Denials: An Ounce of Prevention is Worth a Pound of Revenue

By Glen R. Reiner, RN, MBA, Principal Director, Revenue Capture and Charge Audit Services | Posted: 01/29/2018

The old saying, “An ounce of prevention is worth a pound of cure,” rings especially true when it comes to health care claim denials. To circumvent costly rework, which typically occurs at the back of the health care revenue cycle, today’s savvy health care provider strives to prevent denials altogether, identifying and addressing root causes at the front, middle and back of the rev cycle to deploy accuracy and efficiency improvements.

Taking this proactive approach can literally save you millions. Modern Healthcare reported in 2017 that hospitals lose approximately $262 billion per year on denied claims from insurers, putting approximately $5 million in payments per hospital at risk. Estimates to rework a claim vary; they can range from $25 to $100+ per claim depending on the complexity of the issue.

Uncovering the root causes of denials requires work, but it is more than worth it. Given the rapid pace of change in health care today, an efficient revenue cycle is essential to stay on top of evolving episodic payment models for value-based care, as well as industry mandates and other market forces that are creating unprecedented complexity and cost pressures.

Begin at the Front End

Many of the issues that trigger denials occur at the front end of the revenue cycle.  For example, errors and omissions during registration – from providing a wrong address to lack of prior authorization – can cause a payor to reject a claim.

Here are the top five actions every health care organization should take on the front end to eliminate denials down the line:

  1. Verify patients are who they say are and live where they say they do
  2. Determine if patients are insured and, if so, establish what is and isn’t covered
  3. Provide an accurate estimate to establish any out-of-pocket patient expenses
  4. Make sure any prior authorization requirements are fulfilled upfront
  5. Ensure that an Advanced Beneficiary Notice (ABN) is on file to submit claims

Cover the Middle Ground

In the middle of the revenue cycle, physician documentation that lacks specificity can result in inaccurate coding, another leading cause of denials. This, coupled with coding inaccuracies tied to ICD-10 implementation, have increased denials tremendously. Approximately 58 percent of hospitals report that they have experienced an increase in denials since ICD-10 implementation, with 65 percent never corrected and re-submitted to payors for reimbursement, resulting in lost revenue.

To address denial issues originating at the middle of the revenue cycle, here are some key starting points:

  1. Double-check documentation to ensure it is complete
  2. Verify that codes are ICD-10 compliant and reflect all services rendered
  3. Identify any outstanding charge issues
  4. Take corrective action on issues at pre-bill to prevent costly rework and late charges
  5. Review your charge master on an annual basis for accuracy and completeness

Finish Strong to See Results

The patient financial services portion of the revenue cycle should be optimized, with claims scrubbed effectively, denials kept to a minimum and collections processed efficiently.

Here are top areas to focus on in this area: 

  1. Ensure that your health system is compliant with new payor payment models, as well as changing rules and regulations
  2. Leverage the power of web service integration to increase the effectiveness of your patient accounting system (PAS)
  3. Increase performance with reporting capabilities to identify and drill down to the most common reasons for payor rejections and denials
  4. Maximize follow-up efficiency through automation to eliminate manual status checks
  5. Streamline claims rejections process and automate secondary claims creation

Organizations that address denials holistically – from Patient-to-PaymentSM – can achieve significant results on their bottom line. Partnering with a trustworthy expert can help accelerate the results. For instance, Maricopa Integrated Health System partnered with nThrive to recapture $28M through denials outsourcing, providing much needed backlog relief during their transition to a new electronic health record (EHR) system.

nThrive can help your organization quickly overcome key denial issues and improve your bottom line. Learn here how our experts can help evaluate strengths and address any gaps to ensure success. We’ll help integrate market-leading workflow automation with patient financial services, including claims and contract management, and help provide insights to guide decision-making using robust analytics capabilities.

Want to learn more about denial management? Click here to read the recap of our recent HFMA webinar titled "The Path to Success in Proactive Denials Management and Prevention."