A little over a year ago, SAC founder and managing partner, Joy Stephenson-Laws, wrote here about the importance of appealing claim denials and helping patients file these types of appeals. Since then, denial rates have been steadily increasing and they show no signs of slowing down. In fact, major insurers, such as Cigna and United HealthCare, have increasingly implemented automated claim reviewing systems. These allow for the review and denial of claims at a blistering rate of five claims per second. And at the end of the day, a troubling number of denials will be upheld by insurers on appeal.
Supporting this trend is a recent report from the Kaiser Family Foundation (KFF) analyzing the 2021 transparency data released by the Centers for Medicare and Medicaid Services (CMS) on claims denials and appeals for non-group qualified health plans QHPs. KFF found that in 2021, 291.6 million in-network claims were submitted to insurers, of which 48.3 million were denied, for an average in-network claims denial rate of 16.6 percent. Of these denied claims, about 14 percent were denied because the claim was for an excluded service, 8 percent due to lack of preauthorization or referral, and only about 2 percent based on medical necessity. Most plan-reported denials (77 percent) were classified as “all other reasons.”
Another study, the Change Healthcare 2022 Revenue Cycle Denials Index, reported that the denial rate for both in-network and out-of-network submitted claims has steadily increased over the past five years, from 9 percent in 2016 to 12 percent in 2022. According to the index’s authors, approximately 41 percent of claims denied in Q3 2021 to Q2 2022 fall into three front-end categories:
- Registration/Eligibility at 22 percent
- Authorization/Pre-certification at 13 percent
- Medical Necessity at 6 percent
Other common reasons for denial, i.e., Missing or Invalid Claim Data (16 percent) and Medical Coding (five percent), can often be remedied at the front-end phase of claim submission process.
Steps to Avoid Unnecessary Denials
Given that 82 percent of claim denials are potentially avoidable through proper claim submission practice and methodology, it is critical that providers and their RCM teams take whatever steps they can to minimize these errors. Doing so has the potential to greatly increase reimbursement rates and enhance margins by reducing the time and cost related to appealing denied claims.
It’s also worth noting that some 43 percent of these avoidable denial are not recoverable due to uncorrectable errors, such as ineligibility with an insurer on the date of service, or a service not being covered by Medicare.
Providers can take immediate and tangible steps to reduce the risk of “forced error” denials by focusing on being as accurate as possible in five key areas of the claims submission process. These are:
- Ensure patient information is correct during the pre-registration and registration process
- Confirm patient / service eligibility before submitting a claim
- Apply business rules to examined registration data to help ensure accuracy, completeness, and consistency
- Authorization / Pre-Certification
- Review ordered versus. performed services against prior authorizations to ensure they track
- Communicate with physician offices to have authorizations updated when applicable
- Communicate with insurance companies on any change in authorization status
- Record authorization verification calls
- Capture digital images of authorizations
- Utilize peer-to-peer meetings to align authorizations and identify any possible error or omissions
- Partner for physician second-level reviews of medical necessity to be prepared for any potential denials and appeals
- Medical Necessity
- Ensure all clinical documentation is submitted for continued stays
- Utilize peer-to-peer meetings to ensure substantiation, documentation for medical necessity to be prepared for any potential denials and appeals
- Verify there is an option for administrative days in contracts to cover extended stays due to difficult patient placement
- Ensure documentation clearly explains the severity of the patient’s situation
- Medical Coding
- Ensure accurate patient discharge admitting/discharge dates and status coding
- Include documentation of patient care situation at time of admission
- Ensure charge master is up to date and correct charges are being utilized
- Missing/Invalid Claim Data
- Ensure that claims do not lack information or have billing errors, such as: payer ID missing/invalid, NPI missing or invalid, dx code invalid/not effective on date(s) of service, missing/invalid procedure code, or wrong procedure code billed for date(s) of service
- Avoid duplicate denials by ensuring staff are adhering to appropriate follow-up process
Appeals and Arbitration
Appealing claim denials is a vital step for hospitals to protect their financial stability. The success of provider appeals varies widely across insurers and the types of claims appealed, but proper implementation of front-end processes can have a major impact on recovery at both the appeal and arbitration stages. Although it is unlikely that the insurer’s substantive reasons for denial will change throughout the appeals process, denied claims with clerical errors and/or missing information can often be resolved at this phase. In any event, first-level – and sometimes second-level – appeals are often a contractual prerequisite for bringing claims to arbitration.
Another avenue available to providers is arbitration. When available, arbitration can be a relatively quick and painless avenue for recovery on claims that have otherwise reached the end of the line. However, proper implementation of front-end procedures still plays a vital role in recovery at this phase. Should a claim go to hearing, both parties will scrutinize and question every step along the way, from pre-registration to non-payment. At this point, it is more important than ever that providers properly follow front-end protocol. Recovery on an otherwise-solid claim can be hampered by unnecessary clerical errors, such as inputting incorrect patient information, medical codes, or dates of service.
Stephenson, Acquisto & Colman is dedicated to working with providers to maximize recovery on denied claims. After internal appeals have been exhausted, we utilize various alternative methods of pursuit, such as negotiation, mediation, and, of course, arbitration. Our experience and relationships in the industry gives our firm the edge in pursuing every avenue of recovery for providers.
Ensuring that claims are properly handled will not only mitigate the uptick in denials over recent years, but also increase the likelihood and amount of recovery at arbitration. In other words – an ounce of front-end prevention can save providers a pound of cure at arbitration.