How to prevent claim denials and bolster the bottom line

Insurance claim denials are a costly and time-consuming burden on every hospital and health system. But you can avoid most denials by taking the proper steps. 

Avoiding the most common types of denials — duplicate claims, medical documentation, timely filing, etc. — can add tens of thousands of dollars to a hospital's bottom line. Revenue cycle management experts discussed how to prevent recurring denials in an Oct. 19 webinar hosted by Becker's Hospital Review and sponsored by Availity. 

The experts were: 

  • Linda Perryclear, product line director at Availity
  • Jason Yonkman, director of provider services at Availity 

Five key takeaways from their discussion:

  1. $40.6 billion is spent every year on administrative complexity in healthcare, including working denials. An estimated 9 percent of hospital charges are initially denied, which equates to $4.9 million in net patient revenue put at risk each year, according to data from the Medical Group Management Association. Studies show the average cost to rework a claim is $25 and typically takes about 71 minutes. It also costs about $118 per denied claim to appeal. Denials are costly and a big-time strain for hospitals and health systems.

  2. The majority of denials are avoidable, according to Ms. Perryclear, and avoiding denials can increase patient satisfaction. Typically, patients see denials as an issue with the provider or facility, and if patients don't feel they're being billed correctly they are more likely to seek care from other providers.

  3. The countdown method is a focused, proactive and repeatable way to prevent denials. There are four steps to the method, beginning with step four, which is to identify the top four denial categories from the past 60 to 90 days and plan to tackle one of those codes per quarter. Next, focus on three reasons that cause the denial and form a committee to review how to resolve and rework that denial. Step two is to implement two options to address the root cause of the denials, such as reviewing payer relationships and contracts. Option two could be to look for tools, such as a contract management tool that can help manage fee schedules. The last step, step number one, is to apply one measure of success. Set one goal for success, such as a clean claim rate, denial rate or days in A/R. Create positive behaviors and generate a sense of competition among the team.

  4. Celebrate successes! Have internal competitions for claim denials and offer rewards or raffles. Celebrating successes keeps the team motivated to continue to reduce claim denials.

  5. Preventing denials can save you tens of thousands of dollars per year. Ms. Perryclear gave an example of an academic medical center that conservatively estimated it could resolve about 1,172 claims per quarter. At $25 per claim to rework. The annual cost savings in reworking claims is about $87,912.50. 

To view the full webinar, click here.

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