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T HE T RUTH A BOUT D ENIALS What Every Manager Should Know about Denial Key Performance Indicators January 18, 2013.

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Presentation on theme: "T HE T RUTH A BOUT D ENIALS What Every Manager Should Know about Denial Key Performance Indicators January 18, 2013."— Presentation transcript:

1 T HE T RUTH A BOUT D ENIALS What Every Manager Should Know about Denial Key Performance Indicators January 18, 2013

2 T HE T RUTH A BOUT D ENIALS 2 Learning Objectives Differentiate key denial performance indicators from generic denial performance indicators Understand the difference between “hard”, “soft” and “misclassified” denial codes Show why “hard” denials are the “money” denials and how to prevent and report them accurately Describe the difference between denial prevention and denial processing and why hard denials are prevented, not managed Show the denials on which to focus process improvement efforts for the greatest benefit Demonstrate a full range of revenue cycle key performance indicators

3 A LL D ENIALS ARE NOT E QUAL 3 Determining the right denial benchmark to shoot for can be difficult when standards from industry organizations range from targets of 5% to <1%. Experienced denial managers learn that simply decreasing denial rates doesn’t always lead to cash in the bank as some denials represent l ost cash while others represent m isclassified insurance.

4 D ENIAL M ANAGEMENT M ATURITY The maturity of an organization’s denial management system will affect the quality of it’s denial processes and it reporting. Denial Reporting System 4

5 P RE -D ENIAL P REVENTION Denial Prevention Activities an organization engages in to prevent denials from occurring 5

6 P OST -D ENIAL P ROCESSING Processing Pt Account/UM Training “Soft” Denial Mgmt. - Resubmission “Hard” Denial Mgmt. - Appeals Data Analysis - Reporting, Lessons Denial Management System Denial Processing Activities an organization engages in once a denial has occurred 6

7 C ONTINUOUS I MPROVEMENT C YCLE Prevention Pt Access/UM Training Technical Pre-CertClinical Pre-Cert“OK –to-Delay” Processing Pt Account/UM Training “Soft” Denial Mgmt. - Resubmission “Hard” Denial Mgmt. - Appeals Data Analysis - Reporting, Lessons Denial Management System 7

8 D ENIAL M ANAGEMENT M ATURITY The figure below depicts growth in denial management maturity over time At each level, an organization becomes more attuned to what's most important - Cash! 8

9 A SSESSING D ENIAL M ANAGEMENT P ERFORMANCE Many organizations misperceptions of the value of denials is clouded by unclear information. Unclear information can overstate the impact of reported denials. 9

10 A SSESSING D ENIAL M ANAGEMENT P ERFORMANCE Develop Key Performance Indicators (KPIs) Denial KPIs are quantifiable metrics that benchmark current denial performance against desired denial performance. As such, they should provide context for your denial performance reporting by showing how you compare to best practice standards. When determining KPIs, a key challenge will be deciding which “best practice” KPIs to benchmark against. 10

11 K EY P ERFORMANCE I NDICATORS Develop Key Performance Indicators (KPIs) Denial KPI sources include: HFMA AAHAM HARA Healthcare Financial Management Association American Association of Healthcare Administrative Management Hospital Accounts Receivable Analysis The Advisory Board 11

12 K EY P ERFORMANCE I NDICATORS Key Performance Indicators (KPIs) As the table below illustrates, KPI standards can range from conservative to aggressive. A key factor in reporting will be whether KPIs include or exclude unpreventable denials. Since those dollars were never available to begin with, reporting them inappropriately will overstate patient access’s role. HFMA MAP Keys – What you need to know Organization Benchmark Approach Percentage of Gross Revenues HFMAConservative < 4.00% Advisory BoardModerate 1.00% % HARA (Mid-Atlantic)Aggressive 0.08% HARA (Mid-Atl., Beds) Aggressive 0.04% 12

13 C ORE M EASUREMENTS – HFMA M AP K EYS HFMA MAP Denial KPIs Measure: Initial Denial Rate – Zero Pay Purpose: Trending indicator of % of claims not paid Value: Indicates your ability to comply with payer requirements Indicates the payer’s ability to accurately pay the claim Equation: Number of zero paid claims denied Number of total claims remitted 13

14 C ORE M EASUREMENTS – HFMA M AP K EYS HFMA MAP Denial KPIs Measure: Initial Denial Rate – Partial Pay Purpose: Trending indicator of % of claims partially paid Value: Indicates your ability to comply with payer requirements Indicates the payer’s ability to accurately pay the claim Equation: Number of partially paid claims denied Number of total claims remitted 14

