Don't leave money on the table: Take proactive approach to denials

Avoid denials whenever possible; if that doesn't work, appeal

As reimbursement shrinks and health care providers tighten their belts, hospitals need to take a proactive approach to denials to make sure they get paid appropriately for the care they provide, experts say.

"Hospitals have got to be able to plug all the gaps and prevent as many denials as possible, then appeal those that do occur," says Deborah Hale, CCS, president of Administrative Consultant Services LLC, a health care consulting firm based in Shawnee, OK.

Many hospitals don't work their denials, but they should be doing so, adds Joanna Malcolm, RN, CCM, BSN, consulting manager, clinical advisory services for Pershing, Yoakley & Associates in Atlanta.

"The payers will often deny clinical information for continued stay, and if hospitals don't know their criteria and pursue their money, they won't get the reimbursement they are due," she adds.

Malcolm tells of one large urban hospital where she reviewed a case that had been denied on the first and second levels of appeal.

"The patient clearly needed to be in a hospital. The denial was ridiculous. The hospital appealed again and got paid for it. It often depends on how persistent you are," she says.

The best way to deal with denials is to make sure they don't happen, says Ann Kirby, BA, BSN, MSN, MPAHA, managing director at Wellspring + Stockamp HuronHealthcare, a Chicago-based consulting firm.

"Everyone agrees that avoiding a denial in the first place is best. It's always extra work and uses additional resources if a care manager has to conduct a review for a patient who wasn't put in the right level of care on admission. It's hard to have to research the case and find documentation to support the claim once the patient is gone," Kirby says.

If hospitals have a process in place to look at admissions and get the status and level of care right in the beginning, the likelihood of a denial is greatly reduced, adds Rachel Hayashi, RN, MPAH, clinical consultant for Wellspring + Stockamp HuronHealthcare.

Many organizations don't have good processes in place for getting patient status and documentation correct upfront, Hayashi says. They may not have case managers in the emergency department, or they may not staff case management 24-7 without having a back-up plan for a clinician who understands the criteria to ensure that patients are in the right level of care, she adds.

"If you don't have a good process set up at the front end, you're probably setting yourself up to be denied. When there's a denial, if you don't have the appropriate documentation in place, there's not much you can do," Kirby says.

Although hospital staff typically look to the case managers to make sure claims don't get denied, it needs to be a team effort, starting with the admissions staff before the day the patient goes into the hospital, Kirby points out.

For instance, if the admissions staff determine the number of days authorized and put that in the system, it saves case managers time because they don't need to call the payer until the authorization is close to expiring, Hayashi adds.

If a patient is scheduled for a surgical procedure, the case should be evaluated not just for the hospital stay but for the insurer's requirements to make sure all the details are correct. For instance, some insurers want to be notified within a certain time frame after a patient is admitted.

"Even though it is obvious that almost all commercial payers require preauthorization for a hospital stay, others also have rules to follow on admission," she says.

For instance, commercial insurers sometimes deny a claim because they didn't receive notification of the hospitalization or the need for an extended stay in a timely manner, Hayashi points out.

At Medical City Dallas Hospital, the case managers take a proactive approach to avoiding denials and double-check with the insurer to make sure all of the patient days designated in the medical record have been authorized by the insurer.

"We try to close all the loops by documenting every conversation with a payer, then faxing them a confirmation of the approved days and the level of care. This saves us a lot of work on the back end," says Pat Wilson, RN, BSN, MBA, director of case management.

When you do get a denial despite your best efforts, go through the appeals process, Hale recommends.

Make sure that your hospital isn't agreeing with the insurer just for the sake of agreeing, Hale says.

"If you can show that a claim clearly meets inpatient criteria but the insurance company wants to pay the claim as outpatient with observation services, it is up to the individual hospital to decide whether to appeal. I believe that if an insurance company gives you an inappropriate denial, you should fight it," she says.

Start the appeals process right upfront while you have the insurance company on the telephone or as soon as you receive electronic notification, Malcolm suggests.

"If a care manager is talking to a payer and is getting an indication that something is going to be denied, he or she should start the appeal right then. With electronic communication, case managers can still pick up the phone and talk to their payers or send additional information," she says.

It's important for case managers to develop close relationships with the insurance reviewers, Malcolm says.

"When you have a relationship with someone, they're not as fast to deny a case and get off the phone. If they know you, they respect your opinion and are more willing to listen," she says.

Ask what the payer is looking for, look at the chart and get more information, then call the payer back, she suggests.

"A lot of times, case managers think the payer has all the information needed but they are looking for something else. Case managers should ask if they can provide more information rather than just accepting the denial and moving right along," Malcolm says.

If an insurer indicates that something is likely to be denied, the staff at Medical City Dallas Hospital ask for an expedited appeal, Wilson says.

For instance, the payer reviewer may say that the insurer's medical director did not approve part of a stay, Wilson says.

