Healthcare organizations across the United States have experienced challenges in revenue cycle management. One notable issue is the rise in medical claim denials, which many providers report have increased dramatically. Denial rates have grown from about 9% in 2016 to approximately 12% in 2022. In 2021, 69% of healthcare leaders noted an increase in denials, with an average rise of 17%. Factors contributing to this trend include COVID-19-related coding errors and greater scrutiny from payers.
This situation has strained the financial health of healthcare providers, prompting administrators, owners, and IT managers to adopt strategies to manage and reduce denial rates. The following sections present various approaches to tackle claim denials along with the effective use of artificial intelligence (AI) and automation technologies.
Understanding the Causes of Medical Claim Denials
Organizations must first understand why medical claim denials are on the rise. Research identifies several key factors behind these denials:
- Registration and Eligibility Issues: About 27% of denials arise from patient registration and eligibility verification errors, including incorrect demographic information and lapsed insurance coverage.
- Authorization and Pre-certification: Around 11.6% of claim denials are linked to authorization issues. Many practices either do not obtain prior authorization or fail to provide adequate documentation for medical necessity.
- Coding Errors: Incorrect coding is another major contributor to denials. From mismatched diagnosis and procedure codes to missing modifiers, these mistakes can greatly impact reimbursement rates.
- Timeliness of Submission: Providers often miss deadlines for submitting claims, resulting in avoidable denials.
- Duplicate Claims: Submitting claims multiple times can also lead to denials, especially when patients have overlapping coverage from different insurers.
To address these common issues, organizations need a comprehensive approach to tackle the root causes of denials and enhance their processes.
Implementing a Structured Denial Management Workflow
Establishing a structured denial management workflow is one effective strategy against rising denial rates. Key components of a proper denial management workflow include:
- Data Analysis: Regular analysis of denial data helps organizations identify patterns related to denials. Categorizing denials by type, payer, and reason can reveal systemic issues that need attention.
- Proactive Denial Prevention: Research indicates that about 85% of claim denials are avoidable. Therefore, focusing on patient information verification before claim submission is essential.
- Regular Audits: Conducting audits of claims processes helps identify common errors leading to denials. Reviewing submitted claims and their outcomes can inform strategies to minimize future errors.
- Communication with Payers: Establishing clear communication with payers can lessen confusion and improve understanding of submission requirements. Regular meetings with payer representatives help organizations stay updated on policy changes.
- Training and Development: Ongoing education for staff involved in billing and coding is crucial. Workshops on coding updates, payer policies, and best practices can help improve team performance.
Utilizing Technology to Streamline Processes
Technology is essential for improving denial management efficiency. Organizations should implement the following solutions:
- Denial Management Software: Implementing software that automates the denial management process can decrease the workload on staff and streamline workflows.
- Big Data Analytics: Using big data analytics enhances billing accuracy by identifying patterns leading to claim rejections, allowing for data-driven decisions.
- Predictive Analytics: Predictive analytics can help flag high-risk claims before submission, enabling staff to address potential billing issues early.
- Cloud-Based Solutions: Cloud platforms offer flexibility in managing revenue cycle processes remotely. They help ensure real-time updates to patient information, reducing errors.
AI and Workflow Automation: The Future of Denial Management
With a growing demand for efficient healthcare services, organizations are turning to AI and workflow automation for assistance in medical billing. AI can improve denial management in several ways:
- Automated Claims Processing: AI systems can streamline claim submissions by analyzing documentation and determining necessary coding, reducing human errors.
- Real-Time Eligibility Verification: AI can verify a patient’s insurance status instantly, ensuring accurate billing information and reducing registration-related denials.
- Machine Learning for Error Detection: Machine learning algorithms analyze past data to identify error patterns, providing feedback to improve future submissions.
- Enhanced Decision Support: AI tools enhance decision-making in the revenue cycle by determining requirements for prior authorization based on payer guidelines.
- Robotic Process Automation (RPA): RPA automates repetitive tasks in billing, such as data entry and claim tracking, allowing staff to focus on more complex issues.
Strengthening Staff Training and Knowledge
Training impacts the reduction of claim denials. Organizations should prioritize these educational strategies:
- Understanding Denial Codes: Staff must learn the importance of claim adjustment reason codes (CARC) to recognize denial reasons and implement corrections.
- Continuous Education: Regular training sessions keep staff informed about coding regulations, payer policies, and denial management techniques.
- Collaboration Across Departments: Encouraging teamwork among clinical staff, billing teams, and administrative personnel enhances the focus on improving claim submissions.
- Feedback Mechanisms: Creating channels for feedback allows staff to suggest practical solutions and improvements to workflows.
Collaboration with Medical Billing Companies
Considering the complexities of medical billing, healthcare organizations can benefit from collaborating with specialized medical billing companies. These firms can offer expertise in these areas:
- Claims Management: Experienced billing companies can manage administrative tasks and ensure accurate claims submission to lower denial rates.
- Denial Analysis and Support: Professionals can assist in analyzing denied claims to identify systemic issues and develop effective strategies.
- Outsourced Services: Outsourcing denial management allows organizations to access specialized resources and technologies for improved revenue recovery.
- Expertise in Compliance: Billing companies usually have staff familiar with regulatory changes and compliance, helping organizations stay aligned with payer guidelines.
The Impact of Rising Denial Rates on Financial Health
High denial rates pose a substantial threat to the financial viability of healthcare organizations. For instance, hospitals reportedly spent around $19.7 billion in 2022 attempting to overturn denied claims, with many needing costly appeals. More staff time spent on prior approval processes highlights that the repercussions of denials extend beyond lost revenue.
Healthcare organizations need to recognize that unresolved denials can diminish up to 5% of net patient revenue. To safeguard financial health, a proactive stance towards managing denials is necessary through technology, structured workflows, and staff development initiatives.
Concluding Thoughts
Addressing the increase in medical claim denials is essential for healthcare organizations in the United States. By implementing structured workflows, utilizing technology, and investing in staff training, providers can better manage the challenges of medical billing. Collaborating with specialized billing companies can further strengthen denial management efforts. Taking action now will help ensure both financial stability and the ability to provide quality care to patients amidst rising costs and the demand for transparency in healthcare billing.
