Insight Article

Denials Management Its a Team Function

By Debra Halvorson, Senior Chargemaster Consultant September 15, 2009

Every health care organization struggles with denials management, whether it is due to ever-changing billing codes, contract issues, or staff error. The abundance of industry seminars on this topic speaks volumes on the insatiable quest for new and improved techniques. Denials management has become a crucial component for hospitals to stay in the black rather than the red. The creation of a denials management process remains one of the most overlooked opportunities for revenue increase, second only to a chargemaster review. There is growing frustration in the health care industry where denials are concerned; policies are in place for billing office follow-up and management, so why arent the accounts receivable days decreasing? The majority of denials are caused by administrative errors in the areas of eligibility, service authorization, clinical or physician documentation, and coding. The popular focus has been on claims follow-up and other back-end processes, which, however, do nothing to fix the actual root cause for the denial. Based on denial type, the focus should be on correcting errors at the source rather than fixing them on the back end. The billing office must know what department owns the root cause of the denial so that staff can be educated and a team can be used to update processes. A fail-safe system must be in place in order to adjudicate claims and follow-up on all denials so that claims can be resubmitted. Industry studies report that 50% of denied claims are not filed, 90% of denials may be preventable, and up to 67% can be recovered if appealed. The problem is that many billing office staff do not have a complete understanding of the issues, specifically how to fix issues (bring back to source) and determine the best steps to prevent future denials, which results in consistent denials of the same type. Oftentimes, they are writing off noncovered denials that should be appealed. The following are the most common reasons for insurance denials:

Current processes will not succeed without an assessment of the current revenue cycle procedures from start to finish in ALL areas including:

Registration Prior authorization Physician documentation (timely manner) Coding (DNFB) Chargemaster (accuracy of codes) Billing and edits Follow-up Collections of insurance payment

While many facilities are aware of issues and revenue cycle assessments, it is not enough to simply understand where communication and documentation problems occur. Problems wont get corrected without an action plan to develop department accountability, receive input from staff on broken areas, set realistic expectations, provide staff education, and create documented policies and procedures. The most important element of a good action plan is the formation of a denials management committee to set a baseline of data using the top ten types of denials, the top five payors with high volume/dollar denials, and areas or departments at the source of denials. The denials management committee needs to meet weekly and should include representation from the following personnel and departments:

Diagnosis is inconsistent with age, sex, and procedure Wipfli LLP

Beneficiary not covered Medical necessity Not reasonable and necessary Service provided not covered Duplicate billing Unbundled code Modifier not provided Diagnosis procedure code does not match service provided Procedure code does not match patient sex Procedure code inconsistent with modifier used Procedure code inconsistent with place of service

Chargemaster Coordinator Billing Manager Finance Registration Manager Admitting Manager HIM Case Management Coordinator

It is best if the business office manager facilitates the meetings and provides categories of denials to hand back to each of the committee members. The committee could add department managers to the meetings ad hoc until denials diminish. The committee should also create a flow chart of denial action steps for billing office staff, create education tools for registration, and document issues in a log. The case management coordinators role would be to provide feedback and education to physicians. The business office manager should work with all groups on the rebill timeline once denial issues have been fixed. Because there may be more than one department responsible for identifying and correcting 1

Insight Article denials, it must be discussed in a group setting through the denials management committee. The denials management committee also needs to know which member is responsible for denial adjudication. Here are some examples of who to work with on common insurance denials: Issue - There was a well-defined database; however, the ability to segregate information by payor to identify specific payor trends was not available. The manager position was also unfilled for this area and current staff was not trained to obtain the required reports. Solutions: Establish standard reporting system (with vendor) to provide separate third-party payment errors and denials by payor. Create a reporting system with denial reasons crosswalked to the standard ANSI denial codes on payment remittances. Work with Management Information to provide a more user-driven reporting system. Establish a multidisciplinary denial resolution team (denials management committee), including a system that provides reporting to identify root causes for denials. Build alerts into the registration system for potential registration errors. Develop short-term solution to assist with data reporting.

Beneficiary not covered: Registration, Business office Medical necessity: Case Management Not reasonable and necessary: Case Management Service provided not covered: Business office Duplicate billing: Business office Unbundled code: Health Information Management Modifier not provided: Chargemaster Coordinator or Health Information Management Diagnosis procedure code doesnt match service provided: Health Information Management Procedure code doesnt match patient sex: Registration or Chargemaster Coordinator Procedure code inconsistent with modifier used: Chargemaster Coordinator or Health Information Management Procedure code inconsistent with place of service: Business office Diagnosis is inconsistent with age, sex, procedure: Health Information Management and/or Registration