"At this point, we get our medical director involved, and at that point, 90% of the denials are overturned. Physicians understand the nuances of how to treat a particular condition, unlike the payer's reviewer who is using Milliman or InterQual, which don't have any gray areas," she says.

If the denials aren't overturned during the expedited appeal process, the care manager analyzes the case and talks to the physician to find out what the hospital is providing and to determine why the stay is being denied.

"In some cases, we could get a denial for a day because the physician didn't want to send a patient home when he made rounds at 7 p.m. and told him he could stay. We acknowledge these incidents and assign an avoidable day. We look on it as a patient satisfier or a physician satisfier," she says.

The case management team at Medical City works with the appeals nurses on large denials. For instance, when the payer carves out a high-cost drug, the case managers review the medical record for information that could prove medical necessity.

"We get letters from physicians about why the treatment is needed and do whatever is necessary to get the denials overturned," she says.

As case managers work with insurance companies to get approval for additional days or conduct medical necessity reviews, they also should pay attention to what a denial is going to mean to the patient and act as the advocate for the patient, Malcolm says.

"We're all nurses and we want to take care of our patients, to be an advocate for them, and to be sure they get what they need. Case managers need to remember that they're also an advocate for a patient's financial well-being," she says.

For instance, if a Medicare patient is treated as an outpatient with observation services for several days, the copay is likely to be expensive. If a commercial insurer decides that an inpatient stay is not appropriate, the patient could get a huge bill, Malcolm points out.

"A lot of the time, nurses have no idea how hospital finances work. They should become aware of how a denial affects the hospital's bottom line as well as the patient's pocketbook," she says.

Nurses who review denials must have access to information about the contract that the hospital has with each insurer, Hale says.

It's not necessary for the nurses to have all the details, but they should have basic information, such how the insurer defines an inpatient stay versus observation along with the payment arrangement, such as the percentage of charges, for each, she adds.

"I've been in very few hospitals where case managers have a clue about insurance contracts, but if they are going to appeal denials from commercial payers, they need to know what is in the contract as related to inpatient versus outpatient and associated payment rates," she says.

Case managers need this information in order to decide whether it's advisable to appeal, Hale adds.

For instance, in some cases, because of the percentage of charges specified in the contract, the insurer will pay more for a stay that is outpatient with observation services than if the patient is an inpatient.

"I have found situations where hospitals are arguing with the insurer over whether the stay was outpatient with observation services or inpatient when they would get paid more if the patient were on the outpatient side. If the insurer will pay the same percent of charges for either stay, hospitals shouldn't spend their energy appealing," she says.

Manage your denials on an individual basis, then step back and examine the bigger picture, looking for patterns, Hale suggests.

Make sure the appropriate parties know what is being denied and can determine whether each denial was appropriate or not. If it is an appropriate denial, look for trends and identify areas where improvements can be made.

Analyze your data to determine if the greatest number of denials are for patients treated by a particular physician, if their care is being coordinated by a particular case manager, if the denial claims are for patients who come through a particular entry point such as the catheterization lab or the emergency department, and what diagnosis is most often being denied.

Use the information you glean from your data to develop a performance improvement plan, Hale suggests.

At Medical City Dallas Hospital, an interdisciplinary team that includes representatives from all hospital departments meets monthly and drills down to find out why cases are denied.

"Sometimes all of the days had been approved, but the case goes for medical review after the patient is discharged. The insurer may deny a level of care, but we don't find out until the bill has dropped," Wilson says.

The case management team works closely with the appeals nurses to review trends for payers, for individual case managers, or for physicians.

"Sometimes the days are authorized but we lose days on level of care or on the last day. We trend on both ends," she says.

For instance, Wilson is responsible for analyzing the cases denied for medical necessity. She determines if they're coded properly, if the patient should have been outpatient with observation services rather than an inpatient, if the stay wasn't authorized, or if other issues that arose were the responsibility of case management.

In one example, the team discovered that a significant percentage of denied days were cases managed by one care manager who was not counting the days the insurer had approved correctly. For instance, the insurer approved a four-day stay and the patient was discharged on the fifth day, the care manager didn't realize that she had to call the insurer with clinical information to get the last day covered.

"This was a training opportunity for her and for us. She was a fairly new care manager and there is a huge learning curve, even with all the training we provide to new case managers. This was something she had missed in the training. We identified it pretty quickly and corrected it," Wilson says.

[For more information, contact: Deborah Hale, president of Administrative Consultant Services LLC, e-mail:; Ann Kirby, BA, BSN, MSN, MPA, managing director at Wellspring + Stockamp HuronHealthcare, e-mail:; Joanna Malcolm, RN, CCM, BSN senior consultant for Pershing, Yoakley & Associates, e-mail:; Pat Wilson, RN, BSN, MBA, director of case management, Medical City Dallas Hospital, e-mail:]