's National also conducts its own internal investigations to ensure compliance. If there is an issue with a payer, or if an issue is found internally, a feedback mechanism is in place to notify the appropriate parties and correct any deficiencies.

The feedback given to managers and staff at the hospital helps to ensure that patients receive the right level of care, that the correct charge codes are used in documenting care, and that the correct discharge processes are in place. These are all areas of interest to auditors.

Exhibit 2


A Centralized Response to Audits

Although audits affect the entire organization, from admissions and registration to nursing staff, the heavy lifting in managing audits falls to finance, the health information management department, and the clinical resource management department. These three groups require the most training and coordination on how to effectively manage and respond to an audit. Once educated on the processes, staff in these areas can serve as organizational watchdogs against overzealous audit practices.

Some auditors approach a variety of departments in the institution, creating duplication of work, delays, and confusion. Children's National combated this issue by conducting an organizationwide awareness program of the hospital's audit management process. Now whenever an audit request is received, it is funneled back to the audit coordinator in the health information management department. The audit management coordinator drives the process by sending the appropriate information to affected departments and personnel. This process is well documented and monitored, and includes alerts and reminders to ensure timely workflow.

Once an audit request is verified, auditor letters and any accompanying information are scanned into a centralized system for interdepartmental sharing and tracking. Once the case has been prepared, the coordinator will try to schedule an onsite meeting with the auditor. Having such a meeting take place at the hospital is key, as it allows for one-to-one communication and often expedites the resolution of issues.

All audits are tracked through an automated reporting and coordination system through the hospital's finance department. Tracking is available by audit type, payer, department, dollar value, and probability of successful overturn. The range of tracking capabilities gives finance a forecasting tool for cash flow and income statement projections. More important, it also provides a method for focusing resources on high-dollar and high-probability-of-success cases first.

In some instances, payers may underpay without disclosing a denial. When this happens at Children's National, finance staff notify the health information management department and the case is reviewed by a clinical team at the hospital. If an appeal is warranted, Children's National prepares its case and approaches the payer to remedy the situation. An electronic auditing system aids staff in this process.

Collaborating to Protect Revenue

It is important that hospitals track the costs involved in responding to denials and audits. Doing so will provide a base of information that the hospital can use in negotiating contracts with payers. For example, Children's National charges fees or payments for nongovernmental audits, which allows for some recoupment of costs.

Preventing denials before they reach the appeals process is more cost-effective than responding to denials that have reached the appeals stage, and doing so can help reduce revenue erosion. As Children's National has demonstrated, using a collaborative, multidisciplinary approach to prevent denials and manage audits can help hospitals mitigate their financial risk.

Rick Leach is a senior vice president, Streamline Health, Cincinnati (rick.leach@streamlinehealth.net).

Mary Daymont is executive director, clinical resource management, Children's National Medical Center, Washington, D.C. (mdaymont@childrensnational.org).

Julie Roby is director of business operations, Children's National Medical Center, Washington, D.C. (jroby@childrensnational.org).

Linda Metro is director of health information management, Children's National Medical Center, Washington, D.C. (lmetro@childrensnational.org).

Sandra Walter is corporate compliance officer, Children's National Medical Center, Washington, D.C. (swalter@childrensnational.org).

Publication Date: Thursday, March 01, 2012

Login Required

If you are an existing member, please log in below. Username and password are required.



Forgot User Name?
Forgot Password?

If you are not an HFMA member and would like to access portions of our content for 30 days, please fill out the following.

First Name:

Last Name:


   Become an HFMA member instead