Case Study
The case study involves a medical provider in the Midwest whose variance clearance process (VCP) portion of accounts receivable remained at the same relatively high level for 24 months, which suggested that opportunities existed to reduce payment denials and/or payment inaccuracies. The medical provider had also been postponing the implementation of point-of-service copay collection for fear of upsetting its patients. While patient care should remain the ultimate goal of any facility, so too should keeping the hospital doors open and the facility operational for the community. The facility already had great systems in place, such as the implementation of best practice processes to manage all denials and the development of staff productivity standards. It also developed a data warehouse with significant reporting capabilities and a work queue-based system for staff to efficiently work variances. Yet, with all of the implementation efforts, there was still no change in accounts receivable levels after 24 months. Wipfli assessed the medical providers process for managing thirdparty payment denials. The goal was to identify areas with high potential for improvement through a two-step process during a twoday on-site assessment and to facilitate a report delivery meeting. The following are identified issues and proposed solutions:

Eligibility: Issues: Wrong carrier Expired coverage Prior authorization steps not completed Solutions: Invite eligibility team to be a key part of denials resolution team. Educate staff. System Limitations: Issue - Facility is receiving duplicate errors from Medicare because the billing system software only allows six line items on bill. UB-04 forms (paper and electronic) should accept up to 15 line items. Solution - Enhance software to accommodate both paper and electronic claims. Commercial Carriers: Issues: When manually posted by cashiers, contractual and deductible dollars were being posted to an incorrect field. Patients were billed for contractual write-offs rather than copay amounts, creating errors and rework. Noncompliance with third-party payor contracts that state the patient may not be billed more than the copay amount. These issues skewed accounts receivable. Solutions: 2

Standardized Reporting:

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Insight Article Include representative from the cashier department as part of the denials management committee. Provide a mechanism for correcting the errors at the source where they are being generated. Meet biweekly as a cashier department to work as a team on keying education. Redesign the refund and adjustment write-off process. Create a threshold to automatically write off commercial responsibility under reasonable dollar amount. Return all legitimate denials to the appropriate department through the denials committee: Medical Necessity: UR Eligibility: Registration Diagnosis Code: Health Information Management CPT/HCPC/Revenue Code: Chargemaster

Workers Compensation: Issues: High number of denials compared to workers compensation payor percentage. Workers compensation denials department spending 60% of time on front-end eligibility issues. Line of eligibility still open for scheduled procedures where there had been workers compensation in past. Registration not asking patient if this is first report of injury for services related to injuries. Solutions: Educate registration staff and monitor improvements by employee. Set up patient as self-pay until first report of injury received. If not workers compensation, the line of eligibility should be closed (or depending on software, change patient status). This would free up workers compensation follow-up staff to focus on working true denials and other back-end issues. Share staff from another payor follow-up department, if possible, until the back log and issues are manageable. Point-of-Service Collections: Issue - Health care costs are increasingly being shifted to patients and requirements for managed care approvals are becoming more difficult. As a result, many health care organizations must look at modifying their approach to collecting patient payments while continuing to provide exemplary patient service. Solutions: Require credit counseling and point-of-service cash payment for all self-pay accounts. Educate patients and expect them to be responsible for recertification. Determine a minimum dollar value for variance follow-up by staff. Provide retraining on the system and throughout other departments, as related.

In summary, a well-structured improvement program includes these essential components: 1) a comprehensive database, 2) a standard reporting structure, and 3) a process redesign that incorporates standardization, root-cause redesign, and application of industry best practices. The denials management committee should also prioritize proposed solutions and finalize the implementation plan with a timeline and resource to determine how the improvement program fits into other facility-wide projects (e.g., point-of-service collection initiation). A staff focused on denial management processes will benefit the organization with increased reimbursement levels (more in line with payor contract expectations) on a sustainable basis.

References:
Case Study Wipfli Work Variance Assessment, 2008 Clear Contracts for Denials TM - product Three pillars of a Successful Denials Management Program HFMA article Denials Management: Key Assessment Steps to Prevent and Recover Repetitive Revenue Leakage Med Assets Tip Sheet: Medical Claims Denial Management HFMA article

About the Author Debra Halvorson is a senior chargemaster consultant in Wipflis health care practice. Debra Halvorson has worked in the health care field for 19 years on all aspects of the revenue cycle with a focus on working with her clients to: Update their chargemaster and easily maintain it, identify improvement opportunities in cash collections, manage denials, ensure billing compliance, and continually improve performance, especially by developing efficient processes. To learn more, please contact Debra at dhalvorson@wipfli.com. About Wipfli LLP With more than 800 associates and 15 offices across the Midwest, Wipfli ranks among the largest accounting and business consulting firms in the nation. Serving businesses and individuals since the firms start in 1930, Wipfli has one of the regions strongest health care practices, with an extensive list of clients across the nation. For more information, visit www.wipfli.com/healthcare.

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