Why Are We Worried About Denials Management?

March 1, 2006

For the February 2002 issue of Health Management Technology, I authored a Thought Leaders column entitled, “Write Offs: Doing It Right The First Time”–and received an outpouring of responses from a wide variety of healthcare providers.

Darice M. Grzybowski, M.A., R.H.I.A., FAHIMA, is president of the consulting firm HIMentors LLC, and also serves as vice president of marketing for Craneware Inc. Contact her at HIMentorsLLC

For the February 2002 issue of Health Management Technology, I authored a Thought Leaders column entitled, “Write Offs: Doing It Right The First Time”–and received an outpouring of responses from a wide variety of healthcare providers.

In unison, they all agreed that the healthcare industry spends far too much time fixing errors and working on unimportant or duplicative tasks. Today, there is a new topic on the same horizon.

“Denials management” recently has become a hot topic for many healthcare vendors and consultants, and industry news about large, upcoming revenue cycle initiatives for providers usually includes denials management as a component. Does this mean the industry has once again focused a disproportionate amount of time on fixing errors rather than providing patient care or managing its business aspects right the first time? Is it possible that denials management is replacing write-offs as the new do-over?

How Did Denials Management Originate
Perhaps no one knows the exact origin of the term, but denials management inevitably reflects the practice of studying returns from insurance providers after the healthcare provider is informed that they will not receive any or all of the reimbursement they expected–or at least that they billed–and that something is awry in the process.

This represents an irony. Why are healthcare organizations trying to manage denials after they have occurred–up to and incorporating their expectation of claims denials, and subsequently looking for a software fix? If provider organizations knew their claims would be denied, or suspected so, why wouldn’t they make and take the time up front to fix the problem? This extends beyond simple claims scrubbing. Is a denials prevention program what healthcare organizations really want?

When a vendor or supplier installs software or provides consultation to a healthcare organization to help the organization manage its claim denials, executives should compel their suppliers–and themselves–to make the distinction between denials management and denials reduction or prevention.

What about claims scrubber products? Don’t they eliminate or prevent denials? The answer is a very qualified yes. To some degree, scrubbers mitigate some of the denials. From field reports, these types of products are generally perceived to be in place to identify and strip information that can cause a problem, but most are reported to have limited analytical and trending ability. Also, they are used late in the revenue cycle process, by necessity, and on their own cannot be robust enough to prevent an error in denial or rejection that may have occurred from erroneous data in the charge data master, or when a department selects the wrong units of service on a claim. To reduce a greater majority of problems, a solution must be comprehensive; it must wrap from the front to the back end of the revenue cycle, and it must be integrated into the facility’s workflow.

The Search for a Solution
Every provider and healthcare organization is familiar with the aftermath of claims submissions and, in some cases, the inescapable delays between submission and reimbursement. How long can the float period be stretched? Will the payer organization find that a piece of information in the billing data is missing? Is there a field that contains questionable content? Even when all the data is present and it is all correct, payer organizations may yet request additional information before sending reimbursement, or may want copies of the patient’s medical record, which, of course, requires a consent and delays the process even more.

Some delays and denials are legitimate. Sometimes, an unavoidable and unpredictable error does occur. And yes, sometimes the submitting healthcare organization must dedicate a staff person to investigate what the problem is, how it happened, how it can be corrected and, hopefully, how it can be prevented from recurring. Those should be few and far between.

Here are recommendations that may look simple on paper, but they carry a wallop when it comes to the work, forethought and strategy necessary to prevent denials.

Review the organization’s billing process from front to back end. That includes the data flow that starts at prescheduling, charge master management (hard coding), charge/order reconciliation, HIM processes (soft coding, grouping and abstracting of data), the billing processes (and any prebill audit processes), and review of remittance data and reconciliation up until final payment.

Identify any gaps in process that may result in the issuance of denials. Is there a check and balance to assure all charges were captured and potential lost revenue is identified? Is a system in place to track communication and modification of modifiers? Are comprehensive audit trails kept on all CDM changes?

Ensure that the organization has the best possible software tools in place, up front as well as prebill, so that staff can analyze any problem trends and install fixes before one of them starts having to manage denials.

Avoid a Bad Habit
As leaders in healthcare, provider organizations have a much greater responsibility to start managing productivity and efficiencies of their operations versus managing denials. If they don’t reduce these errors to begin with and just keep applying band-aid style fixes, denials management will become a habit like write-offs. That habit becomes a comfortable part of daily activities, and it eventually integrates its way into the organization’s daily processing, so much that no one realizes it.

Suddenly, one day there is a new and dedicated position at the facility: Denials Management Coordinator. Would an organization ever consider a “Patient Fall Coordinator” because it tolerates these events, or would the smart organization install a “Patient Safety Coordinator?” Is it “loss prevention” or “loss management?”

It is time for everyone in the financial segment of healthcare to learn a lesson from clinicians and really try to prevent a problem or complication in billing from occurring, by installing a “financial care plan,” similar to a patient care plan. It is time to stop fixing the errors after they occur and to work on elimination of them in the first place.

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