Denied! Revenue Cycle Denial Management... Why It’s Hard + An Analytics Approach for Prevention

Revenue Cycle Denial Management... Why It’s Hard + An Analytics Approach for Prevention

If you’re a hospital leader, then you know all too well that denial management is hard. Complexity in the industry persists resulting in the very frustrating and growing trend of denials.

CMS (Centers for Medicare & Medicaid Services), the largest payer at 58.7% of total industry payer mix (source: Becker’s Hospital Review), is also the #1 claim denier among payers (source: American Medical Association National Report Card). With their implementation of ICD-10, the number of available codes increased from 13,000 (ICD-9) to 68,000. More complexity.

Another major contributor to the complexity is the growing trend in value-based agreements with providers. As if the already constant state of change in agreements between providers and payers, and the downstream impact to benefit schedules, wasn’t enough. The transition to value adds a whole new level of complexity with multiple downstream impacts including an increase in self pay...10% in the last 5 years (source: recent HFMA survey). More complexity.

This snapshot of market conditions, while considerable in impact, just scratches the surface in what is the riddle of insurance claim denial management and prevention. Add to it human error, changing technology, and the variability in people’s health and the only constant is change.

Even top performing healthcare organizations average a 4% denial rate according to the AMGA. For most hospitals, 4% represents millions in lost net revenue. So how in the world can hospital leaders create a best practice model for reducing claim denials and maintaining consistency in a higher approval rate that won’t be obsolete next quarter?

We have an answer. Below is a proven best practice model to deploy directly in your organization or to use as a comparative standard for what you are already doing. If you are ready to shift the balance of focus and work from denial management to denial prevention, read on.

1. ASSESS your situation...objectively.

You and your team must achieve a realistic view of the organization’s strengths and weaknesses with respect to the age-old, but still relevant, people-process-technology. What is working and what isn’t. Most importantly, ask and seek to understand WHY. At the core of your discovery is understanding what the data is telling you. To prepare for that, here’s how to go about it:

  1. Define your purpose and vision for the work. Keep it simple but a clear call to action for stakeholders. When things get muddy, and they always do, you can rally a team back around the purpose. Example: Create a path to more net revenue through a better system of achieving a sustainably higher claims approval rate.

  2. Create a SWOT assessment team with multiple stakeholders (or use a current committee/team to accomplish it). If you need a refresher on how to execute a SWOT, Google it. There are many valuable resources you can use to refresh your memory on how to use a SWOT model.

  3. Create an assessment project plan with questions, milestones and owners. Questions are critical and include the following:

    1. What does the data tell us?
      a. Do we have visibility to all the data we need?
      b. Do we view data both strategically and tactically?
      c. Do we segment between soft and hard denials?
      d. Do we have a consistent language in categorizing denials?
      e. Do we understand the financial impact by category?
      f. What data do we use in our appeal process?
      g. Can the data help us effectively determine root cause?
      h. Do we use visualization and trending to help us better understand our data?

    2. What are the known gaps in our analytics technology?

    3. What people touch a claim and why?

    4. How does their workflow work, and fit into the larger workflow?

    5. What kind of synergy or roadblocks exist between clinical managed care teams and the revenue cycle team?

    6. What do we have control over and what’s outside our control?

    7. Are physicians following guidelines? Why or why not? Is it a training issue or a culture issue or both?

Remember, milestones consist of both tasks and dates. Be realistic with your timeline but efficient. That means don’t seek perfection in your effort. Also, don’t slip into performance improvement planning. Stay focused on assessing your situation, except in the case of analytics. If analytics are identified as a major gap, it’s imperative to create visibility to data and insights early in the assessment. Analytics need to become an investment priority to ensure full viability in the results of your assessment.

If you don’t have the bandwidth or comfort with doing this exercise internally, enlist a qualified third party to serve as a guide. Independent subject matter experts have advanced analytics tools and are inherently objective. They can also deliver value in market perspective and process that are not commonly found inside an organization itself.

