Challenges in Denial Management

What is Denial Management in Healthcare?

Denial management is an essential part of revenue cycle management. By using it, practices and hospitals can investigate every unpaid claim, spot trends, and appeal the rejection of a claim. Through this process, these healthcare providers can improve their processes to avoid payment issues for future claims.

Yet, it remains one of the most troublesome areas that small practices and hospitals face despite its importance. Here, several challenges hamper practices’ and hospitals’ ability to implement successful denial management.

Denial Management Today

Before looking at these challenges, it’s essential to see why they significantly impact revenue.

For example:

• Payers deny approximately 1.38% to 5.07%.
• The average claim denial rate across the healthcare industry varies between 5% and 10%.
• There has been an increase in denied gross charges by payers of 15% to 20% of the nominal value of all claims submitted.
• Approximately 90% of claim denials are preventable.
• Providers never resubmit up to 65% of denied claims.
• Approximately two-thirds of all denied claims are recoverable.

Consider the above example, it’s easy to see that unpaid claims and denial management can significantly impact a practices’ revenue. In simple terms, practices are not receiving all the payments owed to them.

Denial Management Challenges That Practices Face

As mentioned earlier, practices and hospitals face significant challenges in their denial management processes. Without overcoming these challenges, they lose income, and it impacts the sustainability of their practice.

Let’s look at some of these challenges in more detail.

• Outdated Strategies:

Many practices still use paper-based, manual processes that are far less efficient and organized than modern solutions. In fact, according to research conducted by HIMSS Analytics, about one-third of healthcare providers still use a manual claim denials management process.

These manual processes don’t support efficient decision-making and prevent the use of automation to make the process more streamlined and effective.

• Lack of Financial Resources:

Although small practices don’t necessarily have the exact operational costs as larger practices, they also deal with increased expenses. For instance, claim denials cost healthcare providers about 5% of their revenue annually, and reworking and resubmitting initial denials increase operational costs by $9 billion. And that does not even take into account the $25 average for managing a denial.

In simple terms, practices are in a vicious cycle. They don’t necessarily have the resources to implement a denial management solution to allow them to submit claims correctly. As a result, they do not recoup enough revenue to ensure that they correct and appeal denied claims.

• Lack of Automation:

As alluded to earlier, many practices still rely on outdated, manual processes for their denial management. Apart from being far less efficient and time-consuming, manual processes open the door for mistakes and offer less transparency.

As a result, those practices that don’t use automation in their denial management process sacrifice the advanced claims reporting and customised decision support that it offers.

• Lack of Appropriately Trained Staff:

Practice staff members often have various roles to fill and have many administrative tasks they must manage. They also have to deal with constantly changing regulations and rules.

Because of this, it often leads to them placing denial management on the back burner. Also, if these staff members aren’t correctly trained in the complexities of claims management, it impacts the practice’s revenue.

• Lack of Standardisation:

The lack of standardization in the reasons and how often health insurers deny claims for patients with an insurance plan is a severe challenge for practices. For example, two different payers could deny the same claim, but each payer could use another code and communication method to inform the practice of the reason.

As a result, practices cannot track their denials and unpaid claims and their reasons, which makes it difficult to avoid future denials.

Say Goodbye to Denials: Proven Tactics to Streamline Denial Management

Despite these challenges, all is not lost, and practices can overcome them effectively. To overcome them requires a two-pronged approach. Practices should first find their initial denial rates and look for solutions to deal with these denial issues. Data analytics offers the perfect tool to do this and could point to the root cause of the denial issues.

Secondly, practices should investigate registration and pre-service issues. Denials often originate at the beginning when front desk staff admit patients who don’t meet the eligibility criteria for payments. So, eliminating this and paying careful attention to patients’ eligibility beforehand can go a long way in eliminating a significant portion of denials.

To achieve this, practices should have an efficient pre-authorisation process that requires authorisation ahead of time. Here, the information goes from the practice to the payer, who refuses approval and sends an answer back to the practice.

To improve their pre-authorisation processes, practices should consider:

• Automating their pre-authorisation screening processes, which make it easier for staff to validate claims.
• Automating payer policy maintenance and be stringent to reduce administrative work.

Practices should also ensure proper and effective reporting, keeping the entire process transparent and making it easier to understand why payers reject claims. Ultimately, this could prevent future denials.

Conclusion

Denial management plays a vital role in the revenue cycle of any medical practice. By having efficient processes in place, practices can know why claims are denied and take the necessary steps to prevent future denials. And by avoiding denials, practices increase their revenue and their sustainability.

For more information on denial management and how we can help practices implement efficient and streamlined denial management processes, contact us for more details. PrognoCIS is a healthcare technology company serving the needs of ambulatory medical practices of all sizes and specialities.