How to Prevent Reimbursement Denials Before They Occur

preventable denials

September 30, 2015  |  Dianne Foster

Overlooked reimbursement denials can put 1-3% (or more) of net hospital revenue at risk. In a billion dollar revenue health system, avoidable denials run $8-25 million per year. Clinical denials constitute one-third of this amount. Studies show that some health insurers reject 20% of medical claims.

The Centers for Medicare and Medicaid estimate a 100-200% denial rate increase due to more detailed coding in ICD-10. These numbers are startling: any denial is a bad denial with today’s narrow margins in healthcare. Further alarming is that hospital teams are not working well with case managers to prevent denials before they occur.

To hospital leaders, I pose the following questions:

  1. Which insurance companies have case managers in your facility?
  2. What is their role?
  3. How do they integrate with clinical and financial teams?
  4. Do you have organizational clarity around payment denials?
      • What is your Denials Management process?
      • What is your denial rate in both volume and dollars?
      • Do you know your top 5 denials?
      • Do you have a strategy for improving denial performance?

The Changing Role of Case Managers
Unfortunately, hospital staff view case managers as an intrusive enemy rather than as a partner. In fact, case managers help improve performance. They assure medical necessity and that the right services happen in the right place.

The definition of case management has evolved since its inception in the 1970s. Today, the Case Management Society of America (CMSA) defines it as:

“a collaborative process of assessment, planning, facilitation, care coordination, evaluation, and advocacy for options and services to meet an individual’s and family’s comprehensive health needs through communication and available resources to promote quality cost-effective outcomes.”

In other words, it recognizes case managers as experts in patient transitions across the continuum of care. They are vital participants in care coordination and discharge planning from acute care settings.

According to the Bureau of Labor Statistics, case management is one of the fastest growing occupations in our nation. It estimates the profession will grow 23% between 2012 and 2022. Case managers work to keep good outcomes a priority while protecting the respective interests of the entire team. They empower the patient, family, payer, health care team, and community in a patient-centered model.

Smart hospitals will achieve better clinical and financial results by embracing embedded health insurance case managers.

An Effective Denial Management Process
As a financial and clinical quality matter, it is imperative for hospitals to develop a best practice “Denial Resource Center.” A transparent process serves as the catalyst for teamwork and improvement in the following situations:

  • When a nursing leader does not know the denial rate or denial reasons on his/her patient care unit,
  • when the CNO and CFO do not know the names or functions of the embedded health insurance company case managers,
  • when case managers feel like unwelcome obstacles instead of valuable resources.

An effective Denial Management process starts with understanding your challenges and knowing your successes. Poor communication between clinical departments and revenue cycle operations results in lost revenue. Case managers can help both parties understand in real time where denials occur in pre-service, service delivery, and post-service delivery. Examples include charge capture, supporting documentation, and coding. Denial appeals consume a large amount of resources on both the hospital and payer sides.

In an industry that prides itself on “getting it right the first time,” partnering with case managers is an emerging model that makes everyone’s life easier. It starts with “Hello.”

Dianne L. Foster RN BSN MBA
Dianne Foster hospital transition planningAsk Dianne about reinventing the nursing profession:

Dianne has three-plus decades of clinical and leadership experience in 90-600+bed hospitals. Her expertise in complex hospital operations, patient care environments, and cultivating relationships helps hospitals surpass the status quo.


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