Technical and Clinical Denials: 8 Top Questions Answered

By Gina Stinson, Vice President of Managed Care Services and Bill Knox, Vice President of Product Management | Posted: 05/21/2018

Denials Questions Answered

In a recent nThrive webinar hosted by HFMA, “The Path to Success in Proactive Denials Management & Prevention,” strategies were shared for preventing medical claim denials throughout the health care revenue cycle. The webinar covered a lot of information and attendees asked many compelling questions regarding denial management. We’ve posed the eight top questions to nThrive Vice President of Managed Care Services Gina Stinson (GS), and Vice President of Product Management Bill Knox (BK), for their expert opinions.

1. What are best practices for handling DRG reduction requests and denials?

GS: First, I’ll define DRG, which stands for diagnosis-related groups and is the basis for establishing medical reimbursements. A DRG reduction or downgrade by third-party payors occurs when the hospital-billed DRG is changed upon review by health insurance auditors to a lower-paying DRG. DRG downgrades are typically worked as denials. They show up in the payment variance data.

Example: The hospital bills out DRG 300 to the payor, but it’s paid as DRG 298, a lower rate. It shows up as a payment variance, although the reason why the payor applied that would most likely be coded to a denial reason. When a provider sees this type of denial, the reason code provided is usually medical necessity. The payor does not indicate, “this is a DRG downgrade.” That’s something the provider must identify.

Start by determining the cause of the DRG reduction. At a high level, the two most common causes are 1. A technical issue, such as an incorrectly calculated DRG or perhaps a technical mistake, and 2. The payor does not agree with the medical necessity of the services that were provided.

BK: The type of denial that’s being worked requires different skill sets. Technical issues are usually a more straightforward fix, such as incorrectly ranked insurance resulting in a claim billed to the secondary as the primary in error. Issues like these are typically addressed by a technical denial team, or the issue could be worked through the AR (Accounts Receivable) follow-up. If the same problem recurs, evaluate the process root cause instigating the issue and eliminate it by implementing a corrective action using technology.

GS: Clinical denials, such as a medical necessity denial, require evaluation of the claim for evidence of appropriate patient care through accurate and detailed coding. Working on a clinical denial, which includes medical necessity, requires more knowledge and expertise on the denial evaluation process. When writing clinical appeals, engage a clinician to work the account, evaluate, pull the records and loop in coding if more information is needed.

You must have data that identifies the type of medical billing denial occurring and the source of the denial.

Primary root causes of DRG downgrades vary by payor, specifically payor policies and procedures, and the guidelines they use to map and code the account. Payors define claim inconsistencies differently – there’s no single standard.

Review the DRG validation and the clinical validation. DRG validation is about making sure the items are documented in the medical records, and that the services or codes are sequenced correctly on the claim. Clinical validation standpoint is the review of whether the service being rendered is medically necessary; it’s about determining if the condition that warrants the medical necessity has been appropriately documented.

Methodology for working and routing technical denials is based on the provider’s preference, but clinical denials require special handling, routing and segmentation. Particularly for clinical denials, it is important to identify and document the root cause so that steps can be taken upstream to improve those practices.

2. What is the recommended process for writing off claims that cannot be reconciled with payors?

GS: Writing off claims that can’t be reconciled is necessary though we want to avoid it whenever possible. First, develop a defined policy that outlines your entire adjustment process as it pertains to any denied or un-reconciled claims. Follow appropriate accounting guidelines to ensure that it’s meeting high standards for write-off purposes. Next, ensure claims are processed properly, particularly those high dollar claims.

Don’t waste effort on smaller claims – reconsider trying to resolve a $20 claim that didn’t process and had a defined deadline. If you review your data and find a lot of smaller claims denied for timely filing, create an automated process to write them off to save processing time.

BK: I recommend writing off claims at the net value of the denial. Using the gross value of the denial can put a provider at risk for overinflating the value, which could impact the provider’s long-term financials.

Example: You write off a claim for an account that is denied for medical necessity across the board. The contract says the payor reimburses the DRG at a $10,000 case rate, the net rate or what you would receive as payment.

But your charges were $75,000. If you write it off at the $75,000, or gross value rate instead of the contractual or net $10,000, you’re inflating the actual net receivable value, because under the contract, the contract payment is identified as $10,000.

3. How can I track productivity on denials follow ups? Any insight into benchmarks of denials worked per hour, per day etc.?

GS: I recommend a standard daily productivity metric for both technical and clinical denials of 25 resolution actions per day. We define these as tasks that push the denial toward final resolution. Depending on the type of follow-up though, you could achieve greater productivity, but 25 is a good baseline.

Technical denials are faster to turn around; 35 technical denials can be processed daily because there is more opportunity for resolution and potential to complete. Again, this is based on how the denials are divided up and how they’re worked.

Example: A denial in which just the insurance ranking is incorrect can be worked, rebilled and processed much faster than a denial that requires contacting the patient to gather additional information.

