Clinical denials: understanding current trends and strategies for reducing denials

Clinical denials are undermining providers' ability to get paid in full for the services they deliver. Trends around this phenomenon are worsening. 

During Becker's Hospital Review's 7th Annual Health IT + Digital Health + RCM Annual Meeting, in a session sponsored by Xtend Healthcare, Colleen Goethals, Vice President for Mid-Revenue Cycle at Xtend Healthcare, led a workshop discussing the need for providers to develop a strategy for handling denials and best practices for reducing and appealing denials.

Four key takeaways were:

  1. Clinical denials are increasing, with many associated causes and consequences. Ms. Goethals shared statistics that speak to concerning trends in clinical denials:
    • 89 percent of health systems saw an increase in denials in the last three years.
    • 11 percent of hospital claims are initially denied, up 2 percent in a two-year timeframe, equating to $262 billion in lost revenue.
    • 90 percent of denied claims are preventable; 66 percent are recoverable.
    • Only 35 percent of healthcare providers appeal denials.
    • 31 percent of providers use a manual process for managing denials.
    • The average denial rate per payer is between 6 and 13 percent.
    • 27 percent of errors associated with denials originate in the registration eligibility workflow.

"There's a lack of denial resources," Ms. Goethals said. "That means there isn't the expertise to support appeals and the data [also] isn't there to support them."

  1. Reversing these trends begins with getting a grip on denial rates and root causes. The denial rate is calculated as the number of zero-paid claims divided by the total number of claims. Ms. Goethals said providers should strive to keep that rate below 5 percent, although best practice is below 2 percent. She added that it is also crucial to know the rate of claim denial appeals; best practice is to appeal 85-88 percent of denied claims.

The next step is to analyze causes for denials and establish whether they are technical or clinical. 

    • Technical denials are due to non-medical reasons, such as a failure to provide requested documentation. 
    • Clinical denials are often rejected on the belief there is no medical necessity — a trend Ms. Goethals noted is also on the rise — as well as on payer criteria related to length of stay, level of care, coding errors, covered services and timely filing.

To gain further insight, organizations need coding departments' data so they can identify patterns between claim-adjusted reason codes and denials across payers, providers and tests/procedures. A good practice is to look at what causes claims to be denied based on "not medically necessary."

  1. To reduce denials, an interdisciplinary team and staff education are key. Once they understand the root causes of claim denials, providers should put together a cross-departmental team to look at each piece of the claim life cycle together and assess how they can prevent those causes. 

"Make sure you explain the process because some departments may not understand the life cycle of the claim or even know they have a piece in it," Ms. Goethals said. She underscored the essential roles of patient access staff responsible for facilitating authorizations and of patient care teams for putting together thorough clinical documentation so that claims get paid correctly.

  1. To successfully appeal denials, having a strong denials team is paramount. Because some claims will inevitably result in denials, having an experienced team that knows how to write appeal letters in response to both technical and clinical denials is critical. "Appeal every case where there's documentation to support coding and keep the appeal letter concise and to the reason for denial — just get to the point," Ms. Goethals said. “Include pertinent excerpts and copies of the medical record that will support the appeal.”
  1. Track and Report.  It’s important to measure and communicate your actions and successes, including, but not limited to, Total initial denials, total appeals, financial impact, second-level appeals, and failed appeals.  

Denials management and prevention is a big project to tackle.  It’s time and resource consuming.  Yet, with consistent and timely review of denial data, ongoing communication and collaboration, successful appeals letter writing and measuring your success are all steps to take toward prevention

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