15 C ORE M EASUREMENTS – HFMA M AP K EYS HFMA MAP Denial KPIs Measure: Denials Overturned by Appeal Purpose: Trending indicator of your success managing the appeal process Value: Indicates opportunities for payer and provider process improvement Improves cash flow Equation: Number of appealed claims paid Total number for claims appealed and finalized 15

16 S UPPORTING M EASUREMENTS Supporting Denial KPIs Measure: Initial Denial Rate – Zero Pay – By Category Patient Type Service Physician/Provider Purpose: Trending indicator of % of claims not paid by category Value: Indicates trouble areas in your ability to comply with payer requirements or in the payer’s ability to accurately pay the claim 16

17 I NTERPRETING D ENIAL R EPORTS Some Claims Should be Denied While every denial is associated with a dollar amount, not all denials represent lost dollars from healthcare payers. The key to understanding where the money lies is an understanding of what a denial description represents. Out of the hundreds of denial codes that may appear on a remittance advice:  Roughly 25 codes will appear most often on claims  Of those 25, roughly 1/3 represent lost reimbursement from payers.  The remaining 2/3 indicate a lack of coverage and as such represent a lost opportunity for up-front cash collection! 17

18 I NTERPRETING D ENIAL R EPORTS Common Denial Report Definitions Denials: A claim line item or service line item that results in no payment including rejected claims Soft Denial: A temporary or interim denial that has the potential to be paid if the provider takes effective follow- up actions. Hard Denial: A denial that results in lost or written-off revenue. Hard denials are often tracked in patient accounting information systems using transaction write- off codes. Preventable Denial: A hard denial resulting from action or inaction on the part of the provider of services. Preventable denials always involve elective services that could have been delayed or deferred. 18

19 I NTERPRETING D ENIAL R EPORTS Common Denial Report Definitions Clinical Denial: Denials of payment on the basis of medical necessity, length of stay or level of care. Clinical denials may be concurrent (while the patient is still in- house) or retrospective (after the patient is discharged), and typically begin as soft denials. Includes delay of payment where further medical or clinical clarification may be required. In such cases, these “payment delay” denials must be categorized as such. 19

20 I NTERPRETING D ENIAL R EPORTS Common Denial Report Definitions Technical/Administrative Denial: A denial in which the payer has notified the provider by way of the remittance advice process with specific information describing why a claim item is denied. This is typically done via remark and/or explanation of benefits reason codes. Includes delay of payment where additional documentation including coding clarification, requests for medical records and/or requests for itemized bills. Like clinical denials, technical “payment delay” denials must be categorized as such. Nearly all patient access denials are technical in nature. 20

21 I NTERPRETING D ENIAL R EPORTS Commonly Misclassified “Denials” A special class of “denials” deserve attention because they don’t represent opportunities for payment from 3 rd party payers…. They are actually indications of non-coverage. When such services are recorded as payment denials, the following can occur: Resources are misallocated in the pursuit of appeals or recoveries from insurance companies Self-pay reimbursement suffers when critical opportunities for up-front collections are missed Customer service suffers when patients are given the mistaken impression that services will be covered by insurance. 21

22 I NTERPRETING D ENIAL R EPORTS Commonly Misclassified “Denials” Lack-of-Coverage Denial: A denial that results when non-covered services are provided. These preventable denials are usually the result of insufficient or ineffective insurance verification. Unpreventable Denial: Hard denials resulting from the delivery of emergency services that could not have been delayed or deferred. Demand Denial: A claim sent to Medicare specifically for the purpose of obtaining a denial when a Medicare beneficiary has signed an Advance Beneficiary Notice (ABN). Short Pay Denial: A denial that occurs when the payer incorrectly pays a claim. Typical underpayment denials include invalid per diem, invalid case rate applied and claim paid at diagnosis-related group (DRG) rates in error. 22

23 I NTERPRETING D ENIAL R EPORTS Commonly Misclassified “Denials” Rejected Claims: Claims that are rejected by a payers’ EDI system and returned to the provider unprocessed. These claims represent non-payment by the payer unless the provider adds or changes information to allow the claim to be resubmitted and adjudicated properly. 23

24 I NTERPRETING D ENIAL R EPORTS Avoid overstating the patient access role Demand or Required Denials: All denials are not preventable. In fact, in cases where patients have secondary insurance, confirmation of denials by the primary insurance may be required before the secondary insurer will process the claim. Expected Non-Covered Service Denials: When insurance benefits are appropriately verified, patients may be proactively asked to pay for non-covered portions of larger claims. In such cases, insurance will be billed in order for covered services to be paid. 24

25 I NTERPRETING D ENIAL R EPORTS Avoid overstating the impact of denials While an organization will want to track such denials it is important to separate these “expected, unpreventable” denials from the preventable type. Including them without qualification will overstate both their financial impact and the access management role. 25

