Preventing Claims Denials

August 25, 2011

Claims denials can hurt practice revenue, so stay on top of your billing process to collect every penny you've earned.

The physicians in your practice put patients first. They're eager to serve and dedicated to the task of providing quality care, but that doesn't mean they're willing to work for free. Each time your insurance carriers deny claims for reimbursement, however, they do just that. Says Cheris Craig, chief administrative officer at Urology of Greater Atlanta, it's a loss of revenue that her practice can ill afford. "We have a very small [profit] margin," she says. "Some of the injectable medications we use cost $2,000 to $3,000 a dose. If you're making 2 percent on each and you're forced to eat one out of 100 [due to a denied claim], then you're losing money each time you give an injection."

Thus the importance of developing a denial management plan. "Too many denials create a cash flow problem," says Mary Jean Sage, president of The Sage Associates, a practice management consulting firm in Pismo Beach, Calif. "From a policy and procedures standpoint, you need to establish some benchmark policies regarding what percentage of claims you're willing to write off as denied." Depending on the size of your practice, she notes, that amount should be no more than 4 percent.

Be proactive

The best way to minimize delays and denials is to monitor your claims submission reports regularly, or designate someone on staff to do it for you, says Sage. These days, most practices either submit claims electronically, or use a clearinghouse to do it for them. In either case, practices should track which claims were accepted and which were not. "This is something that practices don't always do well," says Sage. "You should get a report when you send the claim from your practice management system to the clearinghouse, but there's a second report that gets generated when it goes to the health plan and you have to make sure you review both immediately." The reports provide an explanation of benefits, or EOB, which identifies the reason for any denial, including incorrect demographic information, or lack of eligibility. "There you'll find out if you have an incorrect patient ID number, for instance, so you can resubmit the same day," says Sage, noting your turnaround on resubmission should be no longer than 48 hours.

Craig says she also reviews the expected payment report each quarter. "That's important even if you are getting paid because it tells you whether they're paying you correctly," she says. "Sometimes they under or overpay." For that reason, she suggests all practice managers keep a fee schedule for each carrier in their computer.

According to the Medical Group Management Association, some 5 percent of claims submitted for reimbursement ultimately get denied. The most common reasons for denials include errors committed by the front desk during registration (such as incorrect patient demographic information or identification numbers), lack of medical necessity, and lack of preauthorization. Incorrect or invalid ICD-9 and CPT codes - especially where bundled services are concerned - and inadequate documentation from your providers will also cause your claim to boomerang. Getting it right, and maximizing the reimbursement to which you're entitled, means getting everyone on staff educated on proper registration procedure and the importance of accuracy, says Dannelle McDermott, office manager at Wilkes Family Medicine in Newbury Park, Calif. "It's a collective task that the whole office is involved in," she says. "It starts from the minute your patient walks in the door and making sure your clerks enter insurance information correctly, to making sure your doctors are using proper diagnostic codes. It goes through several steps before it even gets to the billing department." McDermott says she uses mistakes as a learning opportunity to reduce the incidence of denials going forward - flagging manual errors as they occur and discussing them with the staff.

Denials in McDermott's office, she says, are down significantly since they implemented an electronic health record several years ago, which verifies eligibility in real time. Eligibility is confirmed well before the patient's appointment, giving her office a chance to get coverage questions cleared up. McDermott notes practices should not be afraid to involve the patients. "If a claim gets denied, I look at the reason and decide whether it needs to be appealed or call the insurance company to reprocess it," she says. "But I'll also call the patient at times to find out if their insurance has been terminated and get them to take responsibility for themselves. We already did our part and filed the claim."

Start a claims denial log

According to Sage, all administrators should maintain a claims denial log, enabling them to spot trends early and react in a timely manner. Such logs, which can be kept either on paper or electronically as part of a practice management system, should include written documentation from the insurance company, dates of service, dollar amounts, individual claim numbers, the specific code denied, and how it was handled by your team - resubmitted, charge adjusted, or appealed. "Usually, denials come back in the form of correspondence from the insurance plan," says Sage. "You need to work your correspondence. If I get a denial in the mail today, for example, it needs to be resolved and back out the door again within 48 hours."

That may require a little digging. "You need to understand why a claim was rejected and that's where I sometimes see practices not doing such a good job," says Sage. "You need to know why so you can either correct the mistake and resubmit or file an appeal - and if you're going to appeal you need to be sure it's being appealed for the right reason."

Likewise, each practice should establish a policy for how it intends to handle appeals, says Sage. Some practices appeal based on a monetary threshold, while others focus on the specific service provided. For example, Craig says her practice typically doesn't appeal a denial if the dollar amount is small, since she estimates it costs roughly $50 in human resources to process, but it does make exceptions if it's a procedure or test that's done routinely. "We perform a urinalysis on almost every patient who comes into the practice so we have to get reimbursed for that," says Craig.

Make them experts

If you've got the manpower, it helps, too, to assign your billers to one or two individual health plans, since reimbursement contracts differ greatly by company. Each has their own restrictions for what constitutes medical necessity, what is considered a bundled service, and the process for filing an appeal. All, of course, require that appeals be handled in a timely manner - but some allow you to appeal by phone, while others may want it in writing. If a written appeal is required, you'll improve your chance for reimbursement by submitting supporting documentation, including labor and test results, progress notes, and operative reports. Craig says her practice, with eight physicians and 65 staff members, has enough billing staff to train and assign each biller to a single carrier, which gives them an added layer of expertise. "My Blue Cross biller does Blue Cross claims all day long so she would know, for example, that there's no need to appeal that denial because they bundle it," she says, noting larger carriers are particularly complex since their rules differ for members of their HMOs and PPOs.

Given the complexity of insurance contracts, and the trend toward shrinking reimbursement, claims denials are a harsh reality for most practices. But you don't have to take it lying down. By tracking your denials and educating your staff on best practices for filing a clean claim, you can help your physicians collect their fair share for services rendered. In a market where every penny counts, says Sage, it's time well spent.

Shelly K. Schwartz, a freelance writer in Maplewood, N.J., has covered personal finance, technology, and healthcare for more than 17 years. Her work has appeared on CNBC.com, CNNMoney.com, and Bankrate.com. She can be reached via editor@physicianspractice.com.

This article originally appeared in the September 2011 issue of Physicians Practice.