Denial Management Best Practices

According to the Healthcare Financial Management Association, roughly 65 percent of all denials are not resubmitted. Healthcare providers are not getting reimbursed for all the services they’re providing, leaving money on the table. Often, this is a result of therapists and other providers not having an organized process to manage denials effectively. In this post, we’re looking at the types of denials you may encounter, how to better understand why claims are getting denied, and best practices for denial management.

Types of Denials

There are several kinds of denials, and understanding what each entails will help you take the appropriate corrective action. 

 

Hard Denial — A hard denial is one most often resulting in written-off or lost revenue. Examples include bundling, not a covered service, untimely filing, and no pre-authorization secured. You can appeal these denials if you think there was a mistake, however.

 

Soft Denial — A soft denial is an interim or temporary denial with the potential to be paid if you take corrective action. Examples include coding or charge issues, pending receipt of invoice, denied due to inaccurate or missing information, pending itemized bill. An appeal is not required for soft denials. Typically, you need to correct and resubmit the claim.

 

Clinical Denial — A clinical denial is a payment denial due to length of stay, level of care, or question of medical necessity. Clinical denials often begin as a soft denial. An example is the delay of payment where further clinical clarification may be required.

 

Technical or Administrative Denial — When this type of denial occurs, the payer will request additional information and provide remittance advice. Examples include a request for medical records, itemized bills, and coding clarifications.

 

Once you determine the type of denial you’ve received and review the information provided by the payer, you can respond appropriately, providing additional documentation, making corrections, or filing an appeal.

7 Best Practices for Managing Your Denials

Establishing a process to proactively manage your denials is important for your practice’s revenue generation and cash flow. Here are seven best practices that will help you with denial management. 

1. Understand Your Denials

Before you can find ways to manage and prevent denials, you first need to know what types of denials you most frequently receive and how often they occur. Set up a system to track all denials for three months to get a baseline, including the following information: the reason for denial, the payer, ability to appeal, billing date, date of denial, the amount denied, and the amount recovered. 

Next, analyze the data you collected and sort by the top payers and reasons for the denials, looking both at the number of denials and the dollar amounts. If you are facing a lot of data, focus your time on the highest numbers of denials and total dollars. 

2. Identify Weaknesses in Your Current Claim Submission Process

After you have a good understanding of the denials you’re receiving, map out your current claim process to determine if there are any weaknesses that are causing denials. For example, do you frequently forget to include documentation? Are you missing key signatures? Are you using the wrong CPT codes? As you walk through your current process, consider the following questions at every step:

  • What could go wrong?
  • What would be the consequence of failure?
  • What would be the root cause of the failure?
  • What controls are in place to detect or prevent this failure from occurring?

3. Look for Other Problems Related to Denials

Beyond denials, there are other instances where reimbursements may be lost, including underpayments, overpayments, and incomplete or inaccurate billing. Underpayments and overpayments are inaccurate payments resulting from pricing errors, a difference in contract interpretation, and other payment issues. You may also forget to include services in a claim or fail to detect a payment error. You should also monitor these issues in your claims submission process analysis. 

4. Make Improvements to Your Claims Submission Process 

After you complete your analysis, make the necessary improvements you identified to help prevent denials from happening. Prevention is always the first step in managing denials. Write out a step-by-step checklist that you’ll follow each time you’re preparing a claim. 

5. Quickly Process Denials

Despite your improvements, denials will still occur. It’s important to quickly process these denials since there are deadlines involved, and any delay in payment will impact your cash flow. When you have the opportunity to appeal a denial, first take a look at the carrier’s specific process to ensure that you hit any key dates and send your letter to the proper place. You don’t want to lose valuable time for your appeal because you didn’t follow the instructions provided. Once you’ve done your homework, you’re ready to appeal the claim.

6. Have a Plan for Follow-Up

If you don’t receive a response within 30 days, follow up to ensure your appeal was received. Don’t forget to document everything, including who you spoke with, when, and high-level details of the conversation. If you receive a subsequent denial, try again. Review the reason codes for the second denial to provide an appropriate response.

7. Don’t Hesitate to Seek Assistance

If you’re not receiving an approval and you believe the denial is not justified, some payers allow you to request an external review through an independent organization. It may also be worthwhile to solicit guidance from a professional organization. 

Create a Plan Based on Best Practices

Having a plan in place for denial management based on best practices will not only ensure you receive the reimbursements you’re entitled to, but will also help alleviate the headaches involved in managing denials. You’ll know precisely the steps you need to take each time you receive a denial. The result will be a reliable cash flow that allows you to focus on providing top-quality care for your clients. 

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