PHOENIX MEDICAL MANAGEMENT, INC.

When we started this newsletter back in 1994, we reported the difficulties in obtaining information about payer denials.  Hospitals simply could not provide actionable information to identify the source of their denials, the reasons for their denials, the amount of their denials by insurer, nor their actual denial rate (as a portion of expected revenue).  Fifteen years later, it still remains the most elusive financial metric in hospitals large and small!   

Denial data is the foundation of an effective denial prevention program.  Historically, third-party denial data was buried in contractual write-offs.  However, we know that write-offs are not reflective of the big denial picture.  Over the years we've identified several possible deterrents that may contribute to ineffective denial prevention:
1.  Fear associated with an admission that there is a denial problem.  We recall one executive committee that proudly reported a clinical denial rate of less than 2%. But during interviews with the business office managers, we discovered that the rate was more like 11%
2.  Sheer complexity of third-party denials.  The billing/collection process is indeed like a Rube Goldberg invention:   A complex device that performs a simple task in an indirect, convoluted way!
3.  Perceived inability to capture the denial data.  Legacy hospital accounting systems are partially to blame for this challenge although the old 'that's the way we've always done it' mentality is a contributing factor.
4.  Inadequate technology or infrastructure to support robust denial prevention.  In many situations, despite best efforts, the HIS lacks the ability to manage the denial notification process.  Today however, investment in this technology is imperative to stop the hemorrhaging, defend against the RACs, and to achieve complete contractual reimbursement.

There are a few hospitals that demonstrate a 'best practice' approach to robust data mining from the hospital's financial system to identify the amount of the account, the expected revenue (based on contractual rates), the denied amount (it could be an entire day, a specific service, treatment or procedure), whether an appeal should be written (if a case manager knows a day or treatment is potentially avoidable and a probable denial is inevitable, an electronic mechanism to alert finance needs to be in place), the appeal results, and the net reimbursement received.  

While there isn't a one-size-fits-all denial solution, the one common requirement for all is the data!  Accurate data-mining of denial data is potenitally the most critical element of a denial program and investing in technology to support this function is the only way to succeed.  
Several years ago a client customized their patient accounting system and cash application process to automatically capture and post third-party denial information from electonic remittances directly onto individual patient accounts.  The denial data could then be harnessed, tracked, and trended.  Together with the case managers' info on avoidable interventions and probable denials, the denial data was fed into the online collector workstations utilized for follow-up.  We understand that the system is still a work in progress but represents a rational and practical approach to what can be an intimidating initiative.