The way your healthcare organization handles denials has a major impact on its bottom line. Most organizations have worklists or queues to work denials. Fewer have comprehensive denial management programs. It’s the difference between “working” denials and “managing” them.

You want to manage them. This requires having a process in place that enables staff to identify trends and take proactive, corrective action. Since the revenue cycle encompasses multiple departments, the process needs to span these departments. Here are three main components of a solid denial management process:

1.    Good reporting: You should have the ability to pull both claim level and line item denials, trend your denials over periods of time, and slice-n-dice and dive into the data easily to determine root causes. The information should also be easily accessible to all departments within an organization.  There should be a denial management team or workgroup to analyze the information and decide, as a group, which trends to address.
2.    A cross-functional approach: Denials should be categorized and assigned to the department that can take corrective action. However, the corrective action should be discussed in cross-functional meetings to ensure that it is the most effective at an organizational level vs. the department level. For example, patient accounting may correct a denial for a missing modifier by adding a modifier each time, but sharing this information with the team responsible for the charge description master would provide a more efficient solution. 
3.    Incentive programs: Incentives should be put in place to motivate staff and promote healthy competition. Staff should have the right incentives to not only appeal the denials successfully but also to identify trends and share best practices. For example, if an incentive program is put into place to reward a staff person for successfully appealing a denial it may result in inefficient behavior, such as the added modifier example above. However, if the staff person identified the trend and shared the information with a cross-functional group, it could lead to a more efficient solution - to have the billing system automatically add the modifier.  Further, if the incentive was set up to reward the staff for each successful denial appeal, the staff person may not want to share the trend!

The healthcare environment is constantly changing. Provider organizations are experiencing decreasing operating margins and are forced to do more with less. Any little mistake on your claim will impact this margin. Therefore, managing your denials and taking corrective action as soon as possible will not only save you a tremendous amount of time, but may keep you in business. Set up a good denial management process to improve your revenue cycle and ensure you are getting reimbursed for all services rendered.

Paul Fox and Sou Chon Young are Principal Consultants at Hayes Management Consulting, specializing in healthcare revenue cycle management.