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Lance Danbe, vice president, marketing at Altary, has extensive customer acquisition and loyalty experience in
several industry sectors including high technology products such as enterprise CRM software and HDD hardware, industrial process automation and control, and aerospace. His customer-centric perspective has been
refined in the global marketplace and closely integrates pursuit and delivery partners into complete solutions.
Denial Management:
The Last Mile in Expected Revenue Collections
The gateway to reducing denial rates and meeting projected revenue collection is a thorough understanding of reimbursement contracts, payer procedures, and claim denials. Proactive denial management software applications that adapt to the latest payer denial strategies can further decrease denial rates.
By Lance Danbe, Altary
Health care organizations are just now grappling with issues that have existed all along
in commercial establishments. Leading the
list is managing clinical and business operations to achieve predictable revenue collection and an adequate net margin in order to
sustain critical health care missions.
This paper proposes the use of predicted revenue collection as the basis for an effective organizationwide performance metric; describes the critical role of active
claim denial management in achieving revenue predictability;
and identifies important denial management solution features.
Compared to typical commercial transactions, health care
encounters are very complex; diagnosis, care plan, and followup activities can change dramatically as new information
appeal or write-off. Both result in margins that are lower than
would be predicted during the early patient access stages of the
cycle. This kind of driving by looking through the rear view
mirror has to be replaced with forward-looking planning based
on the rules of the road. No matter how far you have traveled to
get to reimbursement claim submission, navigating the last mile
is critical to a successful health care revenue cycle journey.
Why Don’t Providers Collect What They Expect?
Health care’s patient, provider, and payer structure makes
accurately predicting revenue collection a particularly difficult
challenge. While all three stakeholder groups may be well
intended, they simply do not value health care services similarly because of the differences in their individual needs,
wants, and approaches to risk management.
“No matter how far you have traveled to get to reimbursement
claim submission, navigating the last mile is critical to a successful
health care revenue cycle journey.”
becomes available. Therefore, the modern health care cycle
must be managed end-to-end and must include all administrative and clinical functions that lead up to the presentation of
claims for payment. While various performance metrics
should be used throughout the cycle, health care providers
would be well served by adopting revenue predictability (for
example, the comparison of actual revenue collection to predicted collection) as a core metric.
As shown in the provider revenue cycle below, revenue collection remains uncertain until the denial management step when
the provider bears maximum financial exposure. By incurring all
delivery costs and receiving a complete denial or only partial
payment in response to the claim, the provider has two options:
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Governance of this marketplace is achieved through a large
volume of legislated regulations and procedures, and many
providers surprisingly jeopardize revenue collection by not
understanding the full range of reimbursement rules. Current
budget and demographic trends will only increase pressure on
the entire health care delivery system into the foreseeable future.
Revenue predictability requires that individual lines of
business and their unique revenue streams be understood and
managed. Providers should fully recognize patient encounters
as the “activities” that drive internal service, cost, and outcome processes. Predicting and actively managing what
should be collected for individual encounters should take
place before claim denials occur, not after.
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Understand Reimbursement
Rules and Win the Game
Each health care stakeholder seeks its best service, cost, and
outcome solution on a resource scarce playing field.
Accordingly, health care’s critical role in our modern and aging
society has led to the development and constant updating of a
huge body of both legislated and interpreted rules. Clearly,
each group should start protecting its long-term interests by
actively engaging in understanding, implementing, and contributing to the development of these rules. For providers to
ensure that they collect what they expect, they need a thorough understanding of reimbursement contracts, payer procedures, and claims denials, and an active management approach
to comparing predicted revenue collection to actual collection.
addresses and phone numbers required for notifications,
authorizations, claims, and collection follow-up.
Claim Denials – Philosophy and technology should be
combined to manage claim denials and achieve predicted revenue collection. Understanding and documenting reimbursement contracts and payer procedures is largely dependent on
providers negotiating effective contracts and training their
personnel on how to follow the rules. The range of reimbursement and compliance rules is great, but there is no substitute
for understanding.
Reimbursement claim denials are variances to the patient
encounter revenue-collection plan. In order to reduce these
variances, providers need to follow an active and systematic
approach: analyzing and prioritizing denial causes; establish-
Function
Process
Patient Encounter Revenue Cycle
Figure 1
Scheduling
PreRegistration
Financial
Counseling
Patient Access Departments
Registration
Charge
Capture
& Entry
Patient Care
Coding
Info Mgmt
Claims
Processing
Denial
Management
Account
Resolution
Payment
Posting
Patient Financial Services
Active denial management must include all end-to-end administrative and clinical functions to navigate the last health care revenue mile
In order to predict revenue collection, providers must
establish necessary expertise in each of the following areas:
Reimbursement Contract – Providers have to understand
how each reimbursement contract handles varied billing
requirements, coverage limitations, facility-specific needs,
start and end dates, co-pays, per diem rates, and G/L posting
references.
Payer Procedures – Providers have to be intimately familiar
with payer procedures. They need to require payers to provide
in-service training to provider staff to ensure that they thoroughly understand the payer's procedures. They should insist
on receiving initial in-service training for all staff and regular
refresher training to bring new staff up to speed on updates
and procedure changes. Payer educational materials should be
saved for reference. Providers should also develop and systematically maintain a library of provider manuals. Provider staff
should be provided with all the tools and information they
need to work under the payer procedures, including all payer
ing a plan; assigning responsibility; tracking appeal processes
according to contracts and payer procedures; and introducing
business rules that identify and correct processing problems
upstream in patient encounters, thereby preventing denials in
the first place.
The potential to use technology is greatest in the area of
claim denial management. When providers add automated
and collaborative goal setting, business planning, and accountability to the passive measurement of revenue collection, they
create forward-looking and inherently active management that
increases revenue predictability.
