Practice Management Lab: Getting to 'Yes'

May 1, 2006
Kim Lafontana

Many practices focus time and money on appealing denied claims - a good strategy, if necessary. But wouldn't you rather avoid denials altogether?


One of the most important elements of efficient practice management? Eliminate as many claim and billing problems as possible before they occur. That’s the secret to controlling denials, too. And the best way to prevent a denial is to learn from the denials you already receive.

Although learning from experience is essentially the key to effective claim denial management, it is also the part that the vast majority of practices entirely overlook. Most pay much more attention - and spend much more energy - on appeals.

But think about that tactic. Getting good at appealing denials is very valuable, but if you were able to stop and look at each of your denials individually and come up with ways of preventing them from reoccurring, it wouldn’t be long before your skills in the art of appeals became much less relevant. You’d be able to focus your appeal powers just on those claims in which you are actually appealing a payer’s decision - not merely correcting your own work.

Many practices unadvisedly arrange their appeals processes in a manner that practically prevents them from learning from denials. They identify a staff member or designate small teams whose job it is to look at incoming denials, decide which ones are worth appealing, and then work them to closure.

This makes sense as a specialization strategy in that you are building the appeals skill set of one or more of your staff by having them focus on that task alone, and then reaping the rewards of their ever-increasing efficiency. This approach is sound as far as it goes, but it is much wiser to orient your entire practice to the task of identifying the most efficient ways to eliminate denials - not work them.

Examine your denial data

The first step toward effective denial management is gathering useful, accurate data. You need to know what kinds of denials your practice typically receives, and what is causing them.

It’s popular and easy to blame payers for denials - they have clunky systems, they change their rules at random, and they lack the ability to set up their claims adjudication systems to accurately process claims according to their own contract rules. Such criticism is fair enough, but it is just not useful. You most likely cannot change your payers’ practices, but you can change the way you communicate with them, yielding you very significant benefits.

Denials tend to fall into several distinct categories. The pie chart shows the distribution of denials from a national sample within the athenahealth database.

As you can see, three types of denials account for more than half their volume, and if you could successfully address the top seven, you would eliminate about 90 percent of all denials. The bottom line: You can focus your efforts instead of being all over the map.

Your denial distribution will certainly vary from this national aggregate. Depending upon your size, specialty, and payer mix, you will probably have a slightly different set of billing priorities, but each of these denial types can be tracked back to a specific phase of your business process. Some claims are destined to be denied before they are ever submitted due to errors made in scheduling and registration; other claims sow the seeds of their ultimate denial when they are submitted. But each time a claim is denied marks an opportunity to learn from your mistakes and improve your processes to decrease their likelihood in the future.

The payment lifecycle

There are many ways to look at the business processes associated with claims and denials. For the purposes of this article, we think the most practical way to look at it is within the context of the lifecycle of a patient visit. From the claims/payment perspective, the lifecycle of a visit begins with registration and/or scheduling, involves some level of pre-visit prep, includes a clinical encounter, generates claims that are (hopefully) submitted, and ends with those claims being paid or written off.

Each of these phases is associated with specific types of denials. Once you’ve identified the denial types that most often occur in your office and the parts of your workflow associated with each type, your next step is to focus on communication, accountability, and motivation. Communication is key, since you must have a mechanism to inform relevant staff of the denial triggers that occur within their phase of the visit lifecycle, and then train them to counteract those triggers.

We have found this communication to be most effective when done in a manner that is neither punitive nor accusatory, but rather within the spirit of presenting an opportunity to improve. Use your communication mechanisms to create accountability - not resentment. That’s where the motivation part comes in.

Denial control

Here’s a summary of what you’ll need to do to get your denials under control:

  • Understand your denial trends and drivers; create categories of denials and classify each denial based on these definitions.

Tip: If you use a practice management information system, set up a library of payer denial codes. Make sure when you post payments and denials you use those codes and run regular reports to detect trends in denials by type.

  • Spend time each month analyzing which denial categories are up or down and identifying your best opportunities to prevent denials. You should do this overall and by payer, as these trends are likely to be very different.

Tip: It’s hard to find time to look at the reports and make decisions, but it will pay off. Block off an afternoon in your calendar during the first week of each month to invest in this, and you will find within a few months that you have less work to do.

  • Link the knowledge you’ve created back to the relevant point in the lifecycle that needs reform, ideally holding the relevant group accountable, or - better yet - making them responsible for working denials they’ve created.

Tip: Reward positive changes. Track denial rates for each of your groups each month and reward them when those rates go down. Pizza parties, movie gift certificates, and extra paid time off can all go a long way toward building pride and morale, and a little healthy competition is never a bad thing.

Effective appeals

Of course, regardless of your best efforts, you will always have appeals to file. Here are a few best practices:

  • Prioritize your work based on the likelihood of payment and the value.

  • Don’t let your staff spin their wheels on $5 secondary claims just to make a point with the payer. Go where the money is.

  • Assign work based on your payers. Most large practices assign work based on their physicians, but this is inefficient when it comes to working denials. Working by payer allows you to learn the little peculiarities of specific ones (we all know they exist) and tricks to make the denial process smoother. You will soon find your staff knows whom to call at each payers’ corporate offices and can perhaps better convince them that paying specific claims is the right thing to do.

  • Track and reward staff for work well done, measured not by volume but by dollars collected. This tells you if your prioritization is working and if you are pursuing the most lucrative claims. But don’t forget that the real goal of this function isn’t to work denials forever; it’s to eliminate them entirely.

One last thing to remember is that not all unpaid or underpaid claims come back as strictly “denied.” Next month we will discuss claims that are technically “paid,” but are either paid incorrectly (bundled, global charges) or at the wrong rate according to your contract. Finding and pursuing these claims can be worth significant income to your practice, so check this space next month to learn more about zero-pays and under-pays.

Kim LaFontana is vice president of payer performance management for athenahealth, a revenue cycle management company for medical practices whose database of billing information is the statistical basis for this series. She can be reached via editor@physicianspractice.com.

This article originally appeared in the May 2006 issue of Physicians Practice.