Denial Management in Medical Billing: Win by Engaging Every Revenue Cycle Department
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Revenue isn’t revenue unless it’s collected – that’s why denial management in medical billing is so important. A strong denial management strategy is essential to collect all of the revenue you’ve earned, especially considering claims denials are on the rise. Up to 11% of all medical claims were denied in 2022, up from 8% the previous year. And in a separate survey of insurance payers, 17% responded to denying in-network claims.
From providers’ perspective, these factors likely contribute to the reason why denial management is said to require the most subject matter expertise in all of the revenue cycle, according to a survey of finance and RCM leaders asked to rank 15 different tasks in the revenue cycle. Every department within the revenue cycle should contribute to your denial management strategy, but how can they all come together to decrease denials and improve cash flow?
This blog explores how various departments impact revenue and explains how to tailor your approach to denial management in medical billing for different roles in your organization.
What is denial management in medical billing?
Denial management in medical billing refers to the strategic process of analyzing, correcting, and preventing claim denials. A claim denial occurs when a payer, like Medicare or a commercial health insurance company, declines to honor a provider’s request to be reimbursed for medical care.
Claims denial management involves monitoring performance metrics, analyzing billers and payers, looking for denial management in healthcare trends, identifying underlying causes, improving workflows, and taking proactive steps to prevent denials from occurring. Denial management is never done – it’s a constant effort to continuously improve the strength of your revenue cycle, particularly as the reasons for denials continue to shift and payer requirements are always evolving.
Why is denial management in medical billing important?
Denials are a direct block to revenue. They delay incoming payments, consume labor hours, and in the worst-case scenario, result in uncompensated care. Denials have been on the rise in recent history, increasing by 20% industry wide over the past five years. Plus, denials contribute to multiple pain points in your cashflow – one for not receiving proper payment, and one for the cost it takes to rework a claim, which can be up to $25 per claim for ambulatory providers and up to $118 for hospitals.
A proactive approach to denial management in healthcare is critical for maintaining a sustainable financial position. Strong denial management in medical billing can reveal the root cause of denied claims, which empowers organizations to take corrective measures that may permanently prevent denials from happening in the future.
What are the types of denials?
Claim denials can be tied to the clinical side of care, like a procedure being deemed not medically necessary or being performed by an out-of-network physician.
Claim denials can also originate in the business office, stemming from any of the many departments involved in creating, managing, and submitting claims.
There are hundreds of technical reasons a claim could be denied, but here are a few of the most common types of medical billing denials:
- Missing or incorrect patient information, like date of birth or date of care
- Billing and coding errors, like a procedure for infants being billed for an adult patient
- Non-timely filing, a.k.a. missing a payer’s deadline for submitting a claim
- Lack of prior authorization
- Duplicate claims
- Dual coverage issues, like when a patient has both primary insurance and worker’s compensation
As you can see, with proper preventative measures, most of the non-medical causes for denials could be avoided entirely. This is why we can greatly benefit from engaging every revenue cycle department in adopting a denial-management mindset.
Best practices to improve denials management in medical billing
Bringing all your departments together to improve denials management is best done by taking each step one at a time. Denials management does not have one quick fix; it’s a matter of empowering each team and individual to contribute to a stronger revenue cycle by explaining how their work contributes to the organization’s bottom line and what they can do to improve results.
- Engage patient access in denial prevention
The front end of the claim life cycle offers perhaps the greatest opportunity for denial prevention. By gathering all of the necessary data – and making sure that data is accurate – before the patient ever sees a physician, we can greatly reduce the incidence of downstream denials.
Equip patient access staff with tools that automate the process of identity validation and eligibility verification. Not only do these tools proactively catch denial-causing errors like typos and outdated insurance information, they save staff time and speed up the intake process, improving patient satisfaction.
Deploy a financial clearance tool to assess a patient’s propensity to pay, which can inform the best collection strategy to use. Ensure you’re offering a simple, versatile payment collection solution via which patients can settle any up-front balances.
- Engage health information management and medical records in denial prevention
Don’t underestimate the impact you can make on denials with improvements at the middle stage of the revenue cycle.
Health information management and medical records staff play a key role in bridging the gap between the clinical and business sides of the organization. For example, obtaining the proper clinical documentation is necessary to complete accurate coding, which in turn contributes to cleaner claims.
Assess your coding software and claim scrubbing tools to ensure they’re effective for all payers, including Medicare. Assess denials by coder to identify opportunities for further training and engage coders responsible for denials in the appeals process.
- Analyze denials by root cause and individual to improve first pass payment
For the front- and back-end of the revenue cycle, analytics are a must to pinpoint exactly where your denials are coming from.
Using RCM scorecards to better understand the department where denials originate and the exact reason for denial and the individual employees responsible is a game-changer for a strong denials management strategy. The idea isn’t to place blame, but rather to figure out the cause behind any disproportionate denial rates so the appropriate action can be taken to further educate staff on improving their performance, with clear metrics they can track their improvement against.
- Offer denial prevention training
All revenue cycle staff — regardless of department — can benefit from additional education on insurance basics and denial prevention strategies. Employees are more likely to take ownership of their role in preventing denials when they have a better understanding of how it impacts overall cash flow. This begins with the analytics mentioned above, but can also appear in the form of staff-wide revenue cycle reeducation, encouraging staff to keep up with industry best practices and learning on their own, and making it a point for your financial leaders to always be coaching their staff.
- Introduce workflows that eliminate unnecessary touchpoints
When it comes to denial management in healthcare, technology is your greatest ally. The more you can automate processes and minimize touchpoints, the fewer opportunities there are for manual errors. Consolidating vendors and integrating data sources also aids in optimizing first pass payment rates.
Frequently asked questions about denial management
What is denial management in medical billing?
Denial management in medical billing is the process of identifying, analyzing, correcting, and preventing claim denials to ensure providers receive timely and accurate reimbursement.
What are the most common causes of claim denials?
Common causes of claim denials include eligibility errors, missing or inaccurate patient information, coding mistakes, lack of prior authorization, duplicate claims, and untimely filing.
How can providers reduce medical billing denials?
Providers can reduce medical billing denials by improving front-end data accuracy, automating eligibility checks, analyzing denial trends, and training staff on denial prevention best practices.
Why is denial management important for revenue cycle performance?
Strong denial management improves cash flow, reduces rework costs, increases first-pass payment rates, and protects revenue that might otherwise be written off.
Better denial management, stronger revenue cycle
Denial management in medical billing shouldn’t be limited to a single department or set of employees. Instead, making it an all-hands-on-deck endeavor promotes higher engagement, attention to detail, and accountability – ultimately contributing to a higher first pass yield and stronger revenue. It’s all connected, and an improvement to one part of your RCM process can create impressive ripple effects throughout your workflows.
Contact us to learn how our revenue cycle management solutions can help enhance your denial management and overall RCM success.
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