September 19, 2024 • 17 mins
Discover the critical differences between medical claim denial management and prevention programs, and learn how to set up effective processes to reduce and manage claim denials. Guest expert, Sabrina Skeldon, shares valuable insights on the financial impact of claim denials, the importance of clean claim ratios, and practical strategies for improving front desk, coding, and billing staff performance.
Join us as we explore the true cost of reworking claims, the benefits of regular billing audits, and the overall advantage of adopting a denial prevention program. This episode is packed with actionable advice to help you streamline your practice's revenue cycle and enhance financial viability.
For more resources and on-demand education, check out the TMA Education Center at www.texmed.org/education. Stay tuned for more episodes from TMA Practice Well. Until next time, stay well!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:03):
Thank you for listening to TMA's Practice Well podcast. TMA,
helping you improve the health of all Texans.
Music.
Please be advised that the information and opinions presented as part of this
(00:24):
program should not be used or referred to as primary legal sources and does
not replace the advice of your health care attorney,
nor should the information and opinions presented as part of this program be
construed as establishing medical standards of care for the purposes of litigation,
including expert testimony.
(00:44):
The standard of care is dependent upon the particular facts and circumstances
of each individual case, and no generalization can be made that would apply in all cases.
Music.
(01:04):
Hi, I'm Heather Bettridge, Associate Vice President of the Texas Medical Association's
Practice Information and Services.
One of the benefits that TMA provides to its members is staff working alongside
payers advocating for practices when dealing with claim denials.
Premier, Inc. recently conducted a survey of more than 500 organizations,
(01:29):
and responses reveal that nearly 15% of all medical claims submitted to private
payers was initially denied.
So I ask, as practice leaders, do you know which payers your staff find it most
difficult to work with and why?
Do you know from which health plan your practice gets the most denials?
(01:52):
Answering these questions is a good first step to setting up processes and checks
and balances that will help reduce and manage claim denials.
My guest today is Sabrina Skeldon, an experienced healthcare attorney who is
also certified in medical coding, auditing, and risk adjustment coding.
(02:13):
Sabrina is skilled in streamlining practices revenue cycle from front desk procedures
to the business activities of billers and coders.
Her company places heavy emphasis on the development of a robust and systematic
denial management program. Sabrina, welcome.
Thank you, Heather. To start us off today, describe for us, please,
(02:37):
the conceptual differences between denial management and denial prevention programs.
Well, there's a tendency to view a denial management program as a fix-it,
day-to-day approach to be addressed at the back end.
Practices handle denial management by sorting and working denials by age,
(02:58):
dollar amount, and payer.
A conceptually different approach is to develop a denial prevention program
to create procedures to avoid denials, track patterns, and develop KPIs to measure
the effectiveness of revenue cycle processes.
A practice's goal should be to increase its first pass rates and reduce its denials.
(03:22):
The denial prevention approach targets that goal and helps achieve it better.
Okay, thank you for that. That
makes sense. Very helpful to differentiate between the program options.
Sabrina, talk to me a bit about the financial impact that claim denials have
(03:42):
on a practice's revenue stream?
Well, there are three aspects to the financial impact of a denied claim.
The loss of revenue, the cost of reworking the claims, and the delay in receipt of revenue.
The number of times a denied claim has to be touched increases the FTE labor
costs and makes a greater cost in reworking claims.
(04:06):
Appeals also can be lengthy and increase the cost of receiving revenue and increase
the delay in the receipt of revenue.
Even if the appeals are successful, it doesn't take into account the expenses
that are required to bill the patients so that the remaining amounts can be collected.
There are two metrics for evaluating the practice's success in managing denied
(04:29):
claims. The first is called the clean claim ratio.
A clean claim is one having no errors that can be processed without additional
verification and that does not have to be filed more than once.
Since clean claims mean that physicians are getting paid faster,
they'll want to identify those claims so that they can gauge the time spent
(04:49):
in reworking denied claims and pinpoint reasons for the denials.
