Understanding Denial Management And How It Works

According to a survey conducted by Harmony Healthcare, there has been a 20% increase in claim denial rates over the past five years. With the global takeover of the COVID-19 pandemic, this issue has only worsened, and the figures are at an all-time high. To the financial strength of any medical practice, this could be devastating as this means unpaid or delayed revenue. However, this could be completely avoidable if healthcare providers took the time to understand how denial management works and what they could do to increase their first-pass claims submission rate.

What Does Claims Denial Management Mean?

Denial management is the thorough and systematic process of analyzing every claim denial to determine the reasons behind why it was rejected. This procedure aims to discover a common pattern among all the claims denial through establishing a connection between payer codes (individual payer patterns) and denial reason codes. By understanding this relationship, the billing team will subsequently be able to improve their medical billing processes to increase their first-pass claims submission rate, increasing their overall revenue and cash flow.

Standard Process of Claims Denial Management

The IMMP (Identify, Manage, Monitor, and Prevent) approach is one effective field-tested technique that healthcare providers use in managing claims denial. This process helps the billing team to understand the root source, reason, cause, and contributing factors to the rejection while developing management strategies to lower the risk of revenue loss.

  • Identify: The most important step in claims denial is understanding the main reason behind the rejection. When the insurance company denies a claim, the reason is usually indicated by a claim adjustment reason code (CARC). However, interpreting this code can be challenging as some insurers may be using complex, non-conventional codes. Alas, this would still be necessary to be reimbursed for your service.
  • Manage: Once the reason has been determined, your team can develop a management strategy to delegate the work. Many companies use automation tools and software to organize and streamline documents according to their reason codes. A standardized solution can be developed to resolve the denial and submit an appeal.
  • Monitor: After the appeal has been submitted, you will want to track down and monitor each claim denial case – keeping thorough and clear documentation of the various reason code categories it belongs to, dates appealed, received, and current status. Ideally, an internal audit should be conducted on a sample of the appeal to evaluate the accuracy and quality.
  • Prevent: Each claim denial should be an opportunity to learn. Once the data from the cases have been collected, it is an opportune time to conduct a retraining session with your staff to realign and revise the adjusted work processes. This is critical to reducing the rate of claims denial and would benefit the financial strength of any healthcare practice.

Why Is Denial Management Important?

By resolving all your claims denial cases timely, you would be able to reduce the likelihood of unpaid services that could result in a revenue loss, which could significantly impact your practice’s financial strength. In addition, this process is critical in analyzing the common trends and root causes that lead to claims denial, helping you develop a management plan to respond to future cases, and collecting relevant data and information to support your appeal.

With our founder Kayla Ruiz having more than two decades of experience in the medical billing industry, we understand the importance of timely denial management and can help you develop a strategic plan to manage these cases. While healthcare providers should aim to reduce their margin of error regarding claims submission, claim denials inevitably happen from time to time, especially during highly stressful periods. That is why we are here for you to offer our services and lend you our support every step of the way.

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