Keys to effective Denial Management

by Todd Thomas, Director of Provider Product Management

Estimates show denied claims represent over 13% of gross revenue for providers nationwide. Some studies suggest that over 90% of those denials were preventable and nearly 70% could be overturned. An additional 6% of gross revenue was lost to underpayments. These numbers are staggering when you combine lost revenue as a result with the high cost associated with resolving these denials.

To face this challenge, providers must have an effective strategy in place to identify denials, manage their resolution and analyze root cause to facilitate prevention of future denials. Some keys to an effective denial management strategy include:

1) Capturing all remittance information necessary for denial management
A primary source of denial information is the payer remittance advice (RA). Many providers focus on payment posting from the RA and neglect to capture all of the information critical for effective denial management. For denial follow-up, it is important to capture and categorize all payer reason and remark codes.

2) Paying attention to payers who provide hard copy remittance reports
To maximize collections, providers must manage denials for 100% of their payer mix. Payers who cannot provide electronic remittance advice (ERAs) typically represent around 15% of total revenue, and many providers feel that the cost of capturing denial information from a hard copy remittance report is just too high to chase such a low percentage of revenue. A simple cost/benefit analysis will likely reveal that the cost of capturing denial information from a hard copy remittance report is easily outweighed by the denial recovery opportunity, and the opportunity to identify and prevent future denials.

3) Identifying and managing underpayments
If your denial management process does not identify and manage underpayments, you may be losing up to 6% of your annual gross revenue. Managing underpayments is frequently overlooked as part of a denial management strategy. First, you can qualify partial payment denials from remittances by looking for specific reason codes to identify charge-level denials. Second, it is critical to identify payment variances by comparing remittance paid amount to the expected payment amount. This can be challenging if HIS systems, contract management systems and denial management systems don’t work well together, however, this problem is easily and clearly worth resolving given the amount of revenue at stake.

4) Considering how denied accounts are assigned to follow-up staff
Too often the focus on resolving EVERY denial results in chasing hundreds of low balance denials while sacrificing valuable resources who could be working on resolving collectible denials. Make sure follow-up assignments are reasonable. If a follow-up work queue has 2,000 denied accounts in it, the likelihood of staff always working on the most important account will be pretty low, and the likelihood of timely follow-up on all 2,000 denied claims is even lower. There are always exceptions that require judgment, however, consider filtering follow-up work queues to include a smaller number of high priority accounts. Also, consider setting a threshold (based on cost to collect or other defined criteria) for automating low-balance write-offs on denials, eliminating those accounts from work queues.

5) Automating or streamlining follow-up activity
Efficiency is the key to maximizing recoveries. Follow-up staff should have tools to save them time, allowing them to work and resolve more accounts. Some examples:

• Payer-specific appeal letter templates that can be auto-filled with account-level information like Patient Name, PCN, MRN, DOS, Denial Reason Codes, etc.
• Write-off authorization tools to streamline the request and approval process
• Canned follow-up actions and notes to prevent staff from wasting valuable time typing the same thing over and over again
• Quick access to view and/or print the EOB and the denied claim
• Automated alerts that notify users when a prior follow-up action has not resolved the denial within the designated period of time

6) Tracking and analyzing the outcome of denial follow-up
Make sure the outcome of each resolved denial is clearly identified. Analyze outcomes and educate staff to evaluate processes that historically have not been successful overturning denials. If sending the same appeal letter to the same payer for the same denial reason on 100 different claims has not overturned any denials, consider creating a new follow-up plan for that denial reason.

7) Identifying root cause and focusing on prevention
Increasing denial recovery rate is good. Decreasing initial denial rate is better! The key to prevention is in identifying the root cause. When providers understand root cause, they can make business decisions to facilitate prevention. Studies suggest that almost 80% of denials are Patient Access errors, but if the cause is unknown, staff may not be solving the right problem. It is worth the effort to evaluate and assign root cause to denials which includes identifying trends and taking steps to prevent future denials.

8) Setting and tracking financial and operational performance goals
Dashboard-style reporting tools are very helpful to communicate performance metrics throughout the organization and to manage performance. Important denial performance metrics include: initial denial rate, recoveries on denials and underpayments, rate of appeals overturned, monthly denial trends by payer and error type, denial outcomes by payer and error type.

These tips are some of the keys to a comprehensive and effective denials management strategy. Combining these eight tactics with a strong denial management solution like Emdeon Denial Manager will simplify execution of this strategy. Emdeon Denial Manager optimizes efficiencies in each of these areas to help you reduce your collection costs and A/R days, while improving your recoveries and cash flow.

Todd Thomas is the director of provider product management at Emdeon. Interested in learning more about these eight strategies for effective denial management or finding out where the industry is headed with Denial Management applications? Email him at
For more information Emdeon Denial Manager, call 877.EMDEON.6 (877.363.3666) or visit us online.
Source for all statistics in article: The Healthcare Advisory Board


Read More>>