Healthcare Denial Management: 5 Mistakes to Avoid

Denial management is a persistent and rising problem in healthcare. Claims denial rates are increasing year-over-year. This poses significant challenges for healthcare providers. Staffing shortages, staff turnover, and ever-changing policies and protocols contribute to the escalating rate of denials.

Healthcare practices and physicians are actively working to find solutions to the problem of claims denials, particularly through effective claims denial management strategies. It is crucial to address the top drivers of denials, including authorizations, provider eligibility, code inaccuracies, incorrect modifiers, and failure to meet submission deadlines.

A recent survey highlights the escalating problem of uncompensated care in the U.S., estimated at a staggering $43 billion annually. The rate of insurance claims denials is steadily increasing by 10%-15% each year. This is primarily due to issues that arise throughout the patient’s financial journey, ranging from scheduling to coding, billing, and collections. Effective claims denial management plays a vital role in reducing these denial rates and improving revenue cycles.

According to survey responses, the five main causes of claim denials are authorizations (48%), provider eligibility (42%), coding errors (42%), incorrect modifiers (37%), and missed submission deadlines (35%). These findings underscore the significance of addressing these areas within the framework of claims denial management. Healthcare practices must prioritize these factors to prevent revenue cycle leakage and ensure financial sustainability.

By focusing on denial management and implementing robust strategies to address claims denials, healthcare providers can mitigate financial losses and improve overall revenue performance. The integration of efficient denial management practices is crucial for the sustainable growth and success of healthcare organizations.

Top 5 Drivers of Medical Claim Denials

It is essential for healthcare providers to implement robust denial management strategies to address these common mistakes. By focusing on denial management and incorporating efficient claims denial management practices, providers can minimize denials, optimize revenue cycles, and improve the overall financial performance of their medical practices.

The top drivers of medical claim denials
An image showing the five top drivers of medical claim denials with their respective percentages.

Mistake #1: Prior Authorization Errors

Denials in the healthcare industry often arise from errors in prior authorization, such as misunderstanding insurance requirements, resulting in inadequate documentation. Simple mistakes, like incorrect patient details or outdated procedure codes, can also lead to claim denials. Additionally, failure to obtain necessary authorizations in a timely manner or submitting requests late contributes to the frequency of claim denials.

Mistake #2: Coding Inaccuracies

Coding inaccuracies present a complex challenge in claims denials. Certified professional coders play a crucial role in converting the details of a patient encounter into billable claims. Their responsibility involves assigning accurate alphanumeric codes, such as CPT, HCPCS, and ICD codes, to represent the healthcare services provided. However, time constraints and resource limitations often lead to insufficient validation of coding accuracy prior to billing. Effective denial management is essential in addressing these coding inaccuracies.

Mistake #3: Incorrect Modifiers

Denials related to incorrect modifiers are a subset of coding inaccuracies. Modifiers, represented by two-digit add-ons, indicate deviations from the standard use of procedure codes, including popular ones like CPT modifiers 25, 26, and 59. Each modifier requires supporting documentation to validate its use. Failure to provide such documentation can result in claim denials until the necessary evidence is provided. Proper claims denial management is vital in addressing and resolving issues related to incorrect modifiers.

Mistake #4: Failure to Meet Submission Deadlines

Timely filing, which refers to the deadline set by payers for providers to submit claims for payment, is crucial. Failure to meet these submission deadlines can result in denied claims and lost revenue for the healthcare provider. Denials based on timely filing fall under the category of “hard denials,” representing missed reimbursement opportunities. In some cases, if the provider submitted the claim within the designated filing period but the payer failed to acknowledge it on time, the denial may be reconsidered. Effective denial management practices are instrumental in addressing and preventing issues related to meeting submission deadlines.

