When it comes to finding opportunities to improve revenue, hospital administrators often look for ways to add services or reduce costs. But there’s another opportunity providers should consider—payers. Looking out for their own bottom lines, payers issue denials on payment of an insurance claim for a host of reasons, from a lack of medical necessity and preauthorization to inaccurate coding and duplicate claims.
Citing industry studies and figures from clients, healthcare consultant Robert Corrato, MD, says denials can result in anywhere from a 7 to 10 percent impact on provider revenue from commercial payers. “The commercial payer denials continue to be a persistent problem. And, it is still top of the mind for the CEOs and CFOs for our hospital clients around the country,” says Corrato, president and CEO of Executive Health Resources, a Philadelphia-based healthcare consulting firm.
Although they may recognize the problem, some providers may be looking at it from only one perspective. Consultant Darice Grzybowski believes that providers who focus solely on the back end are missing a great opportunity. “It’s like saying we’re going to manage a mess instead of saying let’s prevent the mess, let’s reduce the mess, let’s fix it on the front end,” says Grzybowski, MA, RHIA, FAHIMA, president, HIMentors, LLC, a LaGrange, Ill.-based health information management consulting firm.
Implementing a denials prevention program could be the way to avoid messy and costly administrative work, not to mention a loss of revenue, over the long-term.
The Big Three
Much like managing denials, preventing denials generally involves three main areas: technology, processes, and staffing. All three are linked—for example, new software may be installed to implement a new process that staff must be trained to use--but a provider may be stronger in one area than another. The key is determining which area is weakest and then devising front-end solutions.
Technology
- Automate checks and balances
- Generate data
- Improve processes
When used effectively, health information technology streamlines processes and creates efficiencies that can’t be accomplished through manual labor alone. Incorrect coding, for example can be a common reason for denials. Because there are so many regulations and changes to coding rules, it’s extremely difficult if not impossible for revenue cycle staff to keep up. Software programs can update codes and notify employees of regulation changes automatically. “I’d say there’s still a good 40 to 50 percent of hospitals that don’t have sophisticated enough software in place,” says Gryzbowski. “They’re trying to do this manually. It’s an impossible task.”
Editing systems, often referred to as scrubbers, can also be “bolted on” to the patient accounting systems to check for coding errors before the claim is sent to the payer.
Even more fundamentally, technology can provide the data to pinpoint where the problems are--which types of denials are high volume and which are high dollar for the hospital, for instance.
“You’ve got to get to the root cause—what’s creating these denials,” says Dave Harris, national revenue cycle partner for consulting firm PricewaterhouseCoopers, New York.
A denial management software system can create reports that categorize denials. For example, the report may list denials by physician, by clinical departments, or codes. “You can’t do it in Excel,” says Harris, referring to the spreadsheet software. “Because there’s no way you can take all your denials across multiple payers and build out an Excel spreadsheet. It’d take a full-time equivalent or two to do that.” Harris says the data produced by the denial management system can then be used to address root causes and determine the types of changes required to prevent denials.
Automating parts of the revenue cycle is also an upfront strategy. Eligibility requirements missed at the time of registration results in another common denial, Harris says. Various kinds of technology can support patient access staff in determining eligibility at the point of service. Providers can submit an eligibility inquiry electronically either directly to a payer or through a clearinghouse for a fee. The payer also responds electronically.
Technology may also enhance communication that results in improved processes. Adventist Health System, which has 37 hospitals in 10 states, was having problems getting clinical certification information to its payers on a timely basis. Communication between the patient financial services and case management departments was proving to be inefficient, with too many phone calls and e-mails going back and forth to determine patient day status. The inefficiency resulted in delays that increased the likelihood that a payer would not authorize a service or procedure and potentially result in a denial, says Lynn Leoce, corporate director of case management for AHS, Winter Park, Fla.
About a year ago, AHS came up with a denial avoidance tool that’s housed within an application on its revenue management information system. The tool allows employees from registration, patient financial services and case management to view and work on patient status. When a new patient account requires an authorization, the registration employee assigns an alert code to that account, Leoce explains. The alert automatically generates an e-mail that is sent to the case manager assigned the account as well as others within PFS and case management, as needed. The code may signify, for example, that admission clinical review is required. The case manager then accesses the patient’s account, obtains the necessary clinical information, and assigns a status code, such as pending or working, to the account. Case managers can also document who they’ve communicated with regarding the account and who has been sent clinical information, Leoce says.
“So, anybody from PFS goes into this area within this system, and they can look at any of these accounts requiring authorization at any time and see what case management has done on the status of the account,” she says.
The denial avoidance tool is a more efficient way of communicating than e-mails and phone calls, Leoce says. The tool can also generate reports on the number of accounts that are pending, those that have been updated, and even how many patient days where a denial has been avoided, she says.
“We have been able to avoid a significant number of denials by making sure that we have facilitated that communication not only to the payer, but between ourselves so we understand what’s happening on the account,” she says.
