Denials management has, for decades, stayed quietly in the back end of the healthcare revenue cycle. It has typically been seen as a reactive functioning occurring only after a claim is denied. A denial occurs, a team goes to review the response from the payer, an appeal is filed, and, if lucky, a payment is issued. This operational situational process is often, and completely, separated from the clinical and access functions that came before it.
That model is no longer applicable.
The payer denials’ scale, complexity, and financial impact have changed the role of denial management for good. What used to be a back-end function is now a vital cross-enterprise function that impacts patient access, clinical documentation, utilization management, coding, and, of course, the revenue cycle. In today’s healthcare environment, denials management has to function as a preventative strategy as opposed to a recovery tactic.
Organizations that still see denials as an issue on the billing end are often left pursuing revenue that was at stake long before a claim was made.
Most denials aren’t the fault of the billing office; they likely began much earlier in the patient journey.
Let’s look at an example. A patient shows up for a procedure. We get a snapshot of their insurance. One of the big things that can be a pitfall at that point is figuring out whether we need an authorization for the procedure. This is a common error where we overlook that need. The procedure gets done, the doc fills out the notes, the coder closes the encounter, and the claim is sent in. An elapsed period of time is followed by a payer denial for ‘no prior auth’.
From there, the account comes over to the denial management team to deal with. They start the appeals process. They request submissions for retro authorizations or clinical appeals. Unfortunately, this is also the point where the denial root cause gets defined by billing. The denial root cause is actually at the scheduling and access point.
The same scenario plays out time and time again throughout the entire revenue cycle. Before the billing system captures a denial for authorization, medical necessity, wrong patient status, or documentation, an operational step has already failed.
The denial is just the symptom of the problem.
The Financial Costs of Viewing Denial Management as a Back-End Function
When organizations treat denial management as an exclusive back-end function, they perpetuate a cycle of financial loss.
First, time and resources are spent trying to retrieve money that could have been saved through better process reasons. It takes appeals teams a significant amount of time to understand payer policies, compile a set of documents, and write an appeal.
Second, many appeals will never lead to a successful overturn because of insufficient documentation to show medical necessity and lack of authorization.
Third, operational issues remain unaddressed, and the cycle continues, as denial teams only focus on the individual claims and upstream issues remain.
Predictably, denial volumes are still high, recovery rates remain the same and organizations grow their appeals teams without making meaningful changes to their financial bottom line.
Moving denial management from back-end to front-end is the only way to stop the cycle.
The Enterprise Approach to Denial Prevention
All the relevant patient access, clinical documentation improvement, case management, coding, and revenue cycle management departments are needed for effective denial prevention.
Prior to entering the billing system, each department ensures that claims are accurate, supported, and meet the expectations of the payers.
Ensuring accurate insurance verification, correct benefit clarifications, and appropriate prior authorization are the most important aspects of the denial prevention role undertaken by the patient access teams. The knowledge access teams have regarding the payer rules, and the authorization escalation processes can eliminate many authorization denials, often before the patient has received care.
The role of improvement programs for clinical documentation is also substantial. The absence of documentation to substantiate the medical necessity of the services provided often results in denials. Physicians who receive concurrent review feedback and documentation instructive guidance are better equipped to meet payer expectations, which in turn is likely to reduce clinical validation denials and to eliminate coding conflicts.
Case management and utilization review teams are also key in eliminating denials. Payers routinely review patient status assignments, management of length of stay, and level of care determinations. When case management teams consult with physicians regarding payer policies and modifications, organizations can effectively manage the challenges brought about by observation versus inpatient denials as well as other utilization issues.
The final responsibility for coding and revenue cycle teams is to ensure that the clinical record is accurately converted into claim data. Before submission, the claim’s integrity is protected by accurate coding, correct modifiers, and payer-specific billing edits.
When these various roles work together, denial prevention becomes an organizational capability, rather than just a billing function.
Data Transparency Is the Bridge Between Departments
Visibility is one of the biggest obstacles to enterprise denial prevention. Denial data is often kept in silos in the revenue cycle department. Patient access managers may not see the patterns for authorizations that lead to denials. Clinical staff may not know the diagnosis that the payer often questions. Utilization review denial feedback is often not available to the case managers.
If data is not shared, the various departments work in a vacuum and are unable to address the different denial issues.
Modern denial management programs, thus, focus on analytics and reporting. Denials are categorized by root cause, department, payer, service line, and more. Trends are communicated so that they are actionable for operational leaders.
Patient access leaders should be notified immediately when there are spikes in authorization denial by specific surgical procedure. When there are spikes in denials of medical necessity for specific imaging services, clinical documentation education, and physician education should come into play.
It is not enough to just measure denial. It is more important to use the denial data to improve operations.
There is still a need for strong appeal processes in place and for skilled denial analysts, clinical appeal specialists, and payer negotiators, but appealing should not be the main strategy when it comes to managing denials.
A well-developed denial management program should be aimed at maximizing the recoupment of denied claims and minimizing the number of denials.
When preventative measures improve, the focus of the appeals team can shift to more valuable disputes instead of just administrative denials.
Unified Leadership Drives Change
Denial management has the most potential when it is developed into an enterprise-wide strategy. This requires active leadership. Denials must be recognized by the executive team as operationally aligned feedback across the enterprise and not merely a revenue cycle statistic.
Systemic opportunities for change must be identified jointly by CFOs, revenue cycle executives, and clinicians when analyzing denials. This can be related to the need for revisions to authorization workflows, gaps in physician documentation education, case management, and payer policy.
With shared accountability for denial prevention, cross departmental collaboration becomes more common.
The Future of Denial Management
The level of aggression observed in payers is unprecedented within the healthcare system. Price edits, reviews for clinical validation, and extensive requirements for authorizations are on the rise. With this, hospitals are consistently being asked to finetune their margins and defend their revenues.
At this stage in the lifecycle of this system, denial management must move from being a back end focused effort on the revenue cycle to becoming an area of focus in front of the revenue cycle. Management of denial should be viewed as a focused operating capability that integrates patient access, clinical, and financial management functions. With this focus, organizations will experience a decline in denial, improvement in cash cycle, and a stronger cash flow.
Investment in denial appeals defense will be of no value to an organization that does not focus on improving the workflow to position management of denial as a front-end focused effort.
The denial management value approach for a lot of healthcare leaders will be new. It’s not just about managing denials; it’s about being proactive in workflows so that denials don’t happen.
This is a long process and is a focus that predates the claim.
When organizations shift from being reactive to denial recovery to being proactive on denial prevention, they often look for an operational and financial side to revenue cycle experience paired for most effective results. Action RCM, powered by Harris & Harris, assists healthcare organizations in developing strategies focused on enterprise-level denial management beyond the backend billing level. Because of payer knowledge, denial analytics, and operational workflow design, Action RCM collaborates with patient access, case management, coding, and revenue cycle teams to determine denial causes and practical prevention. The outcome of this work is not solely better appeals, but also robust processes upstream and less denials, resulting in predictable financial improvement during every phase of the revenue cycle.