Revenue collection at both the patient encounter and
aggregate level should be established as key performance indicators for the entire organization, as opposed to individual
departments only. After all, the modern health care cycle must
be managed start to finish and include all administrative and
clinical functions that lead to the presentation of claims for
payment if revenue collection goals are to be met.
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Denial Management:
The Last Mile in Predictable Revenue Collections
Systematic Approach to Denial Management
• Analyze history
• Establish priorities
• Adopt core metrics
• Refine milestones
• Refine metrics
• Refine processes
• Refine priorities
ADJUST
MEASURE
PLAN
DO
• Detect problems
• Trigger actions
• Notify management
Figure 2
• Define processes
• Set milestones
• Execute work flow
• Monitor progress
Denial management is not a one-time event. It should
be iterative and continuous.
Plan, Do, Measure, and Adjust
Steps of Denial Management
Aligning actual revenue collection with predicted revenue
cannot be a one-time event. It needs to be an iterative and continuous process with the ultimate goal of guiding the provider’s
clinical and business course in the desired direction to support
its mission.
It is safe to say that all providers are already involved in revenue prediction through the selection of revenue write-off
percentages for specific accounting periods. But this is a clear
case of passive management; it does little to explain variances and
tends to “institutionalize” average historical write-off percentages.
Denial management technology introduces active management into the process of predicting revenue collection in
several ways. Predicting revenues should be a continuous
process, and this paper looks at effective steps to implement
a focused denial management initiative.
Plan
Planning begins with the analysis of denial history using a range
of denial cause factors (denial code, payer, physician, procedure,
and service). Payers communicate denials through electronic
remittance advice (ERAs), or they may be taken off paper remit-
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tance advises and entered into the denial management application. Either way, the provider must build planning on the thorough understanding of the denial causes experienced.
The “plan” step addresses both proactive and reactive procedures. Reactive activities focus on appeal tracking, and are set in
motion when a denial occurs. Proactive activities are implemented through business rules that combine monitoring of known
denial causes and appropriate prevention workflows or actions
that avoid denials in the first place.
It is important to work with solution providers that have
experience integrating the full range of health care data sources
so that automated data gathering can be used wherever possible. The health care landscape is constantly changing and
providers should look for adaptive denial management applications that quickly react to payer creativity resulting in new
types of denials.
Do
The whole point of denial management is to execute activities
that increase the provider’s ability to predict revenue collection.
These efforts should focus on improving two operational metrics: overturn rate and denial rate.
Overturn rate improvement is realized through better reactive
processes that define and monitor milestones and due dates, as
well as enable more efficient interdepartmental collaboration to
generate information needed to respond to both clinical and
technical denials. This is accomplished by automating manual
work to reduce delays, errors, and oversights and by not letting
appeal tasks fall through the cracks. Providers should seek out
solutions that deliver prioritized task lists with highly flexible
prioritization, distribution, and security features.
Denial rate improvement comes from proactive processes that
detect patient encounter problems during pre-certification, concurrent reviews, coding, and so on. The denial management system needs to accurately detect the condition and apply predetermined rules in a timely manner to correct it. The measurement
step (see below) is critical to the timeliness of proactive management. Health care providers should select solutions built on the
latest Web-based architecture in order to benefit from rapid
detection, collaboration, and prevention activities that affect
denial rate in a positive manner.
Measure
Measure refers to “in-process” measurements that capture,
compare, and document the characteristics of a specific
patient encounter (including payment) against known
“at-risk” revenue cycle conditions. These characteristics trigger
and execute workflows to provide unique management attention or extraordinary processing.
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Measurement effectiveness depends not only on detecting
conditions of interest, but also on delivering analytic functionality that is targeted at specific business needs via key performance
indicators, snapshots, dynamic reporting, and real-time analytics. Providers should make sure to engage solution vendors that
use current information technologies so that automation can be
used, when appropriate, and collaboration functionality can be
fully leveraged.
Adjust
Adjustments should be thought of as fine-tuning the plan, and
not the execution of predetermined workflows. Adjustments to
matic condition recognition.
• Rules libraries that help the user create rules once for
multiple deployments that prevent, cause, or suggest
things to happen.
Conclusion
Measuring actual health care revenue collection against actively
managed revenue prediction is a powerful metric that stands to help
providers achieve necessary margins to sustain their critical health
care missions. Fundamental to useful revenue collection prediction
is thorough understanding and management of reimbursement contracts, payer procedures, and claim denials.
“Denials represent the state of highest financial exposure, since
all costs have been incurred and payment is still outstanding.”
the plan should be based on performance against established
metrics, and the provider’s evolving understanding of controllable factors that drive predicted revenue collection.
In order to perform the Plan, Do, Measure, and Adjust steps
efficiently and realize maximum benefit from an active denial management program, providers should look for the following solution
features from their denial management software provider:
• Business intelligence that includes decision support, query
and reporting, OLAP, statistical analysis, forecasting, and
data mining.
• Workflow and milestone configuration ease through icon-driven graphic user interfaces, full language statements, and auto-
Denial management is the last mile in the health care revenue cycle where end-to-end patient encounters include all
administrative and clinical functions that lead up to capture
and presentation of claims for payment. Denials represent the
state of highest financial exposure, since all costs have been
incurred and payment is still outstanding.
Providers should actively introduce both reactive and proactive
processes to improve the overturn and denial
rates, respectively, and meet predicted revenue collection. Providers
can achieve the highest active management capability by selecting a
denial management application built on
the latest technologies, allowing them to adapt to payer denial
strategies in increasingly shorter time frames and to gauge their performance using powerful predicted revenue collection metrics.
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