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Claim DenialsAccording to the Revenue Cycle Survey from Advisory Board that involved healthcare executives from 90 organizations and data from nearly 300 organizations, hospitals wrote off as uncollectable 90% more denials than six years ago. These uncollectable claim denials would signify a $3.5 million loss over the past four years, for a median 350-bed hospital. Improved insurance verification services and medical billing practices could help prevent claim denials to a great extent.

The report also highlighted three other critical hospital revenue cycle performance indicators: cash flow, patient collections, and cost to collect.

Key highlights of the survey include:

  • The median for successful claim denial appeals for hospitals dropped from 56% to 45% for private payers over the past two years, and for Medicaid, it dropped from 51% to 41%.
  • The rate of successful hospital appeals for Medicare and Medicare Advantage, increased from 50% to 64%.
  • Owing partially due to write-offs and other factors that could reduce accounts receivable, median performance for net accounts receivable days improved by 8% from 2015 to 2017.
  • Though hospitals in states with Medicaid expansion produced better performance on bad debt, the rise of high-deductible health plans has led to an increase in unpaid patient obligations across all states. This results in increased focus on patient collections, especially at the point of service (POS).
  • Median for point-of-service patient collections grew from 0.24% of net patient revenue to 0.80% over the past six years.
  • The cost to collect median remained flat at 3.0% over the past four years, as overall hospital expenses grew by 7.5% in 2017.
  • Median performance for net A/R days improved by 8 percent between 2015 and 2017, adding to the 21 percent improvement in the past decade.
  • Hospital bad debt declined as more individuals gained insurance coverage under the Affordable Care Act and Medicaid expansion in some states.

As appeals are becoming increasingly difficult, the Advisory Board recommends health systems to focus on approaches such as improved documentation and authorization processes. The Board also advised that collecting at the point-of-service is important, as patients are expected to cover more of the costs. Offering discounts to patients may also help organizations to boost point-of-service patient collections. Reducing the cost to collect is also becoming more important for hospital revenue cycles. While patient access is difficult to centralize, other functions that present good revenue opportunities include coding, billing, collections, denials, and payer contracting. An experienced medical billing and coding company can assist physicians with claim denial managements.

How Orlando Health Reduced Claim Denials

A recent article published in Health Leaders Media discussed how Orlando Health, a private, not-for-profit network of community and specialty hospitals based in Orlando, Florida, reduced their claim denials rate.

Health Claim DenialsSince the year 2012, Orlando Health has conducted sincere efforts to reduce their denial rates. Those efforts include:

  • The creation of a denials management team with existing staff members that focused on claims denials enterprise-wide. The team took several actions such as working with department executives to incorporate claims-denial prevention mechanisms in workflows, tracking claims denials as avoidable or unavoidable, then sharing them with all affected areas such as coding, revenue integrity, physician practices and scheduling and educating the clinical team on the medical necessity guidelines for inpatient admissions.
  • Educated the registration staff about the complete revenue cycle.
  • Quarterly meetings were arranged for the denials management team as well as interdisciplinary staff members, including Hospital CFOs, Corporate and facility revenue cycle staff and Managers from multiple departments, including case management, information technology, and rehabilitation services.
  • Educated physicians and clinicians to understand the complete process and inpatient-only procedures. They also ensured that documentation was getting audited.
  • At claim denials, a team that included the billing manager and a cash receipts manager closely examined the 835 electronic data interchange documentation from the payer, which provides payment and remittance advice from the payer, including billing codes. Once the error was identified, the payer updated their system and reprocessed the claims.
  • Established joint operating committees with several payers that bring together face-to-face meetings every other month to find out who is accountable for claims denials and resolve those problems.

Bridget Walters, corporate director of enterprise patient access, recommends that while signing contracts with payers make sure they have provisions to compel corrective action.