The opposite of a clean claim ratio is days in AR, and that includes the time
spent in reworking claims and the delay in receiving revenue.
Gosh, those aspects added together can definitely be costly and time-consuming.
(05:11):
Do we have any data indicating what percentage of claim denials are actually
avoidable and what percentage cannot be appealed?
Yes, there is a 2022 Change Healthcare Revenue Cycle Index that indicated that
82% of all denials are avoidable.
(05:32):
However, of that percent, 22% of those avoidable denials are non-available,
such as the lack of a prior authorization, lapse in insurance coverage,
the absence of a referral.
The highest percentage of denials, 41%, are due to poor front desk policies.
Registration and eligibility make up 22% of the highest percentage of front
(05:54):
desk denials, and 13% were due to lack of prior authorization.
Front desk errors are avoidable.
Typically, they are due to human error in the input of information,
the demographic information, the insurance information.
They also can be attributed to unfamiliarity with payer requirements or failures
(06:17):
to check for changes in insurance coverage.
Wow, I am so glad to hear that such a large percentage is avoidable.
So, all things considered, what is the true cost of reworking claims?
Well, according to that same index, a clean claim costs $6 in labor costs to process.
(06:39):
With each reworking of the claim, the cost increases.
It can range from $25 a claim, but may be as high as $117 to rework the claim.
It all has to do with the number of times the claim has to be touched.
To put that in context, assume a practice has 2,000 denied claims a month,
(07:01):
and it costs $25 to rework the claim.
That's $50,000. dollars. And that doesn't take into account the dollar value
of the denied claims or the delay in payment.
And it also is assuming that the practice succeeds on its first try in regaining the lost revenue.
To the extent multiple appeals are required, the potential for recovery decreases significantly.
(07:25):
So it sounds like regular billing audits would help bring to the forefront the
challenges associated with denials and claims in general?
Or what are the other benefits of billing audits?
Well, billing audits and denial reports are used to identify root cause of denials.
The specific nature of the denial itself can identify for the position the gap
(07:48):
in his revenue cycle processes.
For example, denials that are attributable to lapse in coverage,
eligibility, lack of prior authorization, incorrect or inadequate information
are typically attributable to weaknesses in front death procedures.
Denials that are based on MUE and NCCI edits that result in bundling denials,
(08:12):
incorrect coding, improper use of modifiers are attributable to the coding function.
Issues with timely filing of claims, claims that do not meet the claim requirements, requirements.
Claims that are submitted to
the incorrect payer are issues related to the performance of the biller.
The biller's role is also critical
because they are the party that pursues collection of denied claims.
(08:35):
Once the gaps in processes are determined, corrective action can be taken,
such as increased staffing, the creation of additional procedures and processes
that clearly define the roles and responsibilities of employees,
additional training, or even retrospective audits, billing audits that provide
(08:56):
continuous monitoring of the revenue cycle processes.
Sounds like there's a lot of moving parts with this and various steps that can
be undertaken to address them.
What are the key issues of a denial management program that should address to
correct front desk performance problems.
(09:19):
It's a three-pronged approach. First, you assess the gaps in the front desk performance.
You define a corrective action plan, and you create KPIs for the gauging and
monitoring of how effective front desk performance is.
The first point, the most common denials resulting in poor front desk performance
(09:41):
lead to denials as a prior authorization, absence of referral,
eligibility, incorrect information.
A corrective action plan that would be effective would cross-train the front
desk with the biller, and that would achieve creating more awareness on the
part of the front desk as to their impact on revenue.
(10:04):
A second way that corrective action could be developed would be to educate the
front desk as to payer requirements.
Pair requirements are specifically important as to prior authorization requirements
and coverage, payer coverage of certain services to be provided to patients.
Additionally, because front desk personnel have high turnover,
(10:26):
it's important to have good policies and procedures so that there's consistency
and approach to the duties of the front desk.
