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What is the denials management process?

Practices, clinics, and hospitals across the country use a substantial amount of resources reacting to claims management issues. In fact, 25–30% of the nation’s total health care expenditures are direct transaction costs for inefficiencies associated with claims management (American Medical Association (AMA)). To remedy claims issues such as payment reconciliation and claims follow-up, healthcare revenue cycle professionals implement the denials management process.

Denials management is the process in revenue cycle management that focuses on understanding why claims were denied, implementing denials prevention and workflow solutions, and diving deep into claims analysis.

Specifically, the cycle consists of the following steps:
Identify top reasons for denial
Analyze the data
Align team workflow
Discover preventative steps
Initiate a denials prevention plan & rework claims
Measure success

The following article breaks down these steps.

#1: Identify top denial reasons

Essentially, this step consists of gathering information about your denied claims and either inputting data manually or using a tech solution to organize your findings. First off, you’ll need to aggregate as many of your claims as possible.

Though tedious, you’ll need to look through all of the Claims Adjustment Reason Codes (CARCs), or generalized reasons for denial found on your 835s, as well as the Remittance Advice Remark Codes, or supplemental explanations for monetary adjustment or policy information advice for remittance.

#2: Analyze the data

After you’ve gathered your data, it’s time to sort through what you’ve collected. At this stage your denials are already organized in columns for year/quarter, CARC, billing provider, rendering provider, etc. (whether automatically with a software like Rivet or manually using something like Google Sheets or Microsoft Excel). It’s now time to drill down into the data and analyze trends.

Do you know your average denial rate? If you don’t, now’s the time to find out. You’ll want at least three months of data to get a good look at trends.

While the industry average rate of denial is 5 to 10%, the recommended rate of denial is below 5%, according to the American Academy of Family Physicians. Unfortunately, it’s the new normal to have a denial rate above 10%. In fact, the national average denial rate is now at 11%; a 23% increase since 2016 (Change Healthcare 2020 Revenue Cycle Denials Index).

#3:Align team workflow

In this step, the front-end, mid-cycle, and backend teams must be consulted. Meet as a team or separately to ask what processes are being followed to fulfill each person’s job title. Maybe that’s asking team members how they work a difficult claim. Or maybe that’s how they go about registration or eligibility. You’ll likely find that most, if not all, team members have unique ways of completing the tasks they’ve been given.

Approximately 66% of denied claims are recoverable, but 50–65% of denials are never reworked and lack of claim rework may be due to your team’s current workflow. A few teammates may have extremely efficient workflows, but how will you know until you speak to your team? Align the best way to work denied claims based off of success rates.

#4: Discover preventive steps

The Kaiser Family Foundation found that between 86 and 90% of denials are actually preventable, so in this step you’ll be uncovering ways your team can prevent denials and make solution plans. In step #3 you should have gathered a wealth of information and realized where issues are happening on your team. Is it at the front end with registration? Is it in medical coding? You should have a lot of data at this point, so you’ll need to do some form of triaging to find where to begin.

#5: Initiate a denials prevention plan & rework denied claims

The trends discovered should get taken care of immediately under your prevention plan. Whether issues are found in registration, coding or somewhere else, you can and should build a plan and continue to rebuild plans as you go. Remember: You aren’t solving every problem your team has in this first iteration of the prevention plan. You’ll likely need to perpetually return to this step to tweak, or course correct, for your team as you continue to monitor your claims.

#6: Measure success

Once you’ve done the big job of gathering all the data you currently have available, you’ll need to make a plan of how to keep your data current so you never have such a huge undertaking again.

Next, set realistic goals. A good productivity benchmark is sending 55-65 appeals a day with an appeal success rate of 80-85%. Look into the backlog and make a goal for “no claims over X dollars over 40 days” or “no high-dollar denial over X days.”

As you get more and more out of your data, you’ll be better equipped to shift top priorities as needed and make the most of your team. It can be difficult to overcome issues without as many employees as you’d like, but you can consider obtaining software (like Rivet) to help you batch claims, establish process consistency, easily view trends, and track improvement.

With Rivet, you can do more with less people.

Rivet allows you to manage all of your analyses, auto assign denials to specific team members, keep track of denials notes and timely filing deadlines.

Request a Rivet demo