Knowledge of denials is power for hospitals

With data, health system holds payers accountable

Health information management personnel know that improving reimbursement requires a team effort across an organization. Such an effort took place at Baycare Health System in Clearwater, FL, where key players from patient access, case management, and patient financial services came together to develop a denials database.

This database is helping to correct misconceptions about lost reimbursement and is putting pressure on physicians and other clinicians to become part of the solution, says Martine Saber, CHAM, regional director of access management.

The new system has shown that, by far, the most payment denials — in number and in dollar amount — are for clinical reasons, such as medical criteria not being met, rather than for technical reasons, such as access personnel not calling for authorization, Saber says.

Armed with the information the database provides, hospitals throughout the 10-facility system are setting goals for reducing write-offs and denials, and clinical departments are joining the effort, she adds. (For more information about how Baycare is using the database to improve reimbursement, see story, p. 109.)

"Once [facilities] learn they’re doing services for free, they say, Of course we won’t do that,’" Saber says. "It’s really an education issue."

Already the hospital has brought to the table one large managed care company and said, "We expect payment on these denials that we consider to be unjustified," says Donna Miller, MHS, special projects coordinator for Baycare’s continuum department. "We’re moving forward in our communication with managed care companies. We realized that a lot of the issues we thought were related to the hospital service side turned out to be related to the physicians."

One example is when physicians cover for each other over the weekend and don’t feel comfortable discharging someone else’s patient. Another is when patients are admitted who don’t meet the criteria for an inpatient, Miller adds.

Looking for answers

Saber notes, in some cases, physicians are giving access personnel the wrong authorization number for a procedure. "Just because they got an authorization to do a consultation doesn’t mean it will cover the procedures ordered [as a result]."

The continuum (case management) department began the effort on the denials database by wanting to look at the patient days in the hospital that were avoidable — those that occurred, for example, because a procedure wasn’t ordered in a timely fashion, Miller explains.

"We came up with a list of 30 reasons we have avoidable days," she says. "We code those and run a report every month. Then we asked, How often are avoidable days costing us? How often are we being denied reimbursement for that day we identified as being avoidable?’"

Baycare has identified the top 10 reasons for avoidable days and is working to reduce those as part of its quality improvement focus this year, Miller says.

Meanwhile, patient accounting was "starting to feel the brunt of managed care denials, but there was no central place where they could be processed, reviewed, documented, and worked," she says. "Since we didn’t have a united front in fighting denials, we were not very successful at showing, (1) that we needed to be paid for a day or, (2) that we agreed with the managed care company and accepted responsibility."

There also was no tracking mechanism that allowed the continuum department to know how successful it was in getting denials turned around through the appeals process, Miller says. Through the database, she discovered that in many cases her department had been writing letters and submitting appeals for denials on accounts that had already been written off by patient accounting. "There was no central way for everyone to communicate."

The denials database works this way:

1. Whoever receives the denial enters the information in a special field in the registration system, which is from Malvern, PA-based SMS. The account is tagged with an "X" for a technical denial and a "Y" for a clinical denial.

2. At midnight, the SMS system populates the database with all the accounts that were denied.

3. A list automatically is sent to the database: the names of the primary care physician and the insurance company, expected charges for the account, expected reimbursement, the amount outstanding from the insurance company, and how much is written off.

4. The continuum department manually enters its findings on whether or not the denial was justified, and how many patient days met medical criteria and how many did not.

5. Anyone working on denials can go to the database and see actions taken — for example, that for one case the continuum department has already decided the denial was justified, and for another, an appeal letter has been written.

6. If an employee identifies a denial and calls the insurance company or corrects an authorization number, that person tags the account as a re-bill account, which alerts patient accounting to reissue the bill.

7. If it’s determined that an error was made and the denial is justified, staff in patient accounting know to write off the bill immediately, thus reducing accounts receivable days.

Gaining doctors’ cooperation

The database has illustrated that "there are a lot of opportunities for physicians to partner with us when trying to determine a discharge plan for the patient," Miller says. When physicians fail to properly classify a patient, it puts the hospital in a position where it is not allowed to get an authorization number, she notes.

"The physician is responsible and accountable for the correct authorization," Miller says. "The managed care company might say [to the physician], We’ll pay you for that as an observation [account] even though we initially gave you an inpatient authorization.’"

The physician can change that designation and still be paid, she says, but according to Medicare rules, a hospital cannot change a patient status for reimbursement purposes only.

"We’ve been trying to get a determination from the Health Care Financing Administration as to whether we can change [an account] from inpatient to observation as long as we’re looking for a lesser payment," Miller adds.