The best metric for looking at the performance of the front desk would be the
rejection report for it because it measures denials based on incorrect demographic
and insurance information as well as missing information.
(10:48):
So, in your experience, do you see this as a real problem that denials are often
created because of problems with coding or coding staff or billing staff?
Yes. Again, the same approach. First, you assess the gaps in the coder performance,
create a corrective action plan and metrics to gauge the overall performance of the coders.
(11:13):
If you look at their most common denials, it relates to the coding not aligning
with the encounter note that can cause a medical necessity denial,
lack of specificity in the coding, incorrect coding, incorrect use of modifiers.
A good corrective action plan for coders would be to perform prospective audits.
(11:35):
Prospective audits are audits that occur prior to the submission of the claim
to correct any errors prior to the submission.
And the only constraint upon performance is the timely filing deadline.
But coders also need to remain current on payer policies because payer policies
are used to establish medical necessity.
(11:56):
They define the covered indications or procedures. The metric that you would
use to evaluate coder performance, there's several.
First, you'd look at the denial rate, obviously, but several metrics sort of
key off of the cost of reworking claims, such as the average number of claims
that are required to be resubmitted or the percentage of claims appealed.
(12:20):
So along the same lines then, what about problems with billing staff?
Well, the most common denials relating to biller performance are the failure
to meet the timely filing deadlines, both at the claim level,
the request for reconsideration and appeals.
Also, a failure to meet the clean claim requirements.
(12:42):
The clean claim requirements require all information on the claim to be correct,
all procedures to have a supporting diagnosis,
that insurance coverage was in place at the time of date of service,
and that medical necessity for services is clear.
The corrective action that would best improve biller performance would be retrospective
(13:04):
audits because they go to identifying the root cause of the denials and they
provide monitoring of trends of denials.
The best KPI for evaluating biller performance over a period of time would be
either the denial report or days in AR,
(13:24):
which is actually measuring the number of days it takes to recover revenue on the denied claim.
Thank you. This information is so helpful, and we all know that the revenue
cycle is critical to a practice's financial viability.
To summarize what we've talked about today, what would you say is the overall
(13:44):
benefit of a denial prevention program as opposed to a denial management program?
Well, first, I think it is that it changes the perspective that the physician
has as to his unpaid AR and the action plans he expects to be put in place by his revenue cycle team.
(14:06):
There's a statistic from a 2023 HFMA study that speaks to this point specifically.
The HFMA stated that 65% of all denials are not worked.
There's no challenge to the denied claim, and the loss of revenue is accepted.
(14:27):
And that could only be attributed to physicians' lack of awareness of the loss
of revenue from the failure to pursue denials.
A denial prevention program identifies the root cause of denials,
and by doing that, it helps avoid future denials because it identifies patterns
where the revenue cycle has broken down and allows for corrective action.
(14:48):
It also can establish best practices for the revenue cycle staff and through
continuous monitoring can improve processes and identify trends and denials.
Also, part of what's embedded in the idea of a denial prevention program is
that you increase awareness of physicians as to the importance of improving
(15:11):
their revenue cycle processes.
Through the creation of KPIs, they become aware and have a better overview of
their unpaid accounts receivable.
And the KPIs provide a basis for evaluating whether the processes in place or
handling of claims are effective.
The key KPIs that most practices would use would be days in AR,
(15:34):
rejected claims, claims denial rate,
clean claim ratio, all of that from the continuous monitoring through audits
and, you know, the creation of policies and procedures and the KPIs should lead
to an improved effectiveness in the physician's procedure.
And that will be reflected in an increase in their first pass rates and a decrease in denials.
(15:58):
Sabrina, thank you again for joining us. The reality of losing such a large
percentage of dollars is astounding.
This wraps up the time we have for today.
For more help on this topic, check the episode description for links to the
TMA Education Center to access more on-demand education and resources.
(16:20):
Or go to www.texmed.org forward slash education. Remember to like and follow
to receive every episode from TMA Practice Well.
