Building denial prevention strategies to boost your practice’s revenue cycle

Denial prevention involves proactive work to facilitate payment on first claim submission — a conscious effort to prevent denials and thereby avoid inefficiencies and rework. 

The concept of denial prevention is different from denial management; the latter proposes that all efforts should be deployed to ensure payment at first submission, while the former proposes that denied claims be investigated, corrected and resubmitted to payers.

Revenue cycle processes

Revenue cycle management (RCM) is comprised of a combination of front-end and back-end processes to efficiently maximize reimbursements for services rendered. The rationale for assigning some front-end responsibilities — for accurately collecting relevant demographics and insurance information — is to facilitate efficient back-end processes of billing and collection.

Front-end processes

Front-end processes are the activities necessary to enable clinical encounters (e.g., appointment scheduling, insurance verification, prior authorization, appointment confirmation). The effectiveness of this operation has a direct correlation to the success or lack thereof of the subsequent billing and collection.

The verification process requires that providers validate insurance information presented by patients. Such information includes (but is not limited to): insurance coverage, effective date, expiration date, policy number, copayments, benefit periods etc. The validation of this information is necessary to avoid coverage denials.

Prior authorization determines the medical necessity of a proposed medical intervention. This function requires providers to obtain authorizations for specific medical services for specified period. Failure to secure the authorizations for such services will result in claim denials and loss of revenue. Most managed care payers require authorizations for a host of medical intervention, and it may not be too long before all payers, including governmental payers, require some proof of medical necessity for prescribed medical services.

Front-end revenue cycle functions may include appointment scheduling, appointment confirmation, check-in, insurance verification and prior authorization. It is dependent on staffing and task assignment.

Back-end processes

Back-end processes are the functions required to submit “clean” claims and receive payments in the shortest possible time. Medicare claims should be paid in about 14 days, Medicaid claims should be paid in about 21 days, and managed care claims should be paid in about 30 days. The back-end processes include but are not limited to ensuring that claims have the necessary information to ensure prompt payments. Information required for clean claims include demographic information, clinical information, insurance information, and authorizations when required. It is imperative that RCM staff adhere to payer guidelines and contracts to prevent denials. However, even when all the information required is provided, it is estimated that about 40% of claims are erroneously denied due to human errors and/or systemic failures. Since the RCM operation is responsible for billing and collection, we must evolve different solutions to mitigate against these denials.

Denial prevention strategies  

The goal of denial prevention strategies is to make sure claims are promptly paid to eliminate the need to rework them. The following strategies help to prevent denials:

• Claims validation process
• Collaboration with payers to do the following:
  • System test: Sample claims testing for new/renegotiated contracts
  • Timely transfer of auth information into claims adjudicating system
• Positive and interactive relationships with payers.

Claim validation process

The claim validation process is the back-end equivalent to insurance verification. The process requires the revalidation of demographics and insurance information before claim submission. This process can and should be automated to “run” prior to claims submission. The addition of this automated functionality should eliminate all demographics and/or coverage denials, thereby strengthening the financial position of the organization.

Collaboration with payer

Collaboration between providers and payers to mitigate the inefficiencies of erroneous denials will result in timely and accurate reimbursements. There is the additional benefit of economy of scale by assigning staff to focus on other issues as opposed to reworking claims that were denied, which can also improve employee morale.

The following areas of potential collaboration with payers will go a long way in eliminating the incidence of preventable denials:

System integrity tests for new or renegotiated contracts

The implementation of new/renegotiated contracts may result in the following denials:

• Out-of-network denials
• Non-covered service denials
• Inconsistent billing code denials
• Underpayment

These denials are most likely due to a time lag from contract execution to system configuration of a new or renegotiated contract; the denials could also be due to human error. However, if the system is tested with a few sample claims to ascertain the accuracy of claims processing, potential erroneous denials can be identified and corrected thereby assuring a hitch-free payment for services. The denials that could be prevented by claims testing include:

• Out-of-network denials: Claims submitted after the execution of a contract but prior to payer system configuration. Such claims may be denied as out of network.
• Non-covered service denials: This may be due to a delay in loading the new contract into the claims adjudicating system.
• Inconsistent billing code denials: These denials may be due to a coder adding an erroneous code, not checking Correct Coding Initiative (CCI) edit, not updating claim scrubbers, or not loading payer billing codes upon completed negotiation..
• Underpayment: This usually occurs when there is a delay in loading enhanced rates into the system. Claims submitted prior to loading of the new rates will be paid at the existing rate thereby resulting in underpayment.

The denials enumerated above can be prevented with system integrity tests, thereby preventing unnecessary denials and potential loss of revenue.

Timely transfer of authorization codes into the claims system

One of the most common and frustrating erroneous denial is the “no authorization” denial. These denials can be grouped as follows:

• No auth denial when the service is authorized
• No auth denial when the contract does not require authorization
• No auth denial for the scope of service when the service is in scope
• Auth date range denial when additional services has been authorized.

A collaborative relationship between the provider and the payer can eliminate these erroneous denials, thereby eliminating the need for rework.

Positive and interactive relationships with payers

Developing and maintaining a healthy relationship with payers is priceless. It can be the difference between unmanageable A/R and a consistent cashflow. As has been discussed in the preceding section, claims denial — either legitimate or erroneous — is an unmistakable fact of provider and payer relationship. It is thus incumbent on RCM staff to mitigate the occurrence of erroneous denials by leveraging all available avenues to get the job done. One such avenue is the relationship that can and should be fostered by both entities. Sometimes, the development and maintenance of such relationship is the function of the contracting team, but fostering a collegial and respectful interpersonal relationship is the job of everyone. In an atmosphere of a good working relationship, some of the denials discussed above can be resolved with one phone call.

It is the expectation of this author that the strategies described above can create an enabling environment for a thriving revenue cycle operations with a motivated staff and a consistent cashflow.