Denial management is crucial in medical billing, ensuring healthcare providers receive rightful reimbursement for their services. However, navigating denial management can often be challenging for medical practices.
According to an MGMA Stat Poll, 69% of healthcare leaders reported their organization’s denials have increased. Denials increased due to multiple reasons, mainly:
- Lack of resources
- Staff attrition and training
- Increased denial backlog
- Substandard technology
However, the Medical Group Management Association (MGMA) states that most denials can be avoided if the above challenges are addressed. The bad news is that if claims are not handled, the average cost to rework a claim is $25.20, which quickly adds up.
Health Prime compiled a list of 10 Frequently Asked Questions (FAQ) about denial management:
1. What is denial management, and why is it important?
Denial management refers to identifying, analyzing, and resolving denied claims from insurance companies or payers. It’s vital because denied claims directly impact a medical practice’s revenue stream. By effectively managing denials, practices can minimize revenue loss and improve cash flow.
To calculate your practice’s denial rate, you need to add the total number of claims denied by payers within a given period and divide that by the total number of claims submitted within the given period.
According to the MGMA, the industry average denial rate is 5% to 10%, but keeping it below 5% is more desirable for your practice.
Health Prime’s benchmark for controllable denial percent is below 2%. Controllable denials are those that can be positively impacted by improving front-end or billing processes.
2. What are the common reasons for claim denials?
Claim denials can occur for various reasons, including incorrect patient information, coding errors, lack of prior authorization, incomplete documentation, and non-covered services. According to the American Academy of Family Physicians (AAFP), the six most common reasons for denied claims are:
- Timely filing
- Invalid subscriber identification
- Noncovered services
- Bundled services
- Incorrect use of modifiers
- Data discrepancies
Understanding these common reasons is critical to implementing preventive measures. Look closely at your reports and identify trends regarding your denial reasons.
3. How can medical practices prevent claim denials?
Preventing claim denials requires a proactive approach. Practices can implement strategies such as:
- Accurate patient registration, thorough documentation
- Regular staff training on coding and billing guidelines
- Timely submission of claims.
- Conducting regular audits to identify and address potential issues before claims are submitted.
Read more about this in our blog Simple steps to get your denials under control.
4. What steps should be taken upon receiving a denial?
Upon receiving a denial, the first step is to review thoroughly the denial reason provided by the payer. Once identified, the practice should gather the necessary documentation to support the claim and determine if an appeal is warranted. Prompt action is crucial to meet appeal deadlines and maximize the chances of overturning the denial.
According to a Journal of AHIMA report, denials do not automatically relegate claims to the write-off bin. As many as two-thirds of rejected claims are recoverable. Therefore, success—and lower recovery costs—requires a strategic approach to ensure the process aligns with payer requirements.
5. How can technology aid in denial management?
Technology plays a significant role in streamlining denial management processes. Advanced billing software can automate claim scrubbing to catch errors before submission; track denied claims efficiently, provide real-time analytics to identify trends, and streamline the appeals process.
According to the MGMA, the use of a claims scrubbing tool and best practices in coding, documentation, and denials management all aid in improving days in A/R, but it also requires dedication to running reports on these metrics — at least monthly for administrative leaders and more frequently for billers.
Above all, integrating technology into denial management can enhance efficiency and accuracy.
6. What are the Key Performance Indicators (KPIs) for monitoring denial management?
Monitoring KPIs is essential for assessing the effectiveness of denial management efforts. Key indicators include:
- Denial rate
- Denial reasons
- Days in accounts receivable (AR)
- Denial resolution turnaround time
- Denial appeal success rate
From our Health Prime’s Client Success Team, we recommend a weekly review of metrics so the practice can identify and monitor potential risks and issues that have happened over the past week.
Read more about this in our whitepaper (Guide) Top Three KPIs to Track to Set Your Medical Practice for Success.
7. Is it beneficial to outsource denial management?
Outsourcing denial management can benefit medical practices, especially those struggling to handle denials effectively in-house. Professional medical billing companies specialize in denial management, leveraging expertise and resources to streamline processes, improve collections, and reduce administrative burden on staff.
Outsourcing your denial management and medical billing services can help you get paid faster, reduce overhead expenses, and increase patient satisfaction.
Learn more about the benefits of outsourcing your medical billing processes in our blog 5 reasons to outsource your medical billing.
8. How can denial management contribute to revenue optimization?
Effective denial management directly impacts revenue optimization by minimizing revenue leakage and accelerating reimbursement cycles. By promptly identifying and rectifying denied claims, practices can maximize revenue potential, improve cash flow, and enhance overall financial performance.
At Health Prime, we believe practice optimization and revenue optimization are connected but not the same. Increased revenue is a byproduct of practice optimization. Optimizing your practice allows you to enhance processes, reduce costs, and maximize revenue while maintaining the highest service levels.
Read more about this in our blog Practice Optimization: How to convert resources into revenue.
9. What role does staff training play in denial management?
Staff training is paramount in denial management success. Proper training ensures staff members understand coding and billing guidelines, payer policies, and denial resolution processes. Ongoing education and regular updates on industry changes empower staff to navigate denials efficiently and reduce errors.
Some reasons why training your staff is essential for your business wellbeing are:
- Increase productivity and performance
- Improve staff retention
- Enhance patient satisfaction
- Reduce/Eliminate government penalties & fines
Training your staff can help your practice improve cash flow, reduce errors, enhance patient satisfaction, and develop a great brand image. Learn more about the importance of training your staff in our blog 4 reasons why you should train your staff to improve your practice.
10. How can denial management support compliance with regulatory requirements?
Denial management aligns with regulatory compliance by promoting accurate claim submission and adherence to payer policies and guidelines. By staying informed of regulatory changes and ensuring compliance in denial resolution practices, medical practices can mitigate risks associated with audits and penalties.
Moreover, denial management encompasses navigating government program regulations, complying with documentation standards set forth by regulatory bodies, and following prescribed procedures during the appeals process.
At Health Prime, we can help!
At Health Prime, we understand the importance of reducing and controlling your denial rate so you can optimize your practice, increase revenue, and get paid for your work.
If you want more information about reducing your denial rate, increasing revenue, and optimizing your medical practice, email us at [email protected]. Our team will schedule a meeting to discuss how we can optimize your workflows by cutting costs and saving you time!
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