EXECUTIVE SUMMARY

Denials represent a significant amount of lost revenue. Case managers should take an active role in preventing and managing denials.

• Case managers should be monitoring all patients from preadmission until discharge, covering all points of access in the hospital.

• Leadership should be involved in the contracting process or, at the very least, review every contract with payers.

• Case managers should track denials and work with payers when there is a pattern of denials, and give feedback to hospital staff who may need education to prevent denials.

• Hospitals should create the position of appeals coordinator and develop a revenue cycle team to review, analyze, and manage denials.


In today’s healthcare world, it’s more important than ever to get a handle on denials and take steps to prevent them.

“Hospitals need every dollar. They’ve got to find a way to stop the bleeding in order to survive,” says Brian Pisarsky, RN, MHA, ACM, director at KPMG Healthcare Solutions in Tuscaloosa, AL.

He points out that some hospitals have a denial rate of 2% or less. “But since the average hospital’s operating margin is 2%, those denials may put them in the red,” he says.

“Managing denials is a challenge and there’s no easy answer. However, it’s important for hospitals to manage their denials well because they can represent a significant amount of revenue,” adds Yomi Ajao, vice president of consulting for Cope Health Solutions.

“Even if hospitals get paid after they appeal the denials, it adversely affects the cash flow when payment is delayed,” Ajao says. Appealing also ties up staff time, he says.

Avoiding denials is a tough job but it’s an essential one, especially since managed Medicare and managed Medicaid payers are making every effort to decrease reimbursement, adds Beverly Cunningham, RN, MS, ACM, consultant and partner at Oklahoma-based Case Management Concepts.

“Case management has not always stepped up to the plate to manage denials. So now, in some hospitals, other departments are beginning to take over,” Cunningham says.

There seems to be a growing trend for hospital finance departments to assume responsibility for utilization management because the hospital leadership believes that case managers can’t handle it, Cunningham says. “What I’ve seen may be just the tip of the iceberg,” she says.

The trend is problematic because hospital financial leadership does not always understand clinical denial management. Nor do they understand which department is responsible for what, she adds.

“Some case management leaders also have limited understanding of the denials management process. At many hospitals, no one does due diligence to find the root cause of the denials and take steps to correct any problems,” she adds.

Denials management is a struggle for many case management departments, a problem compounded by the fact that there are many case management directorship jobs that are empty, Cunningham says.

Hospitals need strong and effective case management leaders who know and understand the denial process, the appeals process, and how case management and social work can contribute to a proactive approach to denials, she says.

“If you’re not a strong leader, it’s hard to integrate yourself and your department into the rest of the hospital,” she says.

Case managers should be monitoring and managing payer reimbursement from preadmission until after the patient is discharged, says Toni Cesta, RN, PhD, FAAN, partner and consultant in North Bellmore, NY-based Case Management Concepts. “Get involved from the minute the patient comes into the hospital,” she says.

This means working with the precertification staff at the front end and the billing staff at the back end to avoid denials, Cesta says.

Case managers should conduct prospective, concurrent, and retrospective reviews to make sure all the payer’s rules have been followed and that they have the information they need to prevent denials, Cesta says. (For details on each type of review, see chart in this issue.)

Ensure that the clinical information in the medical record is accurate and shows all of the care the patient received, Cesta says. Make sure that third-party payers receive patient information at the times they require. Then, facilitate a timely transition to make sure that patients go to the next level of care when they no longer meet clinical criteria.

Start managing patients up front and even before admission to make sure requirements are met so their cases won’t be denied, Pisarsky says.

Ajao recommends that the registration staff gather the details of each patient’s coverage, including eligibility, benefits, and the payer’s requirements.

“Then the case managers have what they need to call the payer to get authorization,” he says.

Case managers should be stationed at all access points to review admissions to ensure patients are in the right status and that the payers have authorized the treatment, says Tina Davis, RN, MS, CMAC, consultant for the Center for Case Management.

For instance, case managers should monitor surgical patients before and after surgery, Davis says. Make sure the surgery is authorized and the status is correct before the procedure. Then, make sure the surgeon has not changed the procedure in the middle of surgery and performed a procedure that has not been authorized. “This is an opportunity for a denial because the codes may be different before the surgery and after the surgery,” she says.

A case manager also should be on hand to review the cases coming into the hospital through the bed management component, Davis says. This includes transfers from other hospitals and direct admissions from a physician office, she adds.

The way to improve your denials rate is to drill down and determine the reasons for denials, then change procedures to eliminate them, Pisarsky states. Make a list of every reason for denials — failure to obtain precertification, failure to meet medical necessity criteria, coding problems, the wrong insurance, missing the authorization deadline, and others.

When a claim is denied, the case management department should find the cause of the denial and track, trend, and develop action plans to mitigate future denial risks, Pisarsky says.

Develop a relationship with your counterparts at insurance companies that cover a substantial portion of patients so you can call them when an issue arises, Pisarsky suggests.

When there is a pattern in denials that points to the practices of one insurer, discuss it with the insurance company case manager. “When you have developed a relationship with that payer, you know who to call and can feel comfortable discussing the problem,” Pisarsky says.

There may be occasions when one insurer continually issues denials for one type of patient and every other insurance company approves identical care, Pisarsky says. “Ask the insurance company case manager to help you understand the reasons for such denials since other payers that use the same criteria are approving the services. Ask what other information you need to give them to avoid the denials occurring in the future,” he says.

If that doesn’t work, you may need to evaluate the contract with this particular payer to see if there is any language that could help you. Compile hard data on the denials and share the information with the contract management staff in your hospital. Ask them to address the issue when the contracts are up for renewal or file a complaint with the insurer, he suggests.

“When the chief financial officer of the hospital shows the data to their counterpart in the insurance company, it may result in positive future changes,” he adds.

In addition, case managers should provide feedback to people in the area of the hospital where denials occur, Cunningham says.

“Everybody assumes that no news is good news, so if nobody gives the case managers or physicians feedback, they will assume they are doing the right thing,” Cunningham says.

The best practice is for case management leadership to work with the medical director of the hospitalist team to develop a process to provide feedback to individual physicians when a denial occurs, Cunningham says.

“They may not like the information, but hospitalists are either employed by the hospital or are on contract, so they have a vested interest,” she adds.

It is helpful if the case management team has one or more effective physician advisors who can work with the attending physicians on documentation and throughput issues, Cunningham says.

“It’s ideal to have an internal physician advisor rather than relying on an external firm for denials management. The majority of physicians will not respond to an external physician advisor. A face-to-face discussion makes the difference in effective utilization management and denials management,” she says.

Case management can’t monitor and avoid denials alone, Pisarsky says.

“It takes a partnership between case management, the business office, and the contracting entities of the hospital system,” he adds.

Ajao tells of working with hospitals where each department operates in its own silo and rarely communicates with the rest of the hospital. “This isn’t productive. Everyone needs to work together and share information back and forth,” he says.

For more information on denials management, the on-demand webinar “Case Management’s Role in Managing and Preventing Third-Party Payer Denials,” led by Toni Cesta and Beverly Cunningham, is available at: http://bit.ly/2CbZnyw.