Collecting in Healthcare Monthly Journal Source: The Academy of Healthcare Revenue
Reducing Denials and Underpayments with a Dedicated Team
In a recent issue of CIH, The Academy discussed the impact
that denials and underpayments have on healthcare
providers’ financial health. According to recent Academy
research, on average, denials and underpayment write-offs
accounted for 4.5 percent of providers’ net revenue in 2006.
However, the top quarter of surveyed organizations reported
that payment discrepancies accounted for 0.75 percent
or less of their net revenue. It is not only important for revenue
cycle leaders to focus attention on effectively preventing
denials and underpayments from occurring by
addressing root causes; it is also vital that leaders optimize
their appeal efforts to overturn the payment discrepancies
that do inevitably occur.
One strategy to enhance appeal efforts is to analyze the
effectiveness of appeal letters, paying particular attention
to what arguments for appeal were successful for each
payer. Another strategy to improve the success of appeals
is to create a designated team (or designate a staff member)
that is solely assigned to working payment discrepancies.
One organization that utilizes this approach is Duluth,
Minnesota-based SMDC Health System, an organization
with four acute-care facilities and 17 clinics serving
patients throughout the Duluth region.
In order to improve the tracking and monitoring of payment
discrepancies, SMDC’s leaders created a denial management
department consisting of 11 FTEs. Staff members’
main duties are focused on denial management tasks, such
as analyzing and identifying the root causes of denials and
underpayments, appeal activities, and providing education
to other revenue cycle departments on problems that may
be occurring in their respective departments and on strategies
to prevent errors from continuing in the future.
Prior to the implementation of the denial management
department, each hospital department analyzed and
appealed denials related to their area. For instance, coding-related denials were addressed by coding staff members,
while denials related to the business office (e.g., timely
filing denials) were worked by PFS staff. By reassigning
denial follow-up activities to one department, dedicated
staff members can gain more experience and expertise in
both analyzing denials and drafting effective appeal letters.
Payment discrepancies are sorted into 18 different buckets
in SMDC’s payment posting department by attaching
specific reason codes. Denial management staff members
are cross-trained, enabling each staff member to appeal
any claim that is denied. In addition, staff members are
assigned specific denial types in order to enable staff members
to develop expertise in appealing particular claims (e.g., denials due to medical necessity).
Because staff members are cross-trained to work all
denials, leaders in this department are able to quickly
address spikes in a particular type of discrepancy, re-allocating
additional staff resources to work an account bucket.
Another strategy SMDC’s denial management leaders
have utilized is creating template form letters for appealing
the most common denials. With the implementation of the
denial management department, SMDC has been able to
reduce denial write-offs as a percentage of gross revenue
by nearly thirteen percent, significantly improving the facility’s
financial health.
The ultimate lesson of SMDC’s success in reducing total
denial write-offs is that dedicating staffing resources to
denial management activities can be an effective strategy
to address the payment discrepancies that do occur. Staff
members in each department may not be able to focus the
attention necessary to effectively appeal denials. However,
by dedicating specific staff members solely responsible for
analyzing and appealing payment discrepancies, these staff
members can develop the necessary knowledge and
expertise in order to drive changes to prevent denials from
occurring in each department, while developing effective
strategies to make appeal efforts successful.
The Academy of Healthcare Revenue
The Academy of Healthcare Revenue is a membership-based community that provides healthcare leaders with objective research focused specifically on the healthcare revenue cycle. Members receive an unlimited supply of all research--including benchmarking and best practice reports, implementation tools, monthly journals, attendance to virtual conferences, and more--designed to enable them to improve their revenue cycle processes and financial health from within. Furthermore, The Academy's membership offering is tailored to team members throughout the revenue cycle, from executive leadership to patient access, coding, billing and collections, and clinical staff, helping to drive process improvement efforts revenue cycle-wide. Collecting in Healthcare is one of four journals written by The Academy of Healthcare Revenue monthly.
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Media Contact Andrea Morrill
Research Director
262-782-7919
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