Preventing denials

By Catherine Lightfoot, CPA, CHBC, EEPB

“I am open to money coming to me from new ways that I’ve never imagined.”

This is a quote from a popular affirmation on daily calendars and the like.  What if this was more than a quote on a calendar? What if this could be the new reality in your office? Additional profit need not come from extended clinic hours, contract negotiations, or adding new ancillaries. Additional profit can come from minimizing denials and better managing your collection program. A real system that gets results and improves your cash income on the work you have already done. To put it another way, you can maximize your gains by minimizing your losses. You do the work, why not figure out how to get paid for it?

Let’s look at the problem.  Denials happen for a host of reasons. Most denials can be categorized into the following list:

• Invalid insurance
• Invalid authorization of service
• Missing referral from Primary care physician
• Inaccurate Coding
• Forms pending from patient
• Request for medical records
• Credentialing issues

Did you know that the top four denials are one hundred percent preventable? Preventable. That means they should not even be an issue you are dealing with in your practice. It costs, on average, $25 to rework a rejection. The first thing you need to do is identify the magnitude and the nature of your denials. I am not referring to a percentage.  Most practices will know what their denial rate is and feel pretty good about themselves if it is single digits.  You should still understand what dollar volume that percentage represents and the mistakes that are making it happen.  For example, let’s say your denial percentage is 5%. 5% is pretty good compared to most industry benchmarks. 5% doesn’t look good when you find out that 5% represents approximately $197,000 of claims. If your gross collection rate is 33%, you have lost $65,000.  That makes the 5% denial rate a little more real.  You should know what you are losing. Looking at a denial percentage without understanding the dollars that the percentage represents doesn’t do enough to tell the story.

To better understand where the collections are slipping through the cracks, map your denial report into an excel file where you can group the denials into categories.  Your report should look something like the snapshot below.

Claim Mapping By Denial Code:
No	Denial/Status Code	Action Code	Number of Visits	Insurance Balance $	% of $ Value
1	Invalid Insurance	Contact Patient	161	$70,273.71	23.23%
2	Missing Authorization	Refile Claim with Auth	22	$48,013.00	15.87%
3	Medically Not Necessity	Review Coding	25	$24,164.01	7.99%
4	Claim In Process	Allow Time	62	$23,077.71	7.63%
5	Patient Responsibility – Deductible	Bill Patient	114	$18,111.93	5.99%
6	Claim not on file Insurance is Active	Review Payer ID	106	$14,804.52	4.89%

This report is showing that invalid insurance is where most income is lost. It should come as no surprise, but it all starts at the front desk.  Managers should confirm their staff is collecting accurate demographic data and performing verifications. Your practice management system’s appointment scheduler should have automatic eligibility verification built into it. Your staff should be verifying two to four days before the appointment.  This tracking report should be shared with your front desk to show their performance and, hopefully, their improvements. When people know that their job matters and that people are watching, then they will act like it.

Common reasons for invalid authorization of service include an improper Provider, date of service, invalid or missing CPT code, or invalid place of service.

Once again, you need a report that tracks these rejections and the dollar amount.  The excel report should include enough detail to show the reasons why denials occur. Once you create your reports, give them to the authorization staff for corrections and review. The communication and correction process will start to reduce repeat offenders over time.

The same learning process can be used with coding mistakes. Payors change their rules, and providers are not perfect coders, no one is. Unfortunately, each change and each error costs your practice money. Your tracking system needs to identify the issues so that changes can be made quickly and not go on for months.

The first two reports help eliminate invalid insurance and coding mistakes, now just one more report to track missed income.  This third report is going to check the amount of patient collections at the time of service to what was due.  The amount due would include co-pays, deductibles, and prior patient balances.  It will look something like this:

Account No	Charge Account	Amount Collected	Deduct	Co- Insurance	Co-pay	Other	Patience Balance
29662	$50	$0.00	$50.00				$50.00
20546	$544	$0.00		$8.31			$8.31
29856	$325	$0.00	$162.52				$162.52
20954	$60	$0.00	$25.00				$25.00
24054	$44	$0.00	$8.70				$8.70
29955	$653	$0.00	$313.92				$313.92
23850	$492	$0.00	$201.92	$3.83			$205.75
24366	$186	$0.00			$40.00		$40.00
29546	$585	$0.00			$20.00		$20.00
22054	$30	$0.00		$2.25			$2.25
25006	$30	$0.00	$12.50				$12.50

 

The average provider-patient balance due increases by $4,000 per month. Can you afford for that to happen in your practice? Review your check-in screens to ensure you can see the patient’s balance and eligibility. If deductibles are being missed, your verification process needs to change. The front desk cannot collect what it does not know to collect. Just like working the Accounts Receivable without identifying trends will never improve your cash flow. Your practice will continue on the denial roller coaster if you do not focus on the causes. The answer is not to work harder at correcting denials. The solution is to spend your efforts on preventing denials in the first place.

That is the roadmap to having more money come in the door without additional hours, patients, or service lines. Three reports that you track and monitor monthly, identifying the causes, updating procedures, and working with your staff to reduce these causes, rechecking progress, step by step reducing the denials, and improving your collections.

How many denials do you have on a monthly basis?  I’m looking at one practice that has just under 3,000.  So, approximately 36,000 denials a year times $25 each to work each one, that’s $900,000. That is a little overwhelming.  What if you hired one additional person to focus on denial management?  One additional person could reduce your denials, increase your collections, and reduce your rework time?  An ounce of prevention is worth a pound of cure.