4. Does clean claim rate affect denials?

BK: Yes and no. There is a direct correlation between rushing to get a clean claim out the door and high denial rates. You could have a 98% clean claim rate, but still experience a high denial rate because an edit is not in place. Or a provider may have simple edits in place, the common things that get your claims in the payor’s door, but they may not be covering the complex stuff, which could be the cause of your denials.

This is what we refer to as edit management. If all your edits are easy and allow your claims to push through because you haven’t built in edits that could prevent or mitigate certain denial reasons, your claim rate is going to look high, but so are your denials, because you’re not taking the action necessary to prevent that denial from occurring. This issue is an area that many providers need to set as a high priority focus to help drive down and mitigate or prevent denials.

Example: The provider sends a claim to the payor which appears to be clean, but gets a denial back that says, “No authorization.” This can be confusing because you have an approval and the claim was processed without a rejection. Then you find out that what you sent to the payor began with an alphabetic character preceding the numeric value of the authorization, which indicates it is a reference number that has not yet been converted to an approved authorization. An approved authorization is numerical with no alpha character in front.

Edit your system so that when a claim is sent to that specific payor, it always starts with a numeral, not an alpha-numerical value. By doing that, you have built in an edit that can prevent a denial from occurring in the future.

5. What are staffing best practices for working denials? Dedicated group of billers/collectors etc.?

BK: A lot depends on the size of the facility. A larger health system or single facility can gain efficiencies with a clinical team, a technical team, and a follow-up team, and duties can be distributed across all three groups. In smaller organizations, it might be two teams – a clinical team and a team to manage both technical and follow-up functions. There is value in having a team dedicated to resolving technical denials, but there’s also value to having technical denials addressed by the follow-up team – the collectors. A lot of corrections or proactive edits of technical denials can be integrated into collections or denials workflows if you are leveraging the right tools to enable that ability.

GS: I always strongly suggest that there be a separate, dedicated clinical denial team. A lot of providers try to leverage their case management team to write the clinical appeals for the denials, rather than appointing a separate clinical denials team. That takes the case manager and care transition specialist away from managing the active patient cases, thereby increasing the risk for yet another denial.

Smaller 100 to 150-bed providers utilize one person. Having the same person work with the same payor facilitates better understanding and trend identification faster, because as you go through the inventory, you recognize the same issues happening repeatedly. It’s especially beneficial to a small provider dealing with technical denials – the issue can be fixed before it becomes a denial.

6. What if a root cause has been identified but no change has been implemented, and the necessary change is outside your scope of control – any best practices?

GS: A lot has to do with communication, learning how to deal with other departments and getting their cooperation. If another team refuses to cooperate, escalate the issue up to the CFO.

7. What are some areas “upstream” to target in a denials prevention program?

BK: Good question - effective denial root cause resolution is the result of upstream prevention and mitigation.

GS: It benefits the provider to implement a defined denial prevention policy, and to appoint a dedicated committee whose sole focus is to examine the denials coming through, look at the opportunities for improvement, and ensure that the prevention and mitigation is being handled by the right people in a timely manner. Best practice includes having a denial prevention task force that crosses all departments – front, middle and back end revenue cycle, and a defined charter.

GS: For technical denials, it really serves the provider well if they have an outpatient throughput committee, which is more than a denial task force. The committee looks at the entire patient flow process – from time of scheduling through delivery of the service and coding claims, to getting the claim out the door to the NSB, if they want to include all that – because that’s going to uncover the issues that are feeding the denials. Leverage this committee to prevent the denials. Include an I.T. professional on the team to tackle technical denials that require configuration changes to be made in the patient accounting system.

Example: At 1:46 p.m. Doctor Jones schedules a patient for surgery at 7 a.m. the next morning. Doctor Jones is sending a fax over right now to the scheduling department saying, “I want to add on this additional procedure.” My team is staffed until 4:30 or 5 p.m. tonight and the insurance company closes between 6 and 8 p.m. tonight. There is a narrow window of time in which to look at this newly scheduled service that has come in, determine whether it requires another authorization or modification of the existing, and what must be done to get the authorization, if it is required.

The outpatient throughput committee puts controls in place that state if a physician has a patient procedure scheduled for the next day, cutoff time for adding anything else is noon of this day. Or the control could state that if a requested procedure requires authorization, the authorization must be confirmed prior to scheduling.

8. What are helpful metrics to track when looking to improve denials prevention?

For technical denials, Patient Access MAP Keys (industry standard metrics or KPIs used to track organizational revenue cycle performance) are helpful to track. Sixty percent of the information on a UB claim form comes directly from the information that’s gathered from patient access and is entered on the claim, so it is important to cultivate accurate processes in capturing patient demographic information. For clinical denials, focus on metrics in the middle revenue cycle – case management, documentation, and CDI accuracy.

To learn more about best denials prevention practices, watch our on-demand webinar, “Practical Strategies for Denials Prevention Across the Revenue Cycle,” parts 1 and 2 that offer more advice on how to go from billing to reimbursement with minimal issues.