Mistake #5: Provider’s Eligibility Issues

Provider eligibility issues can often lead to claim denials. This occurs when a healthcare provider is not in the patient’s insurance network or when the provider’s credentials are not updated or correctly registered. Furthermore, if the services provided fall outside of what is considered within the provider’s licensed scope of practice, claims may be subject to denial. Effective denial management practices are crucial in addressing and resolving issues related to provider eligibility.

Researchers from the Kaiser Family Foundation examined CMS data on claims denials for non-group qualifying health plans and discovered 291.6 million in-network claims received by insurers in 2021. Of those, 48.3 million (16.6%) were refused, with denial rates ranging from 2% to 49%.

Best Strategies to Prevent Denials

In 2023, healthcare organizations are expected to adopt more aggressive denial management strategies to tackle the rising challenge of claim denials. A recent survey revealed that 51% of respondents plan to be “more aggressive” in challenging denied claims, while 46% intend to increase their collections efforts with payers. Furthermore, some organizations will focus on assertiveness with authorizations for Medicare Advantage plans. Let’s explore the six best strategies to prevent denials and optimize Revenue Cycle Management.

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1. Detailed Patient Registration for Denial Prevention

One of the foundational steps to prevent denials is through detailed patient registration. This process involves gathering and recording comprehensive information about the patient at the point of registration. It includes patient demographics, contact information, insurance details, and relevant medical history. Ensuring accurate and complete data during registration helps prevent denials related to eligibility and coverage issues.

2. Utilization of Real-Time Claim Adjudication

Real-time claim adjudication (RTCA) tools empower providers to determine the payment or denial status of a claim immediately. By implementing RTCA, providers can identify and correct potential errors in a claim before submission, significantly reducing the chances of denial.

3. Prior Authorization Processes to Minimize Denials

A robust process for securing prior authorization for procedures, treatments, or medications is crucial. Implementing a streamlined and efficient prior authorization process reduces the likelihood of denials due to a lack of pre-approvals.

4. Regular Auditing and Monitoring for Denial Management

Regularly auditing denial data enables the identification of patterns and common reasons for denials. By understanding these trends, healthcare organizations can adjust their processes to address and correct the issues contributing to denials.

5. Clear Communication with Patients to Avoid Denials

Ensuring clear and transparent communication with patients is vital. Patients should be fully aware of their financial responsibilities from the beginning, including educating them about their insurance coverage, co-pays, deductibles, and any potential out-of-pocket expenses. By enhancing patient understanding of services coverage, healthcare providers can help avoid denials related to misunderstandings or lack of awareness.

6. Consistent Staff Training in Medical Billing and Coding

Providing ongoing training to staff on changes in insurance policies, medical billing, coding updates, documentation requirements, and best practices for patient communication is crucial. Keeping the team updated on the latest trends and requirements in the healthcare industry significantly reduces the risk of claim denials due to outdated or incorrect procedures.

More Tips to Reduce Claim Denials

Here are some more tips to prevent claim denials:

  • Collect accurate and up-to-date insurance coverage details.
  • Provide proper training for certified professional coders.
  • Conduct regular coding audits and provide feedback.
  • Establish clear guidelines for correct modifier application.
  • Review and validate supporting documentation.
  • Educate providers and coders about common mistakes.
  • Establish a claims submission process with deadline tracking.
  • Collect updated insurance details from patients regularly.
  • Verify coverage before providing services.
  • Implement procedures to notify staff of coverage changes.
  • Invest in software or solutions with analytics and reporting capabilities.
  • Identify denial trends and areas for improvement.

Lending a Helping Hand with Denial Management Solutions

Avoiding common mistakes in denial management, adopting well-defined strategies, and staying updated with the latest healthcare practices are crucial in handling claim denials. Regular audits, transparent patient communication, and ongoing staff training can significantly reduce the rate of denials.

Bell MedEx specializes in expert denial management services, helping healthcare organizations strengthen their revenue cycles. By leveraging their expertise in denial management, healthcare providers can effectively address denials, improve claim acceptance rates, and enhance their overall financial performance.

Book your FREE demo for expert denial management services.

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