December 2, 2004
Claims denials are a predominant headache in every healthcare business office. Sound denials management processes can help minimize the impact of denials on the revenue cycle.
To help members improve and measure performance in this and all other areas of the revenue cycle, HFMA has developed a series of self-assessment tools to ensure key processes are covered and performance measures up against better-practice target levels. The tools are based on HFMA's February 2004 audio webcast, Developing Key Performance Indicators for the Revenue Cycle, presented by David Hammer, Vice President, Revenue Cycle Management Services, McKesson Information Solutions, and Roland Funsten, Assistant Vice President, Revenue Cycle Operations, St. Vincent Hospital.
Below are the key processes and performance indicators for managing denials:
Key Processes to Effectively Manage Denials
- Track denials by payer, reason, and financial consequence.
- Distinguish between technical and clinical denials.
Track denials by physician, DRG, and department.
- Ensure that contractual allowances are increasing more slowly than gross revenue. (This is a check to make sure that A/R is not being written off to reduce days in A/R.)
Have dedicated denials units with payer-specific appeals experience.
- Respond to clinical documentation requests within 14 days.
- Use an online system to compare expected vs. actual payments.
- Use online payment tracking software.
- Use online contract management software.
- Maintain a self-developed or purchased denials database.
- Use an online outpatient medical necessity system before service.
- Make sure all denials reason codes are actionable.
- Track observation and inpatient authorizations separately.
- Consolidate precertification, authorization, and recertification functions into a single department.
Share precertification requirements with physicians' offices.
- Provide physicians with regular feedback on clinical denials rates.
- Hold regular meetings with payers to discuss denials issues.
- Regularly distribute contract terms to revenue cycle employees.
Inform revenue cycle employees of contract changes before the effective date.
- Exchange structured feedback between the revenue cycle and managed care departments.
- Schedule non-emergency services 12 hours or more in advance to help prevent both medical and technical denials.
Target Key Performance Indicators
- Overall denials rate as a percent of gross revenue: < 4 percent
- Clinical denials rate as a percent of gross revenue: < 5 percent
- Technical denials rate as a percent of gross revenue: < 3 percent
Rate of additional collection for underpayments: > 75 percent
- Rate of appeals overturned: 40 percent to 60 percent
- Electronic eligibility rate: > 75 percent
Physician precertification double-check rate: 100 percent
- Case managers' time spent securing authorizations rate: < 20 percent
- Percent of high-revenue managed care contracts modeled (80/20 rule): 100 percent
- Total denials reason codes: < 25
SOURCE:
Self-Assessment Tool: Billing Follow-Up, part of HFMA's series on revenue cycle performance assessment.
Additional Resources
- Executive Roundtable: Revenue Cycle Challenges for Hospitals and Health Systems
- Medical Necessity Denials: Prevention Pays Off
- Interactive Claim Correction Form
- Coordination of Benefits: Tips for Reducing Payment Delays and Improving Accounts Receivable
Light at the End of the Tunnel for Denials Management, by Pam M. Waymack, August 2004 issue of hfm. (Online access to article is available to HFMA members; non-members see "How to Get Articles.")
- Educational program recordings available through Playback Now:
1. Claims Denial Management Through Process Improvement, February 11, 2004, audio webcast.
2. Best Practices in Denials Management = Denials Prevention, HFMA's Revenue Cycle Strategies Conference, October 27-29, 2004.
3. Legal Issues for Denials Management, HFMA's Revenue Cycle Strategies Conference, October 27-29, 2004.
- Revenue Cycle: Comprehensive Listing of HFMA Products and Services
If you have questions or comments about HFMA Wants You to Know, contact editor Laura Noble at lnoble@hfma.org
HFMA Wants You to Know ISSN: 1540-0697. Volume III, Issue 25. Copyright 2004, Healthcare Financial Management Association. All rights reserved.