Reducing Medical Denials Equals Increased Revenue

Summary: How does an organization begin to reverse the downward revenue trend? What steps need to be taken?

Summary: How does an organization begin to reverse the downward revenue trend? What steps need to be taken?

What is one of the quickest ways to decrease healthcare costs in a relatively short period of time? The answer – managing and reducing medical denials. Millions of dollars are lost each year in revenue as a result of claim denials. Reducing medical denials can be a daunting task. Where does one start? What information is needed? Following is a five-step process to help you begin.

Step 1 Gather data.

Determine the best means for obtaining denied claims information. Some reports which will be required:

1. # and dollar amount of denied claims in total
2. # and dollar amount of denied claims by reason code
3. # and dollar amount of denied claims by provider/payer source
4. # and dollar amount of total claims
5. List of providers/payers
6. % of # and dollar amount of denied claims to total
7. Benchmarks for denied claim percentages

Step 2 Analyze trends in total.

1. Determine how the annual denied claims have fluctuated over the past 3-5 years both in terms of numbers and dollars.
2. How do the trends compare to year-to-date figures?
3. How far from the industry benchmark for denied claims are you off?
4. Set goals

• What is the ultimate denied claim percentage you wish to achieve?
• Based upon year-to-date total claims and the percentage of denied claims goal, what is the ultimate number of denied claims which should be considered acceptable?
• What do these figures equate to in terms of dollars?

Step 3 Quantifying denials by reason code.

1. Determine why claims are being denied.
2. List reason codes in conjunction with number of denied claims.
3. List reason codes in conjunction with the dollar of denied claims.
4. Categorize reason codes into broader categories such as input errors, documentation, improper submitting, etc. to create areas in which to begin addressing.
5. Begin prioritizing these broader categories both by numbers and by dollars to determine which areas can most easily be corrected while providing the greatest savings in lost revenue.

Step 4 Quantifying denials by provider.

1. Are more claims being denied by particular provider/payer source?
2.  List denied claims by payer source in terms of numbers.
3. List denied claims by payer source in terms of dollars.
4. Determine which payer sources/providers are denying the most claims and which ones can easily be addressed and corrected, providing the greatest recoupment of revenue.

Step 5 Create an action plan.

1. Where are you now? Summarize the information from step 1 as this provides a starting point.
2. Set goals for overall claim denials (numbers and dollars).
3. Create an action to address both the top reasons for claim denials as well as the top providers which are denying claims.
4. Share the plan with your organization.
5. Educate staff to constantly ask the questions “Is everything correct? Is there any reason when I review the claim why it might be denied?”
6. Put in checks and balances to make sure claims are reviewed 100% of the time prior to submission.
7. Make sure current reports are readily available to assess progress towards attaining goals.
8. Review data often with the organization to ensure that things are on track.
9. Revise action plan as changes arise (either as issues are addressed and corrected or as new issues arise).
10. Celebrate milestones with the organization.
11. Give credit where credit is due in a public manner.