Medical claims denials are on the rise and continue to be a costly problem for health systems. Unfortunately, the vast majority of providers focus their resources on reactive responses, working to appeal denials and recover payments after denials have already occurred.
In a Becker's Healthcare podcast sponsored by Xtend Healthcare, Colleen Goethals, vice president of mid revenue cycle at Xtend Healthcare, discussed the problem of rising denials, why a proactive approach based on data is more effective and best practices for writing appeal letters.
Four key takeaways were:
- Claims denials are a significant and growing problem for health systems. According to Ms. Goethals, 89 percent of health systems saw an increase in their denied claims over the past three years and about 11 percent of hospital claims are initially denied. "We did see this slow down a bit during the pandemic, because fewer claims equals fewer denials," she said. "However, the number [of denials] in the last year has been going up very quickly. A lot of hospitals are overwhelmed with the number of denials and are having difficulty keeping up with them."
- While the vast majority of denials are preventable, most facilities are focused on reacting after the fact. "There's not a lot of proactive work being done in health facilities," Ms. Goethals said. "What's interesting is that if you can be proactive, 90 percent of denied claims are preventable. However, once the claim is denied, only 66 percent are ultimately recoverable."
- To prevent front-end denials, start with data and analyze your workflows. "We recommend the first step to prevention is digging into your data to get to the root cause of your denials," Ms. Goethals said. "Data can help you identify trends by payer, provider, diagnosis, procedures, treatments or coding issues."
Then, it's important to establish a multi-disciplinary team to thoroughly explore the data and help identify and address workflow and process issues. This team can address bottlenecks and help departments understand how their actions are affecting others in the revenue cycle. "For instance, about 27 percent of the denials start at the front end with issues such as eligibility, authorizations and medical necessity," she said. Yet issues are also present in other departments such as patient scheduling, patient access, utilization management and HIM/coding. Also need to include representation from physicians. Understanding the content of managed care contracts is also critical.
- Invest resources in appealing denials that can be supported by documentation. About 10 to 12 percent of denials do not have enough supporting documentation to appeal. However, the remaining 88 percent can be successfully appealed. "Appeal every case where there's documentation to support the original coding," Ms. Goethals said. "After validating that you have a true denial, get multiple departments involved in writing the appeal letter. But be sure to have a point person with the necessary documentation and coding expertise who understands what the providers are looking for and what the managed care contract might say."
In writing the actual appeal letter, be simple, clear and concise, and speak directly to the content of the denial. "Don't put too much information into a letter because payers don't want to sift through it all," she said. "Use the medical record documentation to support the appeal. Consider including guidelines and the names and credentials of the physicians, nurses, pharmacists or other healthcare professionals involved."
By shifting resources from reactive responses to proactive ones, health systems can prevent a vast number of claims denials. When denials do occur, being simple, clear and concise when providing supporting documentation can increase the number of successful