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Denial Management is Key to Profitability

By:  Wyn Staheli, Director of Research
Published:  July 15th, 2019

A recent article by Modern Medicine cited a report by Becker’s Hospital Review which stated that it costs approximately $118 per claim to resolve a claim denial. Granted, these were hospital claims, but the process is essentially the same for outpatient services. In fact, you could say it is more costly for a smaller organization because they expend more resources for a lower return on the investment of employee time. The bottom line is that every organization should take denial management seriously!

According to the article, the number one cause of denials is eligibility. This is an easily remedied problem. Implement policies and procedures which ensure that the patient’s eligibility is established and verified BEFORE the patient is seen. This brings up another problem practices frequently face: not properly informing the patient of their financial responsibility. Once eligibility has been established, you can ensure that the proper forms (e.g., ABN for Medicare) are signed and that copays are collected immediately.

Other top claim denial problems are:

  • Insufficient information. Have a claims checklist to look for things like leaving out key information such as policy number or date of birth.
  • Improper or outdated codes
    • Outdated codes. Using outdated codes is something that is easily remedied. Since some code sets change quarterly (i.e, CPT, HCPCS), it is your responsibility to be aware of changes that will affect your organization. 
    • Incorrect codes. This could be due to unbundling, payer preferences, or coding guidelines.
      • Unbundling is breaking out a service into separate codes which the payer considers to be inclusive to a single service. Reviewing NCCI edits can help identify these situations.
      • Payer preferences is when a payer wants a certain code to be used. For example, Medicare and some other payers prefer that you use code G0283 instead of 97014 for electrical stimulation.
      • Coding guidelines can come from a variety of sources. CPT codes have guidelines about what is included in a service. The AMA also publishes the CPT Assistant which also answers questions about using some codes. Individual payer policies sometimes provide guidelines for using certain codes. Be sure to review these sources to make sure that you know what is or is not included in a particular service.
  • Verification/eligibility problems. In addition to the eligibility situation previously discussed, the following are also problematic and need to be regularly checked to see if there are changes:
    • Noncovered service. Is this a covered benefit? Is there a limited number of visits? Set up a system to keep track of this information. It may not catch everything, but it can help.
    • Out of network. Are you an in network provider? If not, are there out of network benefits? If there are no out of network benefits, it will be denied. 
    • Prior authorization. Many services require a prior authorization which may include a referral. Subscribing to a payer newsletter is a good way to see if there are policy changes about prior authorization or referral requirements. I’ve seen this happen for a number of payers. Also, keep in mind that sometimes prior authorizations include a limit on the number of services so be sure to keep track of that information as well.
  • Modifier problems. It is a common problem to either leave off important modifiers or use incorrect modifiers. For example, some modifiers may only be used on Evaluation and Management services so they can’t be used on non E/M services. While the order of modifiers is important for some payers, other payers will simply reorder modifiers as claims come in. If the order is important for a payer, be sure you have policies in place to ensure that they are correct on claims that are being submitted.
  • Untimely filing. Know what is required by each payer you have a contract with. Your contract will specify how long you have to file a claim after a service is rendered. In most cases, an appeal based on untimely filing will be rejected unless there are extreme, extenuating circumstances.

Implementing good policies and procedures that address the above list of problems can help reduce the number of claim denials that your organization faces. Not only is it good practice management, it can save you considerable time and money in the long run.


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