Understanding Denial Management for Improved Financial Outcomes

Denial management is essential to any healthcare organization’s revenue cycle management (RCM). It can help ensure that healthcare providers receive the correct payments for services rendered. Knowing how to manage denials can help a healthcare organization reduce lost revenue because of unpaid claims.

Healthcare providers can improve their revenue cycle and reduce denied claim costs by implementing denial management strategies.

In this article, we’ll cover claim denials, appeals to help healthcare organizations get the payment they are due, and some neat tips to improve their denial management process.

What is Denial Management?

Denial management is a vital part of the healthcare reimbursement process. In the healthcare industry, it means finding, identifying, reviewing, and appealing denied medical claims in the right way.

Healthcare organizations must manage denials to avoid lost revenue, cash flow, and inefficient processes. Before sending requests to insurance companies, denials and claims must be thoroughly reviewed.

Denial management allows organizations to identify and take corrective action to prevent future denials. Its goal is to ensure that all claims are paid correctly and on time.

It is essential to have a team of experts to handle denials. Denial management and insurance collection specialists are knowledgeable and HIPAA-trained in coding, billing, and policy changes. They should also have access to an analytics tool that tracks denials and identifies trends.

When denials are handled correctly, and on time, it can help keep good relationships with patients, reduce complaints, and improve the quality of service.

How Does Denial Management Work?

By using the IMMP process (Identify, Measure, Monitor, and Prevent), you can effectively manage denial rates and improve your financial performance and denial management process.

Step 1: Identify

Figuring out why claims were denied, such as wrong coding, not following payer guidelines, or incomplete documentation is part of the process.

  1. Claim Submission

The first step is to submit a clean, accurate claim to the payer. It requires providing demographics, diagnosis, and procedure codes.

  1. Denial Identification

The payer will review the claim after it is submitted and send a denial if it doesn’t meet their requirements. Most denials come with a reason code that says why the claim was turned down. This code is known as a “claims adjustment reason code” (CARC). This is then further elaborated with a remittance advice remark code or (RARC).

Step 2: Measure

Meanwhile, measuring means keeping track of the types and numbers of denials and figuring out why they happen.

  1. Review and Analysis

After receiving the denial, reviewing and analyzing the reason code is important to determine the best action

  1. Appeal

Send the payer a formal appeal if claim changes don’t fix the denial. It should include additional information and documentation to support the request.

  1. Resolution

The payer or insurance company will decide if the denial should be overturned. If they overturn the denial, they will pay the claim. But if the claim is upheld, it will remain unpaid, and the process will start again with claim submission.

Step 3: Monitor

Monitoring entails tracking the progression of appeals and implementing corrective measures as needed. To ensure efficiency and resolve issues, monitor employees’ denial management workflow from time to time.

A remote virtual staff that specializes in denial management will help make a work list system, have all the resources needed, know the results, and know what happened with appeals and claims that were denied.

Step 4: Prevent

After gathering all the significant information for claim denial, the last step is to start a prevention campaign.

Prevention involves taking proactive measures to ensure you can avoid any future denial. It allows you to look back at the denial management process and check whether there is a need to revise it, retrain your virtual staff, or manage workflows.

What are the Types of Denials?

There are two primary categories for claim denials: soft and hard. Understanding the differences between these two denials is important for healthcare providers and patients to know how to handle claim denials best.

Soft Denials

It generally refers to claims denied with a request for additional information or documentation. That could be anything from extra paperwork to proof of payment.

Soft denials are often the result of a clerical error or lack of information. If the patient’s insurance paperwork is incomplete, the claim is still denied.

When that happens, it allows the patient or healthcare provider to provide the necessary information and resubmit the claim.

Hard Denials

Permanent denials are the ones that can’t be changed and often need the formal appeals process to be looked at again. For this reason, hard denials are usually more complicated. They may be due to incorrect coding, wrong information, or insurance policy exclusions.

In these situations, the doctor must file an appeal with the insurance company to get the decision to deny the claim looked at again. This process is often lengthy and more complicated than soft denials, and it can take several weeks or months to resolve.