Until next time, stay well.
TMA has a long, proud history of promoting patient rights, advocating for physicians,
(16:41):
and providing real solutions for your practice.
We can accomplish so much when we unite in one voice.
Call the TMA Knowledge Center at 1-800-880-7955 or visit textmed.org to find
out how you can join or renew your membership today. Thank you.
Music.
Thank you for listening to TMA's Practice Well podcast. TMA,
helping you improve the health of all Texans.
Music.
Please be advised that the information and opinions presented as part of this
(00:24):
program should not be used or referred to as primary legal sources and does
not replace the advice of your health care attorney,
nor should the information and opinions presented as part of this program be
construed as establishing medical standards of care for the purposes of litigation,
including expert testimony.
(00:44):
The standard of care is dependent upon the particular facts and circumstances
of each individual case, and no generalization can be made that would apply in all cases.
Music.
(01:04):
Hi, I'm Heather Bettridge, Associate Vice President of the Texas Medical Association's
Practice Information and Services.
One of the benefits that TMA provides to its members is staff working alongside
payers advocating for practices when dealing with claim denials.
Premier, Inc. recently conducted a survey of more than 500 organizations,
(01:29):
and responses reveal that nearly 15% of all medical claims submitted to private
payers was initially denied.
So I ask, as practice leaders, do you know which payers your staff find it most
difficult to work with and why?
Do you know from which health plan your practice gets the most denials?
(01:52):
Answering these questions is a good first step to setting up processes and checks
and balances that will help reduce and manage claim denials.
My guest today is Sabrina Skeldon, an experienced healthcare attorney who is
also certified in medical coding, auditing, and risk adjustment coding.
(02:13):
Sabrina is skilled in streamlining practices revenue cycle from front desk procedures
to the business activities of billers and coders.
Her company places heavy emphasis on the development of a robust and systematic
denial management program. Sabrina, welcome.
Thank you, Heather. To start us off today, describe for us, please,
(02:37):
the conceptual differences between denial management and denial prevention programs.
Well, there's a tendency to view a denial management program as a fix-it,
day-to-day approach to be addressed at the back end.
Practices handle denial management by sorting and working denials by age,
(02:58):
dollar amount, and payer.
A conceptually different approach is to develop a denial prevention program
to create procedures to avoid denials, track patterns, and develop KPIs to measure
the effectiveness of revenue cycle processes.
A practice's goal should be to increase its first pass rates and reduce its denials.
(03:22):
The denial prevention approach targets that goal and helps achieve it better.
Okay, thank you for that. That
makes sense. Very helpful to differentiate between the program options.
Sabrina, talk to me a bit about the financial impact that claim denials have
(03:42):
on a practice's revenue stream?
Well, there are three aspects to the financial impact of a denied claim.
The loss of revenue, the cost of reworking the claims, and the delay in receipt of revenue.
The number of times a denied claim has to be touched increases the FTE labor
costs and makes a greater cost in reworking claims.
(04:06):
Appeals also can be lengthy and increase the cost of receiving revenue and increase
the delay in the receipt of revenue.
Even if the appeals are successful, it doesn't take into account the expenses
that are required to bill the patients so that the remaining amounts can be collected.
There are two metrics for evaluating the practice's success in managing denied
(04:29):
claims. The first is called the clean claim ratio.
A clean claim is one having no errors that can be processed without additional
verification and that does not have to be filed more than once.
Since clean claims mean that physicians are getting paid faster,
they'll want to identify those claims so that they can gauge the time spent
(04:49):
in reworking denied claims and pinpoint reasons for the denials.
The opposite of a clean claim ratio is days in AR, and that includes the time
spent in reworking claims and the delay in receiving revenue.
Gosh, those aspects added together can definitely be costly and time-consuming.
(05:11):
Do we have any data indicating what percentage of claim denials are actually
avoidable and what percentage cannot be appealed?
