Most healthcare providers are all too familiar with denials of claims for payment. Unchecked, such denials can pose a significant threat to a provider organizations financial well-being.

The reasons for denials vary, but organizations that establish processes for handling denials and take steps to remedy their root causes have the potential of recouping large amounts of money they might not otherwise accrue. Such initiatives also cut administrative costs by reducing the time devoted to reworking denied claims.

Where We Are Now

Rich TrembowiczBilling for services rendered by healthcare providers—and ultimately ensuring that payment due for the service delivery—is a straightforward process. However, it is complicated by the variety of products and services potentially involved; the number of different payers, each with its own rules and procedures; and the sheer volume of information that sometimes must be exchanged. “This is a simple business, but there are a million ways to mess it up,” says Rich Trembowicz, associate principal in the Boston office of ECG Management Consultants.

One common source of denials is not keeping up with changes in codes or requirements. “The insurance companies are always looking for opportunities to reduce cost or change the method of delivery to reduce cost,” Trembowicz says, citing the infusion of drugs as one example. “With the growing popularity of infusion drugs, many insurers are implementing site-of-service limitations requiring that any infusion drugs that can be administered in a physician's office or on a home infusion basis be administered in those settings instead of in the hospital to avoid the facility charge.” Most insurer policies allow the first administration in a hospital outpatient department to assess patient tolerance, with subsequent administrations in the home or office setting. The challenge, for billing, is that it also requires additional billing information (i.e., details about the site of service, medical necessity for continuing hospital administration). Neglecting such details, either in developing a treatment plan or submitting a claim, is the type of thing that can lead to a denial.

Sarah Humbert

Documentation tools also are a source of continuing change. The implementation of ICD-10 a little more than two years ago provided thousands of new codes, enabling much greater specificity in documentation and billing. Additions, deletions, and changes to ICD-10 and CPT codes are introduced annually, requiring providers and payers alike to update their systems to avoid unnecessary denials.

“Training the coding staff is critical,” says Sarah Humbert, coding and compliance manager for Indianapolis-based Kiwi-Tek. “There were 314 changes in the most recent CPT update, which was a modest amount. Coders—and physicians, too—must be aware of these changes because if they continue to submit claims with codes that have been deleted, they're certainly going to experience denials.” 

Where We're Going

“For many years, denied claims were simply written off,” Humbert says. “And that meant the loss of entitled reimbursement.” In the current business environment, however, few healthcare providers can continue to afford that luxury. Whether enlisting outside help or tackling the challenge with in-house staff, implementing a workflow has been shown to be an effective way to address denials.

Bill-WagnerNoting that denials often are repetitive, Bill Wagner, Kiwi-Tek’s COO, suggests holding the person who originally coded the claim responsible for the rework. “As the appropriate manager reviews the chart with the person who made the error, illustrating to them why it was denied and what error was made, it serves as a little retraining session.” This approach also introduces an incentive to avoid future mistakes, knowing that having to correct them would again interrupt the normal workflow.

Of course, one of the best ways to manage denials is to avoid them in the first place.

“Quite often, the issues with billing are there well in advance of when a claim is being processed for submission to the insurer,” Trembowicz says. “The weakness may not be within the processes used by the claims submission group; rather, it may be within those used on the front end to validate eligibility.”

For example, admissions personnel should collect as much information as possible on the front end about payment sources for services, such as whether there is third-party liability coverage. Another oft-overlooked area is gathering information about the circumstances of an injury, how it arose, and whether a category of insurance other than health care might apply.

And again, avoiding denials comes back to knowing, and following, the rules—which can be very complex.

“It’s not as simple as it used to be, when it was, ‘We know who the insurer is, a service was provided, let's bill it,’” Trembowicz says. “Now you have to know the terms and conditions of billing with respect to the specific service, and much more about the diagnoses and services involved.”

In short, Trembowicz observes, the billing department is not a place to try to cut your costs. “You can’t cut back on this; you can’t do it on the fly,” he says. 

Processes and people will continue to be important in managing, and preferably avoiding, denials. But technology also plays an important role in the knowledge management function that provides the foundation for both submitting claims and managing denials.

“There are a lot of software applications that help monitor the changes in codes and payers’ policies and procedures,” Wagner says. “They are constantly updated to incorporate these coding changes and other information that the coders need, which makes dealing with these changes less challenging.”

Although larger healthcare providers generally have the sophisticated technology to manage this vast body of knowledge, the requirements for effective denial management do not bode as well for smaller offices. “When you consider smaller or less sophisticated healthcare providers, such as a physician’s practice where the person doing the coding is looking things up manually, there's a higher probability that they are not aware of the latest changes in the codes or may not have access to them,” Wagner says. “And that will lead to an increase in denied claims.”

What You Need to Know

  • The first goal in managing denials is to avoid the circumstances that give rise to a denial.
  • Payers are being more stringent about billing requirements for medical drugs, among other things. For example, dosages and sites of service are now an important part of the information on drug-related claims.
  • In lieu of site-of-service restrictions, some payers are paying for services based only on the lowest point-of-service rate, even though the provider may have chosen to render the service at a higher-level facility. 

Publication Date: Tuesday, May 01, 2018