Common Types of Medical Billing Denials

Denials can come in many forms and have a wide range of implications. In the medical world, denials related to insurance claims can impact the patient’s care and financial well-being.

According to the 2013 National Health Insurer Report Card from the American Medical Association (AMA), the following are the most common types of denials:

  1. Incomplete Submission

It happens when the insurance company determines that the submission is incomplete or wrong. It can explicitly be the wrong form, missing information like a social security number or modifier, or other wrong information on the claim form.

  1. Authorization or Pre-Certification Denial

These denials occur when the insurance company denies a request for services. The claim does not meet the specific prior authorization requirements in the insurance policy.

Most of the time, it’s because the patient’s insurance plan does not cover the needed service or the insurance company thinks the service isn’t necessary.

  1. Pre-Existing Condition Denial

At this point, it happens when the insurance company finds out that the patient already has a health problem and that the requested service is not medically necessary.

  1. Non-Covered Service Denial

This happens when the insurance company figures out that the patient’s current plan doesn’t cover the requested service. It may include services beneficial to your health or medically necessary.

  1. Duplicate Claim Denial

This type of denial happens when the insurance company finds that the service or procedure being asked for has already been done. It could be on the same day by the same provider for the same patient.

  1. Late Filing Denial

Insurance companies usually indicate a time limit for submitting claims. These denials happen when the insurance company decides that a claim wasn’t sent in within the time frame they set, such as 90 to 120 days.

This filing deadline includes the time it takes to send in revised claims and go through either of the following two types of reviews:

  • Automated Review, where the system checks for coverage and mistakes, for example, improper coding and unmatched codes.
  • Complex Review, where licensed medical professionals determine reasonable, necessary, and covered services.
  1. Medical Necessity Denial

This denial occurs when the insurance company determines that the requested service is not medically necessary. The claim does not provide cost-effective patient care that needs appropriate levels. It could include explicitly experimental or unnecessary services.

  1. Already Adjudicated Services Denial

This type of denial occurs when benefits for a procedure or service are already included in the allowance or payment for another procedure or service, or in a claim that has already been adjudicated, paid, or settled.

No matter the type of denial, it is also important for insurance providers to properly explain the reason for the denial and provide a clear explanation of the appeals process. It helps ensure that the claimant understands their rights and can make an informed decision about how to move forward.

Find the Right Medical Billing and Denial Management Assistant with Phoenix Virtual Solutions

As healthcare facilities navigate the transition towards incorporating Virtual Staff in Healthcare, finding a trusted partner becomes paramount. Phoenix Virtual Solutions stands out as a leader in this space, offering comprehensive support in several key areas:

A. Finding the Perfect Fit

Phoenix Virtual Solutions’ meticulous selection process ensures that they match you with Healthcare Virtual Receptionists who not only meet the specific qualifications and experience required but also align with your facility’s culture and values.

B. Efficient Onboarding Process

Phoenix Virtual Solutions can have your virtual staff up and running in just 1-2 weeks. This rapid deployment ensures that your facility can benefit from Virtual Staffing Solutions without significant downtime or disruption to your services.

C. Saving on Labor Costs

With Phoenix Virtual Solutions, healthcare facilities can save up to 60% on labor costs compared to traditional staffing models. These savings can then be redirected towards enhancing patient care services or expanding facility resources, further contributing to the efficiency and quality of healthcare delivery.

D. Continuous Support and Training

Beyond the initial placement, Phoenix Virtual Solutions offers ongoing support and training for our Healthcare Virtual Receptionists. This ensures that they remain at the forefront of Digital Transformation in Healthcare, equipped with the latest skills and knowledge to excel in their roles.

Getting professional service support is a viable solution for denial management in healthcare. With the demand for high-quality healthcare services growing, offshore virtual assistants can help healthcare providers reach their business goals and help their patients in important ways.

Schedule a free consultation today to streamline your denial management process and sustain a successful medical business!

Tina Johnson helped bring The Marketing Folks from a-weekly newsletter to a full-fledged news site by creating a new website and branding. She continues to assist in keeping the site responsive and well organized for the readers. As a contributor to The Marketing Folks, Tara mainly covers industry new.