2. Create your performance improvement PLAN.

Like the assessment, you want this effort to be as objective as possible. It’s best to create the original draft with a small team, then socialize it with the larger stakeholder team. Because change effects multiple stakeholders, you will no doubt need to position the plan with key influencers before you can even consider execution. And that includes the matter of any investments requiring budget approval. Be prepared to perform an ROI model for any of those investments, particularly as you consider the value of analytics. So what are the key elements to your performance improvement plan?

  1. Plan in 90 day increments even though your goals may stretch over the course of a year. Too many things change from quarter to quarter to plan beyond 90 days. You need that flexibility if you’re going to actually use the plan and expect other stakeholders to be ambassadors for it.

  2. Bring forward your purpose / vision statement from the assessment. Maintaining that focus will ensure your priorities align to the purpose of the work. And again, it will always be the cornerstone of which the team can fall back on when things get muddy. And they always get muddy.

  3. Define your priorities with KPIs designed to meet goals by filling gaps identified in the assessment. Regardless (spoiler alert), the most important priority is to properly frame your analytics model. From there you will be most effective in prioritizing work and creating doers for execution on the remaining priorities. While people and process are important parts of the equation, only a proper analytics model can provide the organization with sustainable visibility to the ever-changing road ahead. Below are the 4 cornerstones of that sustainable best practice analytics model for improving denial performance:

Data segmentation – make sure you have the tools and workflows planned or in place to properly categorize the data by:

  1. unique organizational schema of 835 responses

    • Denials

    • Rejections

    • Null events

    • Patient responsibility

    • Quality penalties

  2. Nomenclature and taxonomy

    • Clear definitions for each rejection and reason code

    • Identification of “originating” and “correcting” departments

Strategic Dashboards – strategic views provide insights at a macro level. Use visualization with the following key elements:

  1. Hospital scorecards

  2. Payer scorecards

  3. Functional department scorecards

Tactical Analytics – Enables root cause analysis and worklists of specific accounts of denials and rejections by permutations and combinations of:

  1. DRG code

  2. CPT code

  3. Reason code

  4. Remark code

Prioritization and Placement:

  1. Segment accounts by event type at payer level

  2. Prioritize accounts by account balance, payer, event class (Technical vs Clinical), etc.

  3. Leverage analytics to enable data-driven placement at the correct functional department

Another example priority is: Elevate overall claim approval rate by from 92% to 95% in 6 months, sustaining that new average rate for 4 of the following six months. This example includes measurable objectives in consideration of a schedule. The promise of results on this one priority can be worth millions to the organization.

4. Limit the planned priorities to three. As Jim Collins (author of Good to Great) said, “If you have more than three priorities, you have no priorities.” This does not mean that team stakeholders won’t each have their own “three” that support the broader three. If there’s one thing great healthcare leaders do well, it’s prioritize. You can’t do it all, all the time. So focus on the top three and then move to the next three. You’ll look back and be amazed at what you and the team accomplish by embracing this principle.

5. Define how you will achieve each objective by assigning tactical milestones (with dates and owners). Also note what tools, process and stakeholders are needed to get there.


“Plans are only good intentions unless they immediately degenerate into hard work.” – Peter Drucker. A fundamental part to your execution is ensuring that your milestones in your plan include accountability. Be sure to integrate the priorities into your regular team meetings. If you want a great resource on how to achieve better results with a team huddle that works, check out chapter 8 of Mastering The Rockefeller Habits.

Execution really comes down to your resolve, and that of those around you, to do what needs to be done. At some point you either do it or you don’t. Just remember, give yourself and your team a fighting chance by ensuring you have the right analytics model in place to meet your denial prevention goals. With that you can see it. If you can see it, you can achieve it!


About the Author

Satish Cheema joined MedAssist in 2013 and brings to the company new product strategy, prioritization and product management expertise. With more than 12 years of healthcare experience developed in blue-chip organizations including McKinsey & Company Inc., The Advisory Board Company and Abbott Pharmaceuticals, Mr. Cheema most recently served as a knowledge expert at Objective Health, a McKinsey solution for healthcare providers, advising health systems and hospitals on operational and strategic issues. Mr. Cheema earned his MBA from INSEAD, M.S. from the University of Colorado and bachelor’s degree in engineering from Bangalore University.