Denials are on the rise, and healthcare providers are losing money because of it. Annual losses from denial write-offs range from as much as 1 percent of total net patient services revenue (NPSR) to over 4 or 5 percent, according to The Advisory Board . For an average 300-bed organization, 1 percent of NPSR can equate to $2-$3 million annually. For the multi-billion dollar health alliances…well, you do the math!
Change HealthCare ran an analysis reviewing over 3.3 billion hospital transactions. Here are some results:
$3 trillion in claims submitted annually.
Payers deny around 9% of all hospital claims.
Hospitals lost around $4.9 million due to denials.
Typical health system lost around 3.3 percent of NSPR due to denials.
With the number of expert billers working in the healthcare industry, how is it that payers are still able to avoid making so many payments? Virtually all of the recent the ICD-10 and CPT coding changes have been addressed and – aside from the occasional human error – resolved. Advances in process and technology have also improved billing efficiencies. How are denials still a problem?
There are several reasons. And providers and payers can both share some responsibility. But, from the provider perspective, what can be done to lower the denial rate – or, at least make hospital and physician groups more successful in appealing denials and getting them overturned?
What they know can hurt you.
Have providers considered the possibility their payers are using claims history against them? A review of many articles written over the last several years on denials all suggest very similar recommendations for improvement. Hospitals need to “benchmark data,” hire a seasoned analyst to locate key indicators, communicate more effectively with denials staff, increase coordination with those within the organization who negotiate contracts and those who have to bill according to the contract terms, etc. These are all strategies sure to improve the process. But how many hospitals ever consider what their payers’ strategy is?
Hypothetically, let’s say an insurance company ran a denials report on a provider and saw they weren’t appealing denials less than $1,500. Might the payer then create a strategy to scrutinize these lower-balance accounts for reasons to deny them? Actually, this is probably not a hypothetical. A review of actual data on millions of dollars of denied claims reveals that low-balance, high-volume denials are becoming an epidemic. One reason for this may simply be because of the migration of many procedures and tests to out-patient settings. But there is no denying that the increase in outpatient denials is overwhelming in-house staff. And you can bet the payers know this. Liken it to the scene in I Love Lucy when Lucy has to wrap chocolates coming down the conveyer belt. There’s just too many to handle. Are there so many denials that it’s impossible for in-house staff to keep up with all of them? Quite possibly, and perhaps, by design. If a hospital is ignoring low balance-denials, might that not tempt the payer to reject as many low-balance claims as they can get away with?
The Clock Is Ticking!
One denials management company that specializes in follow-up and collection of denials recently ran a report on all placements they received from their clients in 2017. Of the tens of thousands of accounts they received, approximately 30% of them had already timed out! The firm simply couldn’t fight the denials because, by the time the hospital had outsourced the account for a second review, the appeal deadline had already passed. Dead on arrival!
One thing a hospital can do is to carefully review contract language regarding timely filing timeframes, they may differ from payer to payer. We also know about the Medicare’s 120-day reconsideration timeframe for denied accounts. Ensure that the provider’s process – whether it is internal, or in partnership with an outside organization – takes into account the timely filing deadlines so that appeals go out before it’s too late.
Denials are up across the board, and many of them fall into the low-balance, high-volume category. Fine-tune your follow-up process to make sure that low-balance denials get the attention they deserve. Segregate them from your simple re-submits. Denials require more work; don’t lump them together!
Review coding, pre-certification and pre-authorization processes to make sure that you are in compliance with contract terms to avoid unnecessary administrative and technical denials.
Timely-Filing is still a big problem. Review contract terms and internal processes to ensure that they are aligned to avoid missing appeal time-frames. If you work with an outside vendor, make sure they get a chance to take a “second-look” after in-house efforts are exhausted before accounts time-out.
Because denials represent a seemingly small piece of the revenue pie, they are often overlooked, with resources and manpower being focused elsewhere. But there is big money in that small piece! Don’t be in denial of your denials opportunities. Those providers who have aggressively addressed their denial management processes and strategies are counting the extra cash and adding, in some cases, millions of dollars to their bottom line.
Author: Joe Hoban is an executive at ARMC Financial Services, a New Jersey-based healthcare revenue cycle company. He can be reached at