Many healthcare organizations are facing financial issues due to changes in the economy, changes to federal, state, and local legislation, and paradigm shifts caused by reform. What can providers and hospital organizations do to improve their profitability?  How does an organization begin to recognize and implement changes to positively affect the bottom line? Maybe start with a program to reduce denials.

Reporting System

The first step to analyzing data is to have a good reporting process. It is crucial to obtain the required data to ensure that it is valid, meaningful, easy to obtain, and current. Data should include, but is not limited to: payroll, staffing, labor, payer mix, contracting, revenue cycle, accounts receivable, billing/expenses, supply costs, sales prospecting and closing, denials, utilization review, staffing, and costs of core services.

Denial Management, Revenue Cycle, and Accounts Receivable

Once the data is available, an analysis should be performed in regard to the billing and scheduling processes.

• Review claim denial rates – An organization needs to identify:
  • How many claims are being submitted?
  • How many claims are being denied?
  • Why are claims being denied? Some of the more common reasons for claim denial include: services not covered, medical necessity not established, prior authorization not obtained, claims filed incorrectly, incorrect diagnosis code, provider error, lack of supporting documentation, coverage terminated, timeliness of filing, and improper coordination between primary and secondary providers.

According to a case study, “BHM Helps Hospital Systems Dramatically Decrease Denials and Improve Profits”, $800,000 in revenue was able to be recouped in 3 months due to performing an in-depth denials analysis. The in-depth approach included  reasons for the denied claim, denial appeal status, provider and payer responses to authorizations, provider and payer responses to concurrent insurance claim denials, information regarding physicians and departments involved in insurance claim denials, case management notes, level of care determination and revenue which was lost or at risk.

According to another case study, “How Mercy Medical Center Ensured Better Payment of Insurance Claims and Increased Revenue by $350,000 Per Year”,  six sigma tools were used to determine what was causing the unusually high claim denials. The main culprit was determined to be incorrect patient demographic information. This could be as simple as spelling out a resident’s state as opposed to using the abbreviation as different providers have different requirements. The audit of the initial 30 claims showed that 63% of the denied claims were due to failure to comply with the insurance company’s requirements. An audit of an additional 386 claims revealed that 78.2% of the denials were due to incorrect demographic information.

• Accounts Receivable and Revenue Cycle
  • How many days are between billing and payment?
  • What is the length of the revenue cycle?
  • What cost reduction processes are being utilized, such as: online bill pay and paperless statements?

According to a case study, “Revenue Cycle Case Study: Reducing Denials Requires Team Approach”, revenue cycle was decreased by forty days and cash on hand nearly tripled. The main cause of the high revenue cycle was claim denials. According to the study, Appalachian used a 5 step process to correct the issues:

1. Count the errors
2. Tweak the health information system for patient accounts
3. Add new scrubbing software
4. Train revenue cycle staff
5. Educate the clinical team

According to a whitepaper by Anytime Credit, “17 Things You Should Be Doing Right Now To Reduce Outstanding Accounts Receivable”, 17 tips are provided to assist with reducing accounts receivable:

1. Create a plan
2. Provide accurate and timely information
3. Develop KPIs
4. Define Roles
5. Standardize messaging
6. Document activities
7. Define dispute resolution procedures
8. Centralize data and communications
9. Manage your resources
10. Score customers using cost of credit
11. Be proactive
12. Focus on key accounts
13. Automate business processes
14. Secure financial information
15. Involve your sales team
16. Escalate trouble accounts
17. Work as a team

With the changes in legislation, it is important to keep close tabs on revenue and expenses.  Reducing claim denials is a great way to increase revenue. It is pretty straight-forward , the information is easily captured, and it is generally fairly simple to make adjustments. A healthcare financial analysis is a great place to begin analyzing your bottom line.  Most denied claims are a result of incomplete claims, incorrect claims, or other input errors. Implementing a system of checks and balances and reviewing provider contracts for specific submission criteria can begin the journey. If you need assistance from our healthcare financial consultants, please contact us for a free consultation.

BHM can reduce denials and has a proven success rate. Our experts know data management is denial management with keys to quickly reduce or eliminate denials. Click HERE to learn more about how BHM can help you with denial management.