- Telling the story of why a denial happened in the first place begins with understanding the reason, the issue and ultimately the root cause.
- The root cause should be written in a way that enables the reader to act on a specific cause with little additional study.
- Collect valid data based on actual root cause rather than only relying on the reason codes returned by payers.
Despite dedicated efforts, the steady rise in claim denials is a mounting concern for hospitals, health systems and physician practices. A review of denial and audit data can help providers prevent errors that lead to denials, and in the process reduce financial loss and increase resource efficiency.
3 emerging trends call for a proactive denial and appeal strategy
A proactive approach is essential to identifying root causes as the basis for denial management and prevention. Here are three trends to know:
1. Clinical validation. We’re seeing an increase in clinical validation denials that are based on a combination of clinical indicators and coding references by the payer. Placing clinical validation under the coding umbrella further complicates the appeal process.
2. Payer targets. Payers tend to focus on 10 to 12 diagnoses. Knowing those focus areas is critical to flagging records for more in-depth review. Use of data analytics to identify the diagnoses that show the highest denial rates and revenue risks is the foundation for building a proactive denial prevention and appeal strategy.
3. Managed care contracts. Breaking down silos extends beyond coders and physicians to include managed care. Organizations are increasingly focused on how diagnoses are defined in managed care contracts and the impact on payer denials.
Using denial data to identify root causes — reason, issue and root cause
Telling the story of why a denial happened in the first place begins with understanding the reason, the issue and ultimately the root cause. Claim Adjustment Reason Codes (CARC) are used to communicate a reason for a payment adjustment — why a claim or service line was paid differently than it was billed.
One of the most common reasons cited is “not deemed a medical necessity by the payer.” But what is the true issue? For example, denial issues can be related to coding, documentation or incorrect status. While CARCs and audit issues describe why the payer or auditor is not paying for a service or claim, the root cause is the confirmed or potential internal failure that caused the variance in payment for the service or claim. What did the organization do to cause the denial?
Whereas denial or audit issue data is typically readily available and easily identified through claims data analysis, identifying the root cause requires internal analysis of the medical record, charges and the billed claim to determine the potential root cause or internal failure. Root causes should be defined operationally to determine the level of analysis required internally.