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By Christine Fontaine
Denials have been endlessly discussed among revenue cycle leaders and continue to be a cause of revenue leakage for healthcare organizations. Industry statistics indicate that providers write off 3 percent to 5 percent of net revenue to denials. High-performing revenue cycle teams realize that they cannot continue to "manage" denials but must change processes throughout their organizations to prevent denials from occurring.
In 2009, Shore Health System, a two-hospital system in Maryland, had a denial rate of 1.2 percent-well below the current industry benchmark of 2 percent. Yet we were able to reduce that rate to 0.5 percent over the course of a year by digging into the causes of our denials and implementing process changes to prevent future denials.
This is a sample article from HFMA's Revenue Cycle Forum, a subscription-based discussion community that encourages networking and discussion among revenue cycle leaders.
Learn more and join the Revenue Cycle Forum
Before you can tackle your denials problem, you need to be able to clearly and accurately define what your initial and final denial write-off rates are, and categorize your denials by types. With more than 250 American National Standards Institute remittance codes and manually posted payments-not to mention a lack of standardization-providers must roll up denials into specific categories, such as "no authorization," "no medical necessity," and "timely filing." Providers can then intelligently workflow these denials to the right person and aggregate patterns or trends across the revenue cycle.
If you don't have defensible data, then you won't be able to change processes. For example, when I was the director of revenue cycle operations at Shore Health System, the lab was a big part of our denials. The lab staff asked me how much we were losing in denials, and all I could say was "a lot" because I didn't have specific data to point to. As you can imagine, that approach got me nowhere. Due to the high volume/low dollars in our lab area, we had not invested in the resources or technology that would allow us to communicate with the lab about each denied account-so those dollars continued to be lost.
However, when we deployed denial analytics technology that clearly showed how much we were losing in denials due to lab and other issues, it allowed us to easily refer denied accounts to the lab to resolve. We then were able to work with the lab to put processes into place that would prevent those denials in the first place.
For example, some physicians were ordering a T4 and a TSH at the same time, but these could not be reimbursed because one could only be ordered based on the results of the other. Once we identified the root cause, quantified the dollars, and identified the physicians primarily ordering these tests, education and outreach resulted in this denial being reduced by more than 75 percent.
When working with specific departments or individuals to reduce denials, you need to ensure that you are reporting the actual loss, not the total dollars billed. So it is important that you have the 835 data and host transactions and adjustment codes. If you do not, someone can poke holes in the information you give them, and you will lose credibility and erode your ability to impact change throughout your organization.
Effective denial prevention requires a committed team approach that is enterprisewide, including the clinical areas. At Shore Health, we had a denial prevention team that evolved over time. Once our approach became more granular-and aimed at root cause analysis-we became the "Revenue Defense Team." The team-which included representatives from patient accounting, case management, medical records, coding, contracting, compliance, and patient access-set a hospitalwide goal of "zero tolerance" for revenue leakage.
The team's primary responsibilities were to review all first-pass rejections, denials, and final denial write-offs, as well as to identify the process improvement initiative that was deployed to reduce the rework, inefficiencies, and lost revenue to the organization.
When developing a Revenue Defense Team, you need to have adequate resources and follow a systematic approach. A program plan, or charter, should be established. This should define the purpose of the project, how it will be structured, and how it will be measured for success. The plan should also include the team's vision, objectives, scope, and deliverables, as well as the roles and responsibilities of stakeholders.
This is not a one-time, isolated initiative; this is a long-term commitment and an ongoing process that combines departmental efforts and tracks success against key performance indicators (KPIs). (For examples of revenue cycle KPIs, see the key indicators identified by HFMA's MAP project.)
Industry statistics indicate that 10 percent of denials are not preventable, but couldn't we say that all denials are preventable if we really dig into the true root cause and ensure they don't happen again?
Trending the reasons for denials and digging into the root causes are critical to your denial prevention efforts. A root cause analysis should be performed for all denials and categories to avoid erroneous assumptions about contributing factors of individual denials.
The coded reason on a remittance advice does not help providers identify the true cause of a denial-it is too generic and used inconsistently. For example, if you receive a denial for "no authorization," do you immediately presume that an authorization was not obtained and that there is a problem with your financial clearance process? I have made this assumption in the past. However, on reviewing such a denial at Shore Health, we identified that we did obtain authorization, but on the day of service, radiology either changed the original order or "added on" a test. Once we were able to identify the true root cause and quantify it into dollars lost, we worked with radiology to ensure that our financial clearance team is now notified when orders are changed. We can then modify the authorizations that day, resulting in limited denials moving forward.
When reviewing denials, you also need to have an action plan that quantifies the dollars lost, the root cause, and the results once process changes are made. It doesn't have to be complicated, but it must track your results and your recoveries so you can celebrate your successes and continue with your process improvement approach.
All denials require a similar level of scrutiny, and providers must be able to report these by location, physician, category, type, root cause, recommended resolution, and outcomes of your efforts.
By following these practices, our Revenue Defense Team at Shore Health System decreased first-pass denials by more than 70 percent, reduced the denial rate from 1.2 percent to 0.5 percent, and saved just under $1 million.
Many providers believe that denials are just part of the status quo-but they don't have to be. Denials can be prevented by using technology that can automate workflow and provide robust analytics, establishing a collaborative team approach to reduce denial rates, and determining the true root cause to improve processes.
Christine Fontaine, CHFP, CPAM, is vice president, revenue cycle solutions, OptumInsight, Eden Prairie, Minn., the former director of revenue cycle operations, Shore Health System, Easton, Md., and a member of HFMA's Maryland Chapter (firstname.lastname@example.org).
Publication Date: Wednesday, September 07, 2011
A leader from McKesson discusses how healthcare reform is forcing hospitals and health systems to take a different approach to capacity management and patient flow.
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
Emad Rizk, MD, president and CEO of Accretive Health, discusses the uncertainty facing hospitals and the transitions affecting revenue cycle management.
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Jim Bohnsack, vice president, solution & corporate development for Conifer Health Solutions, explains how the company helps healthcare providers leverage data to deliver better outcomes while optimizing reimbursement for all payment arrangements.
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
Steve Scibetta, senior director of channel sales for Ontario Systems' healthcare product line, shares insights into effectively managing receivables.
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Elena White, vice president of risk, quality, and network solutions for Optum, discusses how healthcare providers can leverage data and technology as they enable risk in their organization.
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Somnia President and CEO Marc Koch, MD, MBA, explains how hospitals can drive transformative change in the perioperative experience for outstanding clinical and financial outcomes.
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
PMMC President Roger L. Shaul discusses the effects of healthcare reform on revenue cycle management and how PMMC's products help clients adapt to a changing financial environment.
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Greg Burgess, Founder and Chief Product Officer at Burgess Group shares insights and opportunities for payment integrity in the rapidly changing healthcare IT landscape.
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
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To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
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