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Managing Denied Claims
Written by Amy Lillard   

Claim denial is the problem no one wants to address. It’s an issue that seems cumbersome, annoying, perhaps a bit wasteful. But denied claims are a much bigger problem than suspected.

According to the nation’s largest hospital research organization, the Advisory Board Company, the cost of denials to healthcare organizations range from one to three percent of total revenue. Impressive, right? There’s more.  Approximately ninety percent of denials are preventable, and 67 percent of denials are recoverable. Healthcare organizations are missing out on significant revenue due to denials that can usually be prevented. 

This article will describe the problems that practices and organizations face with denied claims, and some approaches to better managing and recovering outstanding revenue.  

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Denied Claims

For years, practices and hospitals have cut costs as much as possible to increase revenue. But there’s an even bigger and untapped revenue source in denied claims.

Denied claims are underreported and unrecognized, due to the same issues that cause them:

  • Ineffective technology and systems: Without clear processes and organized IT, the ability to manage claims and denials is severely limited
  • Changes in billing and coding regulations: With continual revamping, the rules change often, and many offices find it hard to keep up
  • Limited Resources: Lack of needed staff means that denied claims get moved down on the priority list.
  • Inefficient processes: Methods that focus on manual, labor-intensive, time-sapping processes are furthered hindered by poor communication
  • Inaccurate or missing data: This can include insurance types, procedure types, amounts, personal information and more.  

For all these reasons, denied claims are often written off as bad debt, never to be recovered.

Resolving denied claims

To properly resolve current and future denied claims, you, or medical office manager, should take a close look at your current process. Analyze the reasons most frequently given by payers for delays and denials. Also, look at the following percentages:

  • Claims submitted within the last 30 days that were delayed.
  • Claims submitted within the last 30 days that were denied on the first submission.

Revamping your denied claim situation must involve several key considerations:

  • Improved technology. Look at your software and tracking mechanisms. Is there room for improvement?
  • Executive commitment. Ensure that leaders are proactive in management, that staff involved in denied claims are monitored, and that the importance of this work is demonstrated to the organization
  • Organization-wide involvement. An example of effective group involvement is a regular update on the dollars tied up in claims, communicated to the group.
  • Tracking and analyzing data. Tracking should occur by payers, codes, medical areas, and more.  By tracking claims, you can see the financial impact of denials, the rates and outcomes of denials, and internal opportunities for improvement. 
  • Automation of workflow. Remove as many manual and morale-draining components as possible from the claim process.

Specific Claims

Once you have reviewed your current situation of claims and denials, and considered the many opportunities to revise your system, there are also specific methods to improve certain claims.
If you have the majority of denied claims in a certain area, here’s help:

  • Denial reason: Claims submitted to wrong payer    
Resolution: Be sure to collect insurance information for every patient upfront, before the appoitnment. Copy insurance cards, and at subsequent visits, ask patient if the information is still current.  
  • Denial reason: Ineligibility
Resolution: Confirm all insurance prior to visits, and make note of at the visit.
  • Denial reason: Coordination-of-benefits issues
Resolution: Ask patients if they have secondary insurance. When claims are submitted, send a copy of the Explanation of Benefits from the primary payer
  • Denial reason: Delayed or Denied Medicare
Resolution: Collect Medicare information upfront, and at each visit. Also, remember that if Medicare is the primary payer, they usually send claims to the secondary payer. If you submit as well, it will be denied for duplication.
  • Denial reason: Duplication
Resolution: Don’t automatically rebill outstanding claims. Contact the payer for more information first. 
  • Denial reason: Missing/inaccurate information
Resolution: Double-check each prior to sending, especially coding

Sources for this article include:

Third Millenium Healthcare Systems. CFO Leadership Strategies for Managing Denied Claims.
Backer, Leigh Ann. Best Practices in Claims Processing. Family Practice Management.
Moore, Pamela. Managing Medical Necessity: How to Turn Around Denials and Get Paid. Physicians Practice Digest.
Medical billing clearinghouses - information on outsourcing billing function of a physician's practice. 

About the Author

Amy Lillard was a regulatory and marketing professional at the Feinberg School of Medicine at Northwestern University for 4 years prior to writing on healthcare topics.

The author discloses no financial conflicts of interest with the content of this article.

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