Becker's Hospital Review

34 Executive Briefing Sponsored by: How Hospitals, Physicians and Health Systems Can Leverage Advanced Analytics to Reduce Claim Denials, Strengthen Financial Performance H ospitals, physicians and health systems are operating in a challenging economic environment characterized by ever-changing payer contracts and increasingly complex payment models. To maintain fiscal strength, healthcare organi- zations must develop and implement an effective revenue cycle management strategy that includes a process to address the un- necessary revenue loss caused by insurance claim denials. Unfortunately, without the right data and tools, claim denials can be a pervasive and complicated problem for provider or- ganizations to resolve, especially when organizations hold con- tracts with several health insurers. GE Healthcare estimates that payers initially reject about one in every five claims, and that the majority of those denials are pre- ventable. The reasons claims are denied differs year to year and payer by payer, but most denials fall into one of two categories: administrative or clinical. Clinical and administrative claim denials: The most com- mon culprits Common administrative claim denials include timely filing — which occurs when a healthcare organization submits a claim for payment outside of the timeframe established in the payer con- tract — and lack of authorization, when services are provided to a patient without prior approval from their health insurance plan. Within the clinical category, inadequate clinical documentation and lack of medical necessity are two common reasons pay- ers reject claims. Accurate coding of claims is dependent on correct clinical documentation. If documentation is incorrect or lacking, coders are unable to assign proper codes, which could result in a claim being rejected. Claims are denied for medical necessity when the payer determines there was not an evidenced-based reason for the services, tests or procedures provided to the patient. The financial toll of a high rate of claim denials Claim denials can impede cash flow and wreak havoc on a healthcare organization's finances. According to GE Healthcare, a medical technologies and services provider, hospitals lose between 2 percent and 5 percent of their net patient revenue to avoidable claim denials written off to bad debt. After a payer rejects a claim, provider organizations spend sig- nificant resources attempting to correct the claim to resubmit it for payment. On average, it costs a hospital or health system $25 to rework and resubmit a claim after it is denied by a payer. Although the cost per claim is relatively low, a high rate of claim denials can result in a total cost that can take a significant toll on the organization's bottom line. By developing and implementing an effective claim denials strategy, hospitals, physicians and health systems can strength- en financial performance by recouping lost revenues and im- proving reimbursement. For example, a $1 billion health sys- tem can get a 0.5 to 1 percent lift to its operating margin by reducing claim denials, which amounts to $5 million to $10 mil- lion annually, according to GE Healthcare. Implementing a plan to improve claim denials management David Gaydosh, managing director at Accenture Health Prac- tice responsible for the North America Revenue Cycle practice, says there are three key components to a successful claim de- nials management strategy: process, people and technology. Process Process is crucial to identifying and resolving problems on the front-end of the revenue cycle that cause adjudication problems downstream. Many insurance claims are denied for simple and avoidable errors that occur during the pre-registration, registra- tion, insurance authorization and the verification processes. Im- plementing standardized templates across the organization sig- nificantly reduces most front-end errors. For example, provider organizations can implement electronic registration forms that flag missing patient data at registration or during scheduling. Provider organizations can also use standard templates to drive clinical documentation improvement. These templates can help guide what physicians document while providing patient care to help ensure the clinician is capturing the key informa- tion payers seek when reviewing claims. Accurate clinical doc- umentation is key to reducing preventable insurance denials, particularly those based on medical necessity. People The human component of a process cannot be underestimat- ed. Front-end revenue cycle management staff must take a proactive approach to verifying patient information to reduce insurance claim denials. Insurers reject claims that contain de- mographic and technical errors, such as the wrong plan code or Social Security number. This type of information is typical- ly collected during the registration process, making it vital for staff to validate information new and returning patients oral- ly communicate. It is also important for organizations to train front-end staff to identify contradictory information entered in the patient's record. Technology Hospitals and health systems are increasingly deploying ad- vanced analytics solutions that use complex algorithms and

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