Manage Denials to Increase Practice Cash Flow

Revenue cycle management is a fifty-cent phrase for making sure your medical practice is paid for the care it provides.  One obstacle to getting paid is claim denials.  Practices can and must eliminate all denials resulting from practice error in the claims process.

The first step in the process is to measure the practice’s baseline denial rate, and then determine and categorize the reason for each denial.  Simply put, you need to track the number of claims submitted and the number denied.

You can further monitor this by:

  • Location
  • Type of service
  • Payer

But if you are not presently doing denial management tracking, start with the global percentage. Set up denial reason codes in your practice management system that describe specifically the reason for the denial, which you can then roll up into broader categories.  For example, wrong insurance, incorrect date of birth, and wrong subscriber are all demographic registration errors.

Coding denials might be broken down into incorrect modifier use, wrong CPT code, a diagnosis code that doesn’t support medical necessity and submitting bundled codes. Look at the number of errors in each broad category. If you are posting payments manually, instead of with electronic remittance, you will need to post the denials manually. When a denial is received, post it in the system with a $0 payment and assign the correct reason code.  Calculate the baseline for the number and percentage of claims denied in each broad category such as registration, verification, missing referral or authorization, coding, medical necessity, filing limit, incorrect or missing NPI.

Why assess the baseline denial rate?

The purpose of assessing the baseline denial rate is not assign blame “off with her head” style, but to focus the practice’s efforts on improvement.  Let’s say the practice found claims denied as being past the filing limit.  A group should have no tolerance for this type of error, but mandates don’t always bring results.  Track a sampling of these to determine the cause.  Possible causes might be in registration, in unworked suspended claims, in failing to understand Medicare Secondary Payer (MSP) rules or from other coordination of benefit problems.  Methodically, trace back the steps that resulted in denial.  What work processes can be changed and what safeguards implemented to prevent recurrence?  This might be education about MSP rules, a follow up system to review suspended claims or a review of all claims by payer 45 days before the filing limit.

What if there were denials due to coding errors?  An example might be if an Evaluation and Management modifier was incorrectly left off the E/M service and appended to the procedure.  When the denial is received, post it with a zero dollar payment with the reason code “modifier error.”  Modifier error is one example of a coding denial.  Review the practice’s current systems for assigning modifiers and for claims editing prior to submission.  Rather than simply correct and resubmit, review the systems and identify steps that can be taken to prevent this type of denial in the future.

For each type of denial, a small working group can investigate causes and recommend process improvements.  If you are a small medical practice, the Office Manager needs to meet with the billing staff to review reasons for denials and discussion solutions to eliminate. Each month, continue to track the denial rate and volume by type.

What kind of improvements have some medical practices used?

  • Full registration at check in
  • Batch verification of eligibility and benefits
  • Coding education
  • Supervisory review of clearinghouse reports and A/R reports
  • Cross training between the front and back office
  • Publishing and promoting successful results

A colleague of mine jokingly said to me, “Denials will always be with us.”  It is true that some payer denials cannot be prevented and are out of our control.  But before we raise the white flag, let’s do all in our power to eliminate preventable denials, one major obstacle on the road to payment.

Have questions? I’m here to help.