Denial Management Strategies That Beat Insurance Company Tricks

May 15, 2024 | Mark Craig, CEO
denial management strategies

Healthcare providers are increasingly grappling with the complex and growing challenge of denial management. Recent data highlights this trend, showing a significant rise in denial rates that directly impact the financial stability and operational efficiency of healthcare organizations. In fact, providers report a 10% – 15% increase in denials year over year since 2020. 

This surge in claims denials raises the suspicion that payers are intentionally complicating processes to safeguard their financial interests, regardless of medical necessity. At the very least, they sure aren’t making it easy to collect the reimbursement you’re rightly owed.

This article aims to address some key challenges of denial management in healthcare by offering suggestions for an effective denial management process – one that combats sneaky payer tactics. The goal is to equip you and your team with practical, actionable insights to navigate and successfully manage the ever-evolving landscape of present and future denials in a timely manner, especially when the insurance companies are actively working against you. 

Retroactive Medical Claim Denials

Retroactive denials, also called retrospective denials, occur when an insurer initially approves a claim and then, after the healthcare service has been provided, reverses this decision and denies the claim. This denial trend can leave healthcare providers in a precarious financial position, as they have already rendered healthcare services based on the initial approval. It can also seriously erode trust between the provider and the patient. After all, the patient has relied on the provider to follow procedures correctly, but ends up being stuck with a massive bill nonetheless.

It’s my belief that the rise in retroactive denials is no accident; it’s a concerted push by payers to increase their bottom line and leave everyone else holding the bag. For example, it used to be that preauthorizations were required only for major surgeries or expensive procedures. These days, insurance companies often require preauthorization for anything and everything, including prescription drug renewal. To top it all off, the approvals are often time-limited as well, making it even easier for insurance companies to retroactively deny coverage.

And even if your office does everything exactly right when requesting pre-approval, the authorization will likely still come with the caveat, “Prior authorization is not a guarantee of payment.” This loophole allows the insurance company to come back later and say that, upon further review, the treatment was not medically necessary after all. Cue the cascade of zero payment claims and an influx of calls to your patient financial services team!

To effectively combat retroactive denials, revenue cycle managers can adopt several key strategies. While it’s true that these strategies rely on increased administrative responsibilities for your staff, the unfortunate reality is that this time and effort is necessary to beat the payers at their own game. And over time, once your staff is trained and you have standard operating procedures in place, it simply becomes part of the day-to-day.

Proactive Verification and Confirmation 

Before proceeding with any treatment or procedure, especially those that are high-cost or elective, develop targeted strategies to proactively verify and confirm coverage with the insurance provider. This means going beyond obtaining pre-authorization; it involves a direct call to the insurer to reconfirm that the specific service is covered under the patient’s current policy.

During this call, document the representative’s name, the date and time of the call, and any confirmation numbers or reference codes provided. This step helps ensure that there are no misunderstandings about coverage, and the information can be critical if an appeal is needed later. If you’re in a one-party consent state, you may even consider recording the call.

If possible, repeat this claims process once again as the procedure or treatment nears in order to prevent denials. You could say something like, “Last week, I spoke to another of your representatives, Lisa Smith, who confirmed preauthorization and indicated there was no reason this would not be paid. Can you confirm as well?” 

Enlist and Engage Patients

Be open and honest with your patients about the ongoing difficulties presented by insurance companies. Undoubtedly, your patients experience just as much frustration with them as you do, so your warnings will come as no surprise. Ask them to call their carriers as well to confirm and document preauthorization. Like you, they should note the date and time, the person they spoke with, and a list of information confirmed. With multiple documented conversations wherein the representatives confirm that everything is good to go, it’s much harder for the payer to come back later and ultimately deny the claim. 

Regular Policy Reviews 

Stay informed about changes in insurance policies and guidelines. Insurance companies frequently update their policies, which can lead to retroactive denials if providers are not aware of the new terms. Many healthcare organizations have a single person or team responsible for staying up to date on carrier policies, often assisted by technology such as automated pre-authorization to reduce manual errors that lead to retroactive denials. 

A Final Note on Retroactively Denied Claims 

If you encounter a retroactive denial despite your best efforts to prevent it, act swiftly and strategically. Begin by thoroughly reviewing the denial notice to understand the payer’s reasoning. Immediately prepare a comprehensive appeal that includes all relevant patient records, the initial pre-authorization documentation, and any pertinent communication records, such as notes from confirmation calls. Draft a concise cover letter that clearly summarizes the case and highlights the discrepancy between the initial authorization and the subsequent denial.

Once the appeal is submitted, follow up regularly and persistently with the payer. Maintain a detailed log of all communications, including dates, names, and specifics of each discussion. If the initial appeal does not succeed, escalate the issue within the insurance company, leveraging any higher-level contacts your organization may have with the insurer. The key is to combine a detailed, well-supported appeal with diligent follow-up, making it clear you’re not going to just roll over and are happy to fight to the end. 

