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Denial management: the missing ingredient in revenue cycle management

By John McDaniel

The blueprint for effective Revenue Cycle Management (RCM) is complex in today’s healthcare environment. When we map out the RCM process, it includes the following steps:

  1. Patient scheduling and registration
  2. Insurance eligibility and benefit verification
  3. Collection of copayments and deductibles at time of service
  4. Claims submission
  5. Remittance processing
  6. Denial management
  7. Back‐end patient collections

Denial Management Implementing an effective and efficient process for managing claim denials is likely the single most important action a healthcare organization can make to affect its revenue cycle. Denial management is by no means a simple process; in fact, it is often extremely complex. According to the American Academy of Family Physicians, the average claim denial rate across the healthcare industry is 5 to 10 percent, varying between specialties. With the average cost of working a claim denial estimated to be $25, it is not a big stretch to see why inadequate claim denial management strategies could be costing your organization serious revenue.

The first and most important step to claim denial management is understanding the reasons behind claim denials. Tracking denial codes provided by payers provides a high‐level overview of denial reasons. This is a good place to start, but a much deeper analysis is often required to really understand denial trends by payer. According to a Medical Economics article published in July 2020, the top 13 claim denial reasons are as follows:

  • A duplicate claim was submitted when no reimbursement had been received
  • The patient was ineligible for services due to end of health plan coverage
  • The patient had met the deductible for the calendar year
  • Bundled services
  • The maximum benefit was exceeded
  • The claim form was missing a modifier(s), or the modifier(s) was invalid for the procedure code
  • Inconsistent place of service
  • Service wasn’t covered under plan benefits, or there was a lack of medical necessity
  • The claim was deficient in information, for example, missing prior authorization
  • Coding or data entry error with mismatched totals or mutually exclusive codes
  • Coordination of benefits
  • Lack of timely filing
  • Errors or typos were made while collecting pertinent information from the patient or during data entry

We need to develop Claim Denial Trending Reports by both individual practice and consolidated by reason for denials. This would offer an excellent educational tool for review with each practice as well as providing ongoing monitoring and measurement of performance improvement. Indeed, it will be interesting to recognize the reduction of days in A/R and increased collections as the number and type of claim denials are reduced.









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