Leoce says the denial avoidance tool has been implemented at about 20 AHS hospitals, and plans call for all hospitals to eventually be using the tool.
Strengthen Processes
- Focus on the front end
- Support weak spots
- Implement two-tiered medical review
Breakdowns in processes or even a lack of processes can be the root cause of denials. Making changes to front-end operations can help prevent them.
A number of years ago John Hopkins Health System, Baltimore, underwent a major re-design of its patient registration process that has resulted in a significant decrease in the number of denials stemming from this area, says John Lowery, senior director, John Hopkins Medicine Access Services.
A main part of the re-design involved capturing a patient’s insurance information at the time of scheduling an appointment, rather than trying to re-contact the patient to gather the information—something referred to as equal exchange opportunity. “We had something the patient wanted, and they had something we wanted,” Lowery says. “We had access to healthcare, and they had the information that we needed to get paid.”
John Hopkins was also experiencing problems with high dollar outpatient surgeries, diagnostics and procedures. Denials were being issued due to lack of eligibility and required authorization, Lowery says. The solution involved implementing an additional checks and balances process for these outpatient cases. The health system set up a core service unit that is responsible for determining the scope of benefits and making sure that a patient’s eligibility status is current and that any required referrals and authorizations are on file.
The unit then does a benefits workup to let patients know what their financial obligations will be at the time of service.
“To the extent that we’re able to have accounts financially cleared in a core service environment, has cut down on our denials significantly over the years,” Lowery says.
To prevent another common denial, medical necessity during the patient stay, a provider needs to have a process in place that involves an ongoing evaluation of medical necessity based on the physician’s documentation in the patient’s chart, says consultant Robert Corrato. A case manager, who may be a nurse, social worker, or someone trained in screening review, should review the medical necessity of the care according to accepted criteria available in the marketplace, he says.
“There must also be a second level and that is a secondary physician review,” Corrato says. When the screening criteria are not met, a physician should review the patient’s case to determine if the criteria used to evaluate the medical necessity were correct. Sometimes, the physician’s involvement may be initiated after a denial has been issued, Corrato says, in order to appeal and have the denial overturned.
To ensure that there is documented medical necessity, Corrato says there must be a tight connection between the upfront operations involved in the precertification/eligibility determination process and the case management review operation while the patient is receiving services. “If that’s done well using case management professionals and physician advisement, then the likelihood of a private payer issuing a denial while that patient is in the hospital is going to go down, and the probability of overturning the inappropriate commercial payer denial while the patient is in the hospital is going to go up,” he says.
Staffing
- Form committees
- Train/Educate
- Assign Accountability
Technology can shine a spotlight on problematic areas, but it’s people who analyze the issues and make judgments about appropriate steps toward solutions.
When John Hopkins began implementing changes to decrease its denials, one of the first things it did was set up a Revenue Recovery Operations Committee. The committee is made up of representatives from clinical areas, admitting, Access Services, billing, training, and information technology. “So, we have a broad based group that is able to meet, bring issues to the table, and identify where we think attention is required to correct whatever the situation is,” Lowery says.
Lowery says it’s also important to train registration staff on new processes, provide ongoing coaching and feedback, perform audits on their work, and even issue staff report cards to help them understand where there may be room for improvement in their performance.
Revenue cycle leader Vicky Ferguson views technology as a vital reporting tool, but people as action agents. The business office needs to communicate issues and supply data that spotlights those issues, but it’s the individual departments that should be held accountable for preventing denials that originate from their areas. “I think the key to attacking and really making a difference in the denial front is merging your clinical and business areas and having a true understanding of the root cause of your denials, and developing an action plan around each one of those denials,” says Ferguson, executive director of regional revenue cycle operations for Knoxville-based Mercy Health Partners, which has nine hospitals in Tennessee. “It is not something that you can do in a business box with software.”
At Baptist Health, which merged with St. Mary’s Health System in January to form MHP, a revenue recovery committee proved successful in preventing denials. Now, Mercy Health Partners is taking the committee approach to the next level by developing a steering committee and separate focus groups. The steering committee will be comprised of clinical and business leaders, plus representatives from patient access and the billing office, Ferguson says. The committee will spot trends, analyze root causes, and develop targets for preventing denials. Focus groups will be assigned specific types of denials, such as medical necessity or late charges, and will then be charged with coming up with solutions.
Ferguson emphasizes the importance of having clinical leaders and business leaders working together. At MHP, the chief nursing officer and chief financial officer will serve as executive sponsors of the denial prevention committee. The two chiefs will create a sense of urgency and intercede when gaining buy-in from certain groups proves difficult, she says.
Ferguson says any success Baptist Health had experienced with reducing denials (before the merger) is because people have been held accountable. “The tools are critical, but you can’t do it with the tools alone,” she says. “It’s my job as a revenue cycle leader to educate the facility on the importance and the financial impact [of denials].”