Delayed Payments and Underpayments 

Sometimes, delayed payments and underpayments are the result of a mistake on the practice’s end, such as incorrect medical billing, coding errors, or failing to include all medical documentation with a claim. Just as often, however, they are deliberate attempts on the part of the payer to reduce payouts and increase their own bottom line. You are no doubt familiar with the recent scandal in which insurance giant Cigna intentionally paid claims at a lower rate than the one agreed upon in contracts with providers. In my experience with clients and patients, this happens all the time, not just with Cigna, but with all payers.

It’s incredibly frustrating to have to take on the burden yourself of keeping these companies honest. It takes a lot of time and resource investment to achieve something that should simply be a no-brainer standard: Pay what’s agreed.

But unfortunately, that’s where we are in our broken healthcare system. It brings me no pleasure to say it, but your only options are to fight back or take the hit. Sure, some practices may be in a position to become concierge services and say goodbye to insurance once and for all. But that’s just not an option for most organizations, including hospitals, ambulance services, and most medical practices.

For those groups, resolving claim denials requires these steps:

Provide An Abundance of Documentation 

Don’t give payers a chance to give you the bogus excuse that you didn’t provide enough documentation. This is especially true for higher reimbursement services, such as E&M codes at level 4 or 5. Without appropriate documentation, the payer will simply lower it to a 3, pay the smaller amount, and not even say anything, hoping you don’t notice.

If you have the office resources available, you can also speak to a representative before even submitting the claim. Let them know what the service is and what documentation you’re providing, and get them to confirm that there should be no issues receiving payment. Keep notes of everything.

Set Your Fee Schedule Appropriately 

Healthcare organizations must maintain a consistent fee schedule for all third-party payers. Crucially, your fee schedule should never be lower than the highest rate agreed upon with any payer. If an organization sets its charges lower than what an insurer has agreed to pay, the insurer may opt to pay the lower rate instead of the higher, agreed-upon rate. This of course leads to rampant underpayments, as payers may legally pay the lower rate that the practice itself has set.

One big challenge in getting these rates to line up, however, is the difficulty involved in getting a copy of the insurers’ pay rates. They don’t want you to have this information because it makes it harder for them to cheat you. The good news is, they are obligated to give you a copy at the time of contract signing or renewal. If all else fails, ask for a copy at that point.

Be Vigilant

Many healthcare organizations don’t even know that they’re being underpaid! Insurance companies are not obligated to tell you when they’ve paid a lower amount than agreed, and most staff members are unaware of what the insurer has theoretically agreed to pay. And even when they do know what the rates are, it’s time-consuming to go through every payment and determine which ones have been underpaid.

Depending on the size of your organization, it may not be practical to check every single payment that comes in. For smaller practices, it’s conceivable that you can invest the time and resources in monitoring denial or underpayment trends, through something like a simple spreadsheet that includes expected payment vs. received payment. For larger organizations, spot checks may be all that you can conceivably and sustainably do to monitor payments.

Automation software may again be useful in monitoring payments and discovering variances; however, if your organization renews payer contracts on an annual basis, it may not be worth the time and effort to manually key in the many codes and rates required. For organizations that maintain contracts for years without renewal, the effort may be worth it.

Be Relentless – But Polite 

When you discover one or many underpayments, be prepared for enduring frustration in the form of long hold times and ongoing wrangling with payers across the healthcare industry. These stall tactics are designed to get you to give up and move on; don’t fall for them. It can help to cultivate a relationship with one or two specific representatives at each payer, especially once they realize you’re on to their tricks and have the tools to combat them. Don’t be afraid to escalate the issue with a network manager.

At the same time, even though you have every right, ensure you’re not too aggressive. Insurance companies have been known to retaliate by dropping contracts, a tactic that small practices are especially vulnerable to. You’ll need to strike the right balance between frustrated, informed, and genial. As much as I hate to say it, until this system is reformed, we are at the mercy of the payers in many unfortunate and unfair ways. 

Lack of Transparency in Policy Changes 

Healthcare organizations frequently face difficulties arising from the subtle and often opaque policy changes implemented by payers. These changes, which can be strategically designed to benefit the insurers, significantly impact claims processing and reimbursement, leading to a rise in rejected claims and underpayments.

Payers might employ tactics like altering coverage guidelines in ways that are not clearly communicated, introducing new benefits with complex conditions, or modifying coding requirements in a way that’s easy to miss. These policy shifts can be strategically timed or worded in ways that make them hard to detect, resulting in increased confusion and errors in claim submissions – just as intended!

Additionally, payers may adjust their payment policies or reimbursement rates without adequate notice or bury significant changes in the fine print of lengthy policy documents. Often cloaked in legal and technical language, these changes can lead to misunderstandings and misinterpretations by healthcare providers.

To navigate these challenges effectively, healthcare organizations need to adopt proactive and vigilant solutions.

Leverage Your Representative Relationships

Here again, it’s important to have go-to representatives that your staff communicates with regularly. When someone from your office is speaking to the rep about a claim or question, they can also ask