Claims management is among the primary RCM hurdles faced by providers and can also pose challenges for payers. Becker's Hospital CFO reports that hospitals lose anywhere from 1% to as much as 4-5% of net revenue because of denial write-offs. While single-digit percentages seem small, they can translate to at least $2 to $3 million in lost revenue annually. Industry experts describe the most common healthcare denial management challenges and how to overcome them.
1.) Claim denials.
According to the Advisory Board, as many as one in five claims are initially denied. Rejected claims have to be re-worked, requiring considerable time and resources. While the majority are approved upon appeal, physicians never receive reimbursement for some claims and have to either write them off or try to collect from patients.
2.) Managing denials on an individual level.
The same types of errors often appear consistently throughout entire batches of claims. However, Karen Bowden, RHIA, reports that administrators typically handle denials individually, rather than looking for aggregate patterns across general categories.
3.) Coding inconsistencies.
Providers and payers are not always on the same page regarding codes for various procedures; claims sometimes contain invalid entries. This is especially common at the beginning of the year, when new CPT codes take effect. In other instances, providers bill payers for services that are not covered. Missing or incorrectly applied modifiers, namely -25 and -59, can result in denials. These errors can be easily corrected by monitoring remittance advice codes and making necessary changes.
4.) Authorization issues.
Denials are certain when a claim is sent to a payer that is no longer responsible for a patient's coverage. Similarly, insurers will reject claims for procedures that are not deemed medically necessary. In other cases, referral codes, additional documents, or other critical data are missing.
5.) Inadequate technology.
When hospitals lack the appropriate tools to track payer performance and other aspects of the revenue cycle, denials frequently cannot be rectified in a timely manner. Thus, it is difficult or impossible to analyze underlying causes of denials to improve reimbursement rates.