Denials Management

3 Key Disciplines for Productive Denials Management

February 16, 2018 10:43 am

Although recognizing big shifts in denied claims is important, revenue cycle leaders can be more proactive if they detect 2-3 percent changes that slowly emerge over time.

Managing denials is a critical part of any revenue cycle process. With reduced payments from governmental payers and health plans and more financial responsibility migrating to patients, healthcare providers need to recover payments fully when claims are filed. A recent Crowe Horwath analysis reviewed claim data from the top five major health plans and found that initial claim rate denials range from 7.5 percent to 11 percent. These denials put pressure on revenue cycle staff productivity because of the time it takes to appeal them, thus elongating the payment cycle.  

Denials can happen for many reasons, but the key is to recognize the top reasons they occur and create action plans to improve processes moving forward. The three disciplines outlined below provide a foundation for identifying denial trends and creating improvement plans. 

Evaluate Anomalies

It is critical to examine key denial trending data by looking at multiple variables like payer and timeframe. By using snapshot data, you can compare points in time such as day to day, week to week, and month to month for corresponding years. This helps to identify trends in how payers are processing claims.

Big shifts are easier to see, but what about a 2-3 percent change that slowly emerges over time? Shifts like these tend to go unnoticed, unless you have the data to compare from previous timeframes. Being able to trend this data through a snapshot view will allow you to react faster to changes in denial rates and lessen impacts to cash flow and days in accounts receivable. 

Arrange CARC Codes into Subcategories

Denials are typically received via 835 files that detail specific denial and claim adjustment reason codes (CARCs). There are more than 300 CARC codes that can appear on denials. Most processes notate denial CARCs on accounts and then send them to a work queue to be reviewed. Even though there are more than 300 codes, the resolution action necessary to fix denials is typically the same for several. 

By combining these CARCs into subcategories that outline the same resolution actions and defining technical from clinical denials, you can identify the main reasons for denials. A few examples are eligibility, missing or invalid claim data, and missing authorizations. With this breakdown, focus on resolution actions needed to fix denials, eliminating unnecessary steps. This improves staff efficiency and allows managers to target improvement activities toward the functional areas from which denials are originating.   

Perform Root Cause Analysis Review

Identifying CARC codes into subcategories is a key discipline in solid root cause analysis review. Combining this process with snapshot reporting enables revenue cycle leaders to see how specific subcategories are trending as compared to previous timeframes. The next step is to analyze why denials are happening. To do this, take the biggest denial subcategory and analyze it by the largest number of denials per payer. Usually you will find areas in your registration process where something is being missed or that a pre-registration process might not be financially clearing the patient as cleanly as first thought. 

Start small and work through by analyzing one per month. When you identify a functional area that has an impact, hold a process review session to determine how it can be improved. Carving out time to complete this process each month allows for steady progress toward denial improvement.

Maintain a Disciplined Approach

Denials management will continue to be an important part of the revenue cycle process because of the continued pressures on payments to providers. Performing the three disciplines above will help you recognize and focus on denial trends and drive improvement over time. 

Shawn Yates is director of product management, Ontario Systems. 


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