On average, roughly 10 percent of all healthcare claims are initially denied and require additional work on the part of the provider to secure payment, adding substantial personnel time and cost to the reimbursement process.
“The industry has not really gotten their arms around the issue,” said Brian Sanderson, managing partner of Chicago-based solutions firm Crowe Horwath LLP's healthcare services group, noting that providers need to figure out what denials are, what impact they have on their organization and how they can prevent them.
“Most organizations focus on the final denial rate. Generally what we are seeing is somewhere between a 1 to 2 percent loss … It’s money you could have received. So think about that … 1 to 2 percent of your revenue, you’re writing off because of these denials,” said Sanderson.
Sanderson urges healthcare providers to take a three-part approach to preventing future denials and improving their overall revenue cycle:
- Denials reporting. “You can’t spot anything that you can’t measure,” said Sanderson. “If you have no idea how many denials are coming in, how do you stop them? You need to have a denials reporting system that allows you to categorize the denials that are coming in.” According to Sanderson, most denials are caused by 10 to 15 core reasons such as not having authorization for service, not having the correct patient insurance information or not filing the claim in a timely manner. Providers who capture this data in a denials reporting tool can often identify departments that create more denials than others, which allows them to address and correct the problem.
- Denials prevention. After the top denials reasons are identified, Sanderson says providers should develop a multi-functional SWAT team to understand why the issues are occurring. “The team should include department managers, a physicians’ liaison, someone from operations who reports to the COO and someone from finance,” said Sanderson. “The person from finance should sit at the head of the table.” Sanderson says the SWAT team should take an organization-wide approach to finding ways to resolve denials issues.
- Standard denial resolution processes. Providers need to establish standard practices for handling denials. “Each hospital should have a standard protocol where they follow up on these accounts to resolve them,” said Sanderson. “Too often they fall into a collections queue and things happen very haphazardly.”
Providers that take systematic and thoughtful action to prevent denials can expect to see significant improvement to the revenue cycle.
“The idea is to get it right the first time,” said Sanderson. “Every denial that you stop from becoming an initial denial creates less follow-up work and less risk for no payment.”
Folow HFN Editor Rene Letourneau on Twitter @ReneLetourneau.