Surefire strategies to reduce claim denials - Managed Care - health care providers need to focus on preventing denials before patient care begins

Healthcare Financial Management, May, 2003 by Kara Atchison

To succeed in today's managed care environment, healthcare providers need to focus on preventing denials before patient care begins.

Hospitals are adept at quickly and efficiently registering patients and administering care. However, being successful in managed care requires more than that. Before they can receive payment, hospitals must have obtained authorizations and verification that the patient is eligible for coverage, and must submit clean claims to the payer to receive timely payment.

Hospitals generally focus on utilization review or medical necessity issues when managing denials. Interestingly, though, such issues often account for less than 5 percent of all denials. If one considers a denial to be any claim that is a zero payment, the admitting and patient access departments typically account for more than half of all denials. Most denials occur before patient care even begins due to incomplete or inaccurate information being gathered at the time of registration. Next, deficient processes in the billing office may give rise to 25 percent or more of a hospital's total denials.

Front-End Benchmarks

As Jack Welch, former CEO of General Electric, once proclaimed, "What gets measured gets managed." Healthcare providers should measure the causes of their denials and work to reduce the frequency of these causes. Causes of denials can be measured by tagging payment amounts of zero as noted on the remittance advice and tracking these denials using a variety of methods. Healthcare providers may use simple methods such as spreadsheets or more sophisticated methods such as software that is linked to existing A/R systems.

Denials can be reduced by pursuing specific goals relating to causes of denials. The following benchmarks are a guide.

Denials due to lack of authorization: less than 1 percent. An analysis of denied claims in more than 100 hospitals found that more than 62 percent of denials originating in the admitting/patient access departments were a result of no autorization." The number of "no-autorization" denials easily can be reduced by building an authorizations logarithm into the registration pathway and deferring nonurgent treatment, such as MRIs or physical therapy, until proper authorization is obtained. An authorizations matrix will allow registration staff to follow a registration path appropriate for the patient's insurance plan and the care being given, according to the procedure or service type.

It is not uncommon for a noncontracted service, such as a physician clinic charge or laboratory service, to be "tacked on" to the claim, with the result that the entire claim is denied. In some instances, by obtaining an authorization for these noncontracted services, payment may be allowed. If the service is necessary, its frequency should be tracked and steps taken to have it included in the contract.

Denials due to patient ineligibility: less than 0.5 percent. In the same set of hospitals referred to previously, on average, 37 percent of denials originating in admitting/patient access departments were due to the patient not being eligible for coverage, or services not being covered. The easiest way to remedy many denials due to ineligibility is to use web sites designed to verify eligibility, such as those offered by many managed care payers and electronic data interchange suppliers.

Patients preregistered before admission and their authorizations in hand: at least 90 percent. Hospitals should make it standard protocol that any patient who is given an appointment by the scheduling department be automatically transferred to the preregistration department to have benefits verified and an authorization obtained immediately. For walk-in and nonscheduled outpatient visits, the registration staff should be trained to confirm that the care being given matches the authorization that has been issued, and that the place and date of service is verified.

Denials due to data-entry errors or incomplete information on a claim: less than 0.5 percent. Data fields should be large enough to enter all information needed. Registration representatives should be trained to have the patient provide the correct spelling of names, addresses, phone numbers, and plan names and numbers. Another option that can reduce denials due to incorrect addresses or other information is to have patient parameters (address, plan, guarantor information, and account number) automatically deleted from the system if there is no activity within six months. This simple change compels the registration staff to verify and re-enter patient information, leading to greater accuracy.

Claims often are denied due to "insufficient information to process claim:' Plan representatives should be called upon regularly to help train staff to include all information that is required to pay the claim. Fields for information that is often omitted should be highlighted in registration software.

Copayments and deductibles collected from the patient at the time of registration: at least 25 percent. The current norm seems to be 7 to 10 percent, which is below an acceptable norm. The registration staff should be trained to request these payments at the time of registration. Hospitals can offer patients discounts for paying at registration to encourage payment. Finally, staff should be trained to inform patients during the preadmission process that they will be asked to pay their copayment or deductible before services are provided.