26 A T ALE OF T WO H OSPITALS Hospital AHospital B $500,000 in Gross Charges Denial Description Billed Charges Action Denial Description Billed Charges Action Pre-Existing$20,000Billed PayerPre-Existing$20,000Ref. to F.C. Demand Denial$10,000Billed PayerDemand Denial$10,000Billed Payer Non-covered service $10,000Billed Payer Non-covered service $10,000Payment Plan Inactive plan$10,000Billed PayerInactive plan$10,000Payment Plan No authorization$10,000Billed PayerNo authorization$10,000Rescheduled Denial Rate:12% Collection Delay Denial Rate:2% Accelerated Collections Same Unpreventable Denial Profile – Vastly Different Reporting 26

27 A T ALE OF T WO H OSPITALS What’s the Lesson?Not a penny more came from insurance! 27 Hospital AHospital B $500,000 in Gross Charges Denial Description Billed Charges Action Denial Description Billed Charges Action Pre-Existing$20,000Billed PayerPre-Existing$20,000Ref. to F.C. Demand Denial$10,000Billed PayerDemand Denial$10,000Billed Payer Non-covered service $10,000Billed Payer Non-covered service $10,000Payment Plan Inactive plan$10,000Billed PayerInactive plan$10,000Payment Plan No authorization$10,000Billed PayerNo authorization$10,000Rescheduled Denial Rate:12% Collection Delay Denial Rate:2% Accelerated Collections

28 W HERE D O W E F OCUS O UR E FFORTS ? A tangled web of cause and effect relationships spread the blame for denials across the revenue cycle. However, the place to start is wherever we can prevent denials from occurring. 28

29 F OCUS ON P REVENTABLE D ENIALS Develop a “zero-tolerance” mindset for preventable denials Some issues are totally within the control of an organization. As previously indicated, preventable denials are considered as such because they are “avoidable”. They are caused by either actions or inactions by the provider organization. Leading organizations ask two key questions when a denial occurs: Was the denial preventable? How could a preventable denial have occurred if we had the appropriate processes and controls in place? 29

30 F OCUS ON P REVENTABLE D ENIALS Develop a “zero-tolerance” mindset for preventable denials Since a zero-tolerance mindset naturally assumes the denial could have been prevented, process improvement efforts should focus on breakdowns in denial prevention processes which usually include: Communication Verification Documentation A zero-tolerance approach to such process breakdowns ensures that preventable denials won’t occur. 30

31 F OCUS ON P REVENTABLE D ENIALS “Zero-Tolerance” in Practice Examples of zero-tolerance operational practices include: Policies and training to communicate the organizations approach to prevention – eliminate excuses Controls are established to ensure policies are executed Preventable denials are categorized, valued and assigned Preventable denials rank as “stand-alone” errors in quality policies for patient access departments Reports indicate that preventable denials are rare and decreasing 31

32 P REVENTION F OCUS A REAS A CROSS THE R EVENUE C YCLE Patient Access - Scheduling Typical denials Inpatient-only procedures performed on an outpatient basis Outpatient procedures performed on an inpatient basis Failure to obtain pre-certification/pre-authorization Scheduling Best Practices Schedulers are fluent in payer contract requirements Non-emergent services are scheduled 12 or more hours in advance to allow time to obtain pre-certification Physician offices are educated that only they can provide the clinical information that allows hospitals to pre-certify cases. 32

33 P REVENTION F OCUS A REAS Patient Access - Scheduling Scheduling Best Practices (continued) Surgeries are verified against inpatient only list Collect complete information prior to surgery in accordance with InterQual, Milliman or other criteria Medical necessity is validated to prevent ABNs Non-certified elective services are delayed “OK to Delay” criteria is established with scheduling providers 33

34 P REVENTION F OCUS A REAS Patient Access - Pre-Registration Typical denials Pre-certification not obtained Non-covered services Pre-Registration Best Practices Complete insurance information is obtained Specific service line item eligibility is verified manually when electronic verification systems offer only general benefit information 34

35 P REVENTION F OCUS A REAS 35 Patient Access - Pre-Registration Pre-Registration Best Practices (continued) Service line item level insurance verification is performed (electronically or manually) Non-covered services are explained to patients so that self-pay collections processes can begin Voice-certification technology is utilized to support pre- certification appeals Include denied dollar information in registrar quality reports

36 P REVENTION F OCUS A REAS Patient Access - Registration Typical denials Certification not obtained Non-covered services Member not eligible Registration Best Practices Registration staff is trained to recognize complete orders ABNs are issued Registrar is focused on “100% financial clearance” 36

37 P REVENTION F OCUS A REAS Patient Access - Registration Registration Best Practices (continued) Service line item level insurance verification is performed (electronically or manually) Address validation performed “OK to Delay” criteria is established with referring providers Include denied dollar information in registrar quality reports 37

