A 2022 Healthcare Denial Management Update

Healthcare denial management is always challenging, to the point that many providers work with a range of medical billing and coding services to make sure they’re keeping their denials low and optimizing cash flows. But since the COVID-19 pandemic, many elements of the denial management process have shifted.

This is why we’re bringing you an update on the current state of healthcare denial management, including a look at the impact of COVID-19, new KPI trends, and tips you can use to keep your denials low.

COVID Denials Rates
Since the COVID-19 pandemic, hospital claim denial rates have reached record highs. Recent surveys have tracked them jumping as much as 20% over the past five years. But 33% of hospital executives have reported average claims denial rates reaching 10% or more. The national average of denial rates comes in at between 6% and 13% – a rate that many leaders say is near a “danger zone”. Here’s how that breaks down:

  • 31% reported rates less than 5%
  • 20% reported rates between 5% and 7%
  • 16% reported rates between 8% and 10%

Unfortunately, as these rates have crept up, hospital leadership has been somewhat distracted dealing with the public health emergency. But as responses to COVID-19 have normalized, many leaders have more space to recommit attention and resources to lowering their denial rates.

This is good news and an area of opportunity for hospitals, since research has found that around 85% of denials are preventable. To do this, though, leaders will need to improve prevention and recovery strategies and possibly even consider working with medical billing and coding companies as part of their plan. Even hospitals that hadn’t considered this last option in the past might want to rethink things. A survey of healthcare leaders found that coding was their top concern in denials strategy, with 32% of respondents ranking it as number one. Other issues include medical necessity acute IP, the front end, and clinical validation denials [1].

The History of Rising Claim Denial Rates
While COVID has accelerated the denial rate issue, for most hospital leaders, this isn’t unfamiliar territory. Hospitals have long been seeing more denials from payers, with the average rate jumping 23% in 2020 compared to four years before. A recent report found that the hospital denial rate had been increasing steadily since 2016. Their analysis found that claims denied on initial submission jumped from 9% in 2016 to 10% at the beginning of 2020 [2].

For organizations like yours, it could be helpful to look at updated reports, since these trends do vary. For example, denial rates rose more sharply in the Northeast and Pacific regions, while they actually fell in the Southern Plains. You might also find it useful to look at and compare the historic trends of your own denials over time. The report found that most of the denials were originating in registration (26.6%) with another 17.2% being traceable back to missing or invalid claim data.

You will likely find that the root cause of denials in your past are attributable to a few sources:

Staff Training and Attrition Issues
The labor market for talented denials management staff is tight and hiring and retention can be difficult. Even if you have great staff, the complexity of denials can require you to implement robust training and education. And, even as their jobs are becoming more complex and their burnout rates are increasing, clinical staff are expected to manage more and more clinical denials.

Growing Backlogs of Denials
As patient volumes fluctuate and peak seasons become more difficult to predict, timely filing challenges are only growing. If you’ve been focused on addressing individual denials and not looking at root causes in the past, you might be missing opportunities to reduce the volume of the denials you’re seeing. These backlogs also could be getting in your way when creating prevention strategies on the front-end and mid-cycle phases of the revenue cycle.

Lack of Resources
If you look at your history of managing denials, you might find that you haven’t had the experienced resources needed to address, let alone prevent denials. You are possibly lacking the expertise needed to support appeals and insight into the data needed for root cause analysis.

Steps to Move Forward in Denials Management
As you rethink your approach to denials management, now is an excellent time to rethink how you use medical billing solutions and your stance on medical billing and coding companies. But first, you’ll likely find it valuable to review some new key performance indicator (KPI) trends that hospitals are using to address their denial challenges.

Many hospitals put emphasis on the difference between clean claims and initial claims denials and tracking them as a major KPI. While this can be helpful, it might not be the best measurement of revenue cycle health. It can even lead executives to think their revenue cycle is better off than it actually is. A better metric is shifting your focus to manage performance against first pass payments. This metric will, by default, trickle down to improve clean claims and initial denial numbers at the same time. If you’re looking for other useful indicators, this list of KPIs could also be helpful.

Other Tips to Lower Denials
As you move forward with a new goal of driving down denials in an era changed by COVID-19 keep these tips in mind [3].

  • Use Your Analytics: Good use of analytics will be foundational to monitoring the efficiency and effectiveness of your revenue cycle processes and medical billing solutions.
  • Beef Up Your Coding: Your coding practices have a huge downstream impact on your denials; so getting these right by avoiding mistakes like undercoding, not updating old codes, or not demonstrating medical necessity can go a long way.
  • Check Your Workflows: It’s likely that, especially with all the changes thanks to COVID-19, that you have worsening or even new inefficiencies popping up.

Most importantly though, look for partnerships that can help you achieve all the above in the most efficient and cost effective way possible. Experienced medical billing and coding companies can get you started on a denial management strategy that fits your needs and that will help you respond to a changing future with confidence. To talk about what that could look like for you, start here.

[1] J. Lagasse, “More than 30% of hospitals are near the ‘danger zone’ of denial rates,” Healthcare Finance, 18 June 2021. Available: https://www.healthcarefinancenews.com/news/more-30-hospitals-are-near-danger-zone-denial-rates#:~:text=Nationally%2C%20hospitals%20are%20facing%20average,between%208%25%20and%2010%25..
[2] J. LaPointe, “Hospital Claim Denials Steadily Rising, Increasing 23% in 2020,” RevCycleIntelligence, 2021 February 4. Available: https://revcycleintelligence.com/news/hospital-claim-denials-steadily-rising-increasing-23-in-2020.
[3] S. Meyer, “4 keys to driving down denials,” MGMA, 19 December 2018. Available: https://www.mgma.com/resources/revenue-cycle/4-keys-to-driving-down-denials.[/vc_column_text][/vc_column][/vc_row]

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