Yes, there is a 2022 Change Healthcare Revenue Cycle Index that indicated that
82% of all denials are avoidable.
(05:32):
However, of that percent, 22% of those avoidable denials are non-available,
such as the lack of a prior authorization, lapse in insurance coverage,
the absence of a referral.
The highest percentage of denials, 41%, are due to poor front desk policies.
Registration and eligibility make up 22% of the highest percentage of front
(05:54):
desk denials, and 13% were due to lack of prior authorization.
Front desk errors are avoidable.
Typically, they are due to human error in the input of information,
the demographic information, the insurance information.
They also can be attributed to unfamiliarity with payer requirements or failures
(06:17):
to check for changes in insurance coverage.
Wow, I am so glad to hear that such a large percentage is avoidable.
So, all things considered, what is the true cost of reworking claims?
Well, according to that same index, a clean claim costs $6 in labor costs to process.
(06:39):
With each reworking of the claim, the cost increases.
It can range from $25 a claim, but may be as high as $117 to rework the claim.
It all has to do with the number of times the claim has to be touched.
To put that in context, assume a practice has 2,000 denied claims a month,
(07:01):
and it costs $25 to rework the claim.
That's $50,000. dollars. And that doesn't take into account the dollar value
of the denied claims or the delay in payment.
And it also is assuming that the practice succeeds on its first try in regaining the lost revenue.
To the extent multiple appeals are required, the potential for recovery decreases significantly.
(07:25):
So it sounds like regular billing audits would help bring to the forefront the
challenges associated with denials and claims in general?
Or what are the other benefits of billing audits?
Well, billing audits and denial reports are used to identify root cause of denials.
The specific nature of the denial itself can identify for the position the gap
(07:48):
in his revenue cycle processes.
For example, denials that are attributable to lapse in coverage,
eligibility, lack of prior authorization, incorrect or inadequate information
are typically attributable to weaknesses in front death procedures.
Denials that are based on MUE and NCCI edits that result in bundling denials,
(08:12):
incorrect coding, improper use of modifiers are attributable to the coding function.
Issues with timely filing of claims, claims that do not meet the claim requirements, requirements.
Claims that are submitted to
the incorrect payer are issues related to the performance of the biller.
The biller's role is also critical
because they are the party that pursues collection of denied claims.
(08:35):
Once the gaps in processes are determined, corrective action can be taken,
such as increased staffing, the creation of additional procedures and processes
that clearly define the roles and responsibilities of employees,
additional training, or even retrospective audits, billing audits that provide
(08:56):
continuous monitoring of the revenue cycle processes.
Sounds like there's a lot of moving parts with this and various steps that can
be undertaken to address them.
What are the key issues of a denial management program that should address to
correct front desk performance problems.
(09:19):
It's a three-pronged approach. First, you assess the gaps in the front desk performance.
You define a corrective action plan, and you create KPIs for the gauging and
monitoring of how effective front desk performance is.
The first point, the most common denials resulting in poor front desk performance
(09:41):
lead to denials as a prior authorization, absence of referral,
eligibility, incorrect information.
A corrective action plan that would be effective would cross-train the front
desk with the biller, and that would achieve creating more awareness on the
part of the front desk as to their impact on revenue.
(10:04):
A second way that corrective action could be developed would be to educate the
front desk as to payer requirements.
Pair requirements are specifically important as to prior authorization requirements
and coverage, payer coverage of certain services to be provided to patients.
Additionally, because front desk personnel have high turnover,
(10:26):
it's important to have good policies and procedures so that there's consistency
and approach to the duties of the front desk.
The best metric for looking at the performance of the front desk would be the
rejection report for it because it measures denials based on incorrect demographic
and insurance information as well as missing information.
(10:48):
So, in your experience, do you see this as a real problem that denials are often
created because of problems with coding or coding staff or billing staff?
Yes. Again, the same approach. First, you assess the gaps in the coder performance,
create a corrective action plan and metrics to gauge the overall performance of the coders.
(11:13):
If you look at their most common denials, it relates to the coding not aligning
with the encounter note that can cause a medical necessity denial,
lack of specificity in the coding, incorrect coding, incorrect use of modifiers.
A good corrective action plan for coders would be to perform prospective audits.
(11:35):
Prospective audits are audits that occur prior to the submission of the claim
to correct any errors prior to the submission.
And the only constraint upon performance is the timely filing deadline.
But coders also need to remain current on payer policies because payer policies
are used to establish medical necessity.
(11:56):
They define the covered indications or procedures. The metric that you would
use to evaluate coder performance, there's several.
First, you'd look at the denial rate, obviously, but several metrics sort of
key off of the cost of reworking claims, such as the average number of claims
that are required to be resubmitted or the percentage of claims appealed.
(12:20):
So along the same lines then, what about problems with billing staff?
Well, the most common denials relating to biller performance are the failure
to meet the timely filing deadlines, both at the claim level,
the request for reconsideration and appeals.
Also, a failure to meet the clean claim requirements.
(12:42):
The clean claim requirements require all information on the claim to be correct,
all procedures to have a supporting diagnosis,
that insurance coverage was in place at the time of date of service,
and that medical necessity for services is clear.
The corrective action that would best improve biller performance would be retrospective
(13:04):
audits because they go to identifying the root cause of the denials and they
provide monitoring of trends of denials.
The best KPI for evaluating biller performance over a period of time would be
either the denial report or days in AR,
(13:24):
which is actually measuring the number of days it takes to recover revenue on the denied claim.
Thank you. This information is so helpful, and we all know that the revenue
cycle is critical to a practice's financial viability.
To summarize what we've talked about today, what would you say is the overall
(13:44):
benefit of a denial prevention program as opposed to a denial management program?
Well, first, I think it is that it changes the perspective that the physician
has as to his unpaid AR and the action plans he expects to be put in place by his revenue cycle team.
(14:06):
There's a statistic from a 2023 HFMA study that speaks to this point specifically.
The HFMA stated that 65% of all denials are not worked.
There's no challenge to the denied claim, and the loss of revenue is accepted.
(14:27):
And that could only be attributed to physicians' lack of awareness of the loss
of revenue from the failure to pursue denials.
A denial prevention program identifies the root cause of denials,
and by doing that, it helps avoid future denials because it identifies patterns
where the revenue cycle has broken down and allows for corrective action.
(14:48):
It also can establish best practices for the revenue cycle staff and through
continuous monitoring can improve processes and identify trends and denials.
Also, part of what's embedded in the idea of a denial prevention program is
that you increase awareness of physicians as to the importance of improving
(15:11):
their revenue cycle processes.
Through the creation of KPIs, they become aware and have a better overview of
their unpaid accounts receivable.
And the KPIs provide a basis for evaluating whether the processes in place or
handling of claims are effective.
The key KPIs that most practices would use would be days in AR,
(15:34):
rejected claims, claims denial rate,
clean claim ratio, all of that from the continuous monitoring through audits
and, you know, the creation of policies and procedures and the KPIs should lead
to an improved effectiveness in the physician's procedure.
And that will be reflected in an increase in their first pass rates and a decrease in denials.
(15:58):
Sabrina, thank you again for joining us. The reality of losing such a large
percentage of dollars is astounding.
This wraps up the time we have for today.
For more help on this topic, check the episode description for links to the
TMA Education Center to access more on-demand education and resources.
(16:20):
Or go to www.texmed.org forward slash education. Remember to like and follow
to receive every episode from TMA Practice Well.
Until next time, stay well.
TMA has a long, proud history of promoting patient rights, advocating for physicians,
(16:41):
and providing real solutions for your practice.
We can accomplish so much when we unite in one voice.
Call the TMA Knowledge Center at 1-800-880-7955 or visit textmed.org to find
out how you can join or renew your membership today. Thank you.
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