38 P REVENTION F OCUS A REAS Ancillary Services Typical denials Medically unnecessary services Ancillary Services Best Practices Ancillary staff are trained to recognize complete orders Ancillary staff are trained to issue ABNs Ancillary staff are educated about NCDs and can explain them to patients 38

39 P REVENTION F OCUS A REAS Case Management Typical denials Clinical information doesn’t support stay Clinical information not provided in timely manner Case Management Best Practices Contacts every payer for certification of stay Provides information to payers in timely fashion All denied services are appealed Reviews physician documentation for rationale 39

40 P REVENTION F OCUS A REAS Case Management Case Management Best Practices (Continued) Initiates discharge planning at admission Involves attending physicians in appeals Is fluent with contract terms Responds to clinical documentation requests in 14 days Is a member of the denial task force Utilize voice-certification technology to support authorization appeals 40

41 P REVENTION F OCUS A REAS Discharge Planning Typical denials Untimely discharge resulting in carved out days Discharge Planning Best Practices Discharge Planning is initiated at admission Families are advised of discharge options 41

42 P REVENTION F OCUS A REAS Health Information Management Typical denials Untimely submission of copies of requested records Coding discrepancies Health Information Best Practices Records are coded in a timely fashion Coding quality is validated by an external firm Physicians are queried when documentation is unclear Physician documentation education is provided Assists registrars for ABN purposes Is represented on the denial task force 42

43 P REVENTION F OCUS A REAS Health Information Management Health Information Best Practices (continued) Coding professionals can remove incorrectly posted charges Transcription is timely HIM is fluent with contract terms Responds to clinical documentation requests within 14 days Sanctions for incomplete records are extended to unanswered queries 43

44 P REVENTION F OCUS A REAS Patient Accounting Typical denials Untimely Filing Inaccurate revenue codes due to outdated chargemaster Patient Accounting Best Practices Has a designated denial unit with payer-specific appeals experience Rejected claims are corrected timely Rejections are investigated and corrected Monitors charges that are entered on wrong accounts Denied claims are appealed Clean claims are rising 44

45 Patient Accounting Patient Accounting Best Practices (continued) Patient Accounting is fluent in contract terms Copies of appeal materials are maintained Contract management module is current Charge master is regularly updated to reflect current CPT and revenue codes 45 P REVENTION F OCUS A REAS

46 Chief Medical Officer Typical denials Insufficient documentation to support medical necessity Chief Medical Officer Best Practices Has regular contact with medical directors of payer’s with high denial rates Provides physician education to physicians with high denial rates Provides feedback to physicians about clinical denial rates Educates physicians about LCDs and NCDs Participates in denial appeals demonstrating to CMS or 3rd party payers the efficacy of treatment or technology 46

47 P REVENTION F OCUS A REAS Information Systems Typical denials Incomplete interfaces result in incomplete coding transferred to bills Inadequate reporting results in poor denial analysis Information Systems Best Practices All information systems modules installed timely Ad-hoc reports prepared to assist in denial management analysis Documentation collected electronically Contract management system installed and updated 47

48 P REVENTION F OCUS A REAS Information Systems Information Systems Best Practices (continued) Extract denial information from X remittance advice ABN system integrated bi-directionally Information system includes 3-day crossover reports Voice certification systems utilized Real-time eligibility system utilized with detailed insurance benefit information Physician order and payer authorization are auto-archived to the document imaging system 48

49 P REVENTION F OCUS A REAS Compliance Compliance Best Practices Appropriate audits of performance are conducted: Remittance Advice Reviews Write-off Adjustments Zero-Payments Registration and Insurance Verification Quality Educational programs are offered to employees and medical staff Claims denials are reviewed for potential False Claims Act potential 49

50 M ORE A BOUT D ENIAL KPI S Benchmarking performance against industry standard KPIs is a critical component of revenue cycle processing improvement. In this presentation, we’ve also demonstrated that focusing on the right KPIs is the most cost- effective way to implement your denial management program. Focusing on the right KPIs is also important across the entire revenue cycle. 50

51 Denials (Net Revenue) IndicatorBest Practice  Overall denials rate< 1 - 3%  Clinical denials rate< 1 - 3%  Technical denials rate< 1%  Underpayments additional collection rate> 75%  Appeals overturned rate40% - 60%  Electronic eligibility rate> 75%  Physician pre-certification double-check rate100%  Case managers time spent securing authorizations rate < 20%  Total denial reason codes< M ORE A BOUT D ENIAL KPI S

52 Q UESTIONS 52

53 C ONTACT I NFO John Thompson, PMP, CHAM, CRCR Principal, Access Management and Technology Innovation Services (301)


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