With many payors now intensifying their efforts to deny or reduce claims, your medical office’s denial management system is more critical than ever for protecting and increasing practice profitability, according to Beth Pysell, a certified professional coder (CPC) and healthcare consultant for Coding Strategies Inc.
Pysell says an efficient denial management system can help you reduce claim denials, overturn payor denials and underpayments, and appropriately increase the revenue and cash flow of your practice.
“The American Academy of Family Physicians (AAFP) states that the average practice has a claims denial rate of five to 10 percent. If you are (experiencing a rate of) less than five percent, that’s indicative of the most efficient revenue cycle.
“But here’s the scary part—50 to 65 percent of denials are never reworked (reviewed, corrected, resubmitted or appealed),” she says.
That means the average medical practice is losing up to $20,000 annually, in addition to staffing expenses. And specialty practices and facilities are losing considerably more money.
“One of the goals in reducing denials should be to minimize the rework associated with denials and the entire claims process. The more time we spend on those claims, the more money it’s going to cost us,” says Pysell.
Most denials are avoidable
According to Advisory Board, a best practices firm that uses research, technology and consulting to improve the performance of healthcare organizations worldwide, 90 percent of denials are avoidable.
“Imagine if you could get rid of 90 percent of your denials, how much rework would be eliminated,” she says.
It’s important to differentiate between a denial and a rejection, according to Pysell. A rejection happens before the claim is accepted by the payor. Often, it’s your billing system or your clearinghouse that rejects the claim prior to sending it to the payor.
A denial is usually communicated in one of the following ways:
- From Electronic Remittance Advice (ERA), generally utilizing national standard denial codes to communicate the reason for denied payments, which are included in each line item.
- A Paper Explanation of Benefits (EOB) that may use national standard denial codes, but frequently utilizes payor-specific codes.
- A letter notifying you that the payor needs more information, such as medical records, to support medical necessity.
Pysell says the benefits of using Electronic Remittance Advice (ERA) include the fact that the less a person has to perform data entry, the less the chance for errors. So, when available, electronic posting of the ERA is always preferable.
“It takes so much more time for someone to manually post an ERA than it does to post it electronically and just validate that it is posted correctly. The pitfall is that if your system denial codes don’t match the codes on the ERA, you’ll have errors and incorrect data.
“It’s very important to verify that all denial codes utilized by the payor are built into your practice management system. This can then be used for reporting and trending to identify problem areas within your process,” she says.
Pysell says one of the most common reasons for denials stems from failure to submit your initial claim, corrected claim, or appeal within the timeframe required by your payor contract.
“Be sure you know the filing limits for your major payor contacts. This should be conveyed to everyone involved in the revenue cycle to ensure there are no delays in the process,” she says.
It is critical that verification of a patient’s benefits is performed prior to a service being provided.
To prevent non-covered services:
- Identify services provided that have coverage limitations for contracted payors and communicate the requirements to all staff who are involved.
- Verify a patient’s benefits prior to all encounters with that person. When a procedure is being performed, verify that the patient has coverage for the planned procedure. If not, notify the patient and make arrangements for an alternative form of payment.
- When submitting claims for problematic procedures, use the appropriate modifiers to communicate that the patient was notified and agreed to have a non-covered service performed.
- Watch out for inaccurate claim information. Pysell says this is most often a problem with the patient’s demographics. It may boil down to the member not being found. Inaccurate claim information can be avoided by validating all patient demographic information at every patient encounter and implementing a data verification process that includes the patient’s name, date of birth and what insurance coverage he or she has. Ensure this information is entered accurately. Pysell recommends that you consider using a system that can electronically validate demographic and insurance information.
- Watch out for current procedures technology (CPT) diagnosis or gender mismatches. For example, a baby boy’s circumcision may be billed under his mother’s coverage, instead of under the baby’s coverage. Such mistakes can be avoided by ensuring that patient demographic data is always complete and accurate before it reaches the payor.
- Always assign diagnosis codes to the highest level of specificity supported by the provider’s documentation. Do not fall back on unspecific codes because they are on the list. Provide feedback to providers when needed specificity is not documented in the patient’s records so that improvements can be made. Track payors denying coverage for specificity and locate coverage policies for services being denied. Share this information with your providers.
- Identify services provided that when performed together are bundled and not separately billable. Identify when these services may be appropriately unbundled with a modifier. If services don’t meet the requirements for a modifier, do not enter a charge for bundled service.
- Ensure that modifiers are used appropriately and correctly. Failure to do so is a major reason claims are denied and can increase your medical practice’s risk of an audit by payors, according to Pysell. Modifiers 24, 25 and 59 are some of the most frequently abused modifiers.
- Ensure that the diagnosis code and CPT (current procedural terminology) match. Linking diagnosis codes to the proper procedure code is an essential skill for your coding personnel to master.
How to include the front office
Pysell says the best way to reduce denials is to clean up the processes on the front end and ensure that everyone in the revenue cycle plays a part in reducing denials.
Here are some tips for preventing denials on the front end:
- Insurance verification: Develop a report at least three days before the patient comes in to verify the patient’s information. Using an electronic verification system can speed up this process tremendously.
- Have experienced coding staff in place to minimize errors. Denials related to documentation and coding can be caused by an invalid modifier, failure to meet new patient criteria, invalid or expired diagnosis codes, bilateral procedures or bundled procedures. Pysell recommends utilizing the edits of your software and clearinghouse to minimize these denials.
- Check charge entry daily. The more manual processes that occur, the greater the chances for error.
- Carefully monitor your claims submission process. Questions to answer daily include: Did the clearinghouse receive our file? Are there any claims that are unbilled? If so, why? What rejections are we receiving at the clearinghouse level? What is the source of the missing information? Can these rejections be prevented? If so, how?
How to appeal a claims denial
If you intend to appeal a claims denial, the number one item you must know before doing so is why the claim was denied, says Pysell.
If the answer is unclear from the denial codes, the payor may need to be contacted before the claim is resubmitted, or before you send an appeal. Pysell says it’s essential that you document all correspondence, both verbal and written, with the payor.
This documentation should include the date and time of the correspondence, the name of the person with whom you spoke and any confirmation authorizations or treatment numbers.
“The clinical documentation should also be reviewed to ensure that there is factual documentation to support the service, and that it is thorough and complete,” she says.
Pysell says it’s important to involve your clinical staff in all denials documentation requests to ensure you have everything you need that pertains to the service provided.
She notes that many payors have online instructions on how to file a claim appeal. Many have tools on their websites which allow you to directly submit an appeal.
“When submitting an appeal, it is important to tell the story of the service in order to prove the medical necessity (of the treatment given). It has to be detailed, but simple. You don’t want to overload them with information,” she says.
This “story” should detail:
- The primary reason the patient was being seen.
- The condition for which the patient is being treated.
- Any risk factors that could impact the patient’s outcome for this condition.
- What information is required by the code set.
The appeal needs to be reviewed by a qualified person, such as a coder, a clinical person or a physician, before it is sent.
Pysell warns that sending a patient’s medical record to a payor as part of an appeal can be dangerous if you or your clinical staff have not reviewed it to ensure that the information to support the service rendered is there.
“You must be sure the documentation supports the service as billed before submitting the notes with your appeal,” she says.
Not only must you ensure that the documentation is complete, but you should direct the payor to key pieces on information directly supporting the services billed by highlighting important sections with a colored marker.
Pysell suggests including the codes beside this information so the payor is aware of where you pulled the information for each of those codes.
Organization counts
“A payor will not spend time searching through pages and pages of information to find what supports your codes. You have to give them a roadmap to the information,” says Pysell.
That includes providing a cover letter defining the issue, describing what was done and defending what was done.
Ensure that the pages are in order and that each page has the patient’s identifying information on it.
“Don’t provide too much information. You don’t want to give them the patient’s entire medical record. Give the payor only the information that is required to support the procedures you are appealing,” says Pysell.
Trend and track your denials
“Some of your best denial management tools are the reports you can generate to track and trend the denials you are receiving,” she says. “These reports don’t only identify training opportunities and deficiencies in your process—they can also help to measure how successful your denial management processes are.”
Trending, tracking and benchmarking your denials, even if doing so shows you the ugly truth, is essential, because if you don’t have a starting point, you can’t improve the situation, according to Pysell.
Completing denial reports allows your medical practice to identify the payors causing you the most problems, the procedures that are being denied most often, and what providers’ claims are effective.
Charge lag reports can help you to identify deficiencies in your pre-claim submission process. Generating these reports can help you avoid claim delays and ensure that your claims are being filed in a timely manner.
Pysell says if your claims aren’t getting out the door efficiently, you’ll have less time on the back end to fix any problems.
“AR (accounts receivable) reports are valuable to run to give you an idea of the health of your entire process,” she says, adding that as your denial rate increases, so will your days in AR.
Any unpaid claims over 120 days require intense follow-up with the payor until they are resolved.
Another important part of AR management is the posting of adjustments. It is important to correctly note what type of adjustment is being taken on the claim. If the correct adjustment code is not placed on the claim, it can keep you from effectively identifying those claims that may have been collectible if worked differently, according to Pysell.
And don’t write things off just because you are tired of working them.
Pysell recommends tracking your adjustments by type to identify collectable charges that were not collected and detailing why that was the case. If you wrote something off because of timely filing or due to improper patient information, you need to be able to track those adjustments to prevent those kinds of things from happening in the future.
Form a denial management committee
Forming an effective denial management committee to trend your denials and determine the root causes can also help you to reduce denials.
This committee can also develop an action plan to handle the problem and measure the results of your efforts.
Pysell says the committee should include members from all levels on your team, including administrative, clinical and billing office staff.
A typical meeting agenda could include:
- A summary of denials and appeals.
- Specific procedure and/or diagnosis coding issues.
- Any payor updates or policy changes since the previous meeting.
- A review of procedures receiving requests for documentation of medical necessity.
Pysell says meetings do not have to be long and they should not be allowed to drag on. Meeting minutes should be taken and provided to all attendees.
Conclusion
The health of your medical practice depends upon your revenue cycle. Establish an efficient denial management system and increase the revenue and cash flow of your practice.
