One of the biggest challenges for healthcare providers in an increasingly complex and competitive market is denied claims. According to a healthcare analytic expert Jason Williams, denied claims accounted for $262 billion in losses for hospitals across the country in 2016. This is a significant increase in the past decade, and many industry experts are pointing at the Affordable Care Act and other classification changes as the culprit.
Healthcare providers who in-source their claim denial management services have a wide range of challenges to overcome, especially when faced with government and private payers who are looking for any way to cut costs. Hospitals are denied claims by payers for a few distinct reasons:
- Technical, billing codes - 52%
- Authorization - 28%
- Documentation - 13%
- Medical necessity - 7%
While hospitals have the right to appeal nearly two thirds of claims denied for these reasons, minimal staffing, lack of specific claim knowledge and insufficient resources prevent them from tackling the biggest issue, codes. There's a significant opportunity cost to taking a staff member away from a resource-generating activity within their expertise and assigning them to a claim denial.
ICD-10 and the ACA
The International Classification of Diseases Tenth Revision requires the use of seven times as many procedure and diagnostic codes as previously used by hospitals. When it comes to inpatient codes alone, it's an increase of 1700%. If staff were already having technical trouble with coding, this increase was bound to generate numerous challenges. According to health care journalist Kevin McCarthy, common early problems with ICD-10 implementation include a limited grace period, extensive backlogs, shortage of coders, slow adaptation and system overloads.
The ACA added to this challenge of claims denial management by implementing insurance exchanges and Medicaid expansion, meaning hospitals would need to process claims for millions of more patients. While the law strives to improve simplicity and efficiency, a 2016 survey by the American Hospital Association found that hospitals were still experiencing a wide range of challenges dealing with CMS denied claims management. Incorrect coding was by far the biggest reason for denied claims, and it's share of denials went up during the survey period.
The Solution to Denied Claims
Since the 1990s, health care providers have been using denials management software to increase their revenue streams, but technology alone is only part of the solution. It especially falls short when it comes to complex appeals that require follow up with CMS or other payers. By outsourcing the labor involved in claims management, hospitals can take advantage of outsourcing personnel who have extensive training and experience with a wide range of very complex issue.
Denied claims outsourcing can improve revenue for providers both through prevention and more effective appeals. An experienced outsourcing company that takes a comprehensive approach to this problem will not only increase cash flow for their client, but they'll provide the data required to pinpoint ongoing errors in claims processing whether they're occurring at the inpatient, outpatient, or pre or post-billing phase. Revenue cycle managers from claims management companies can provide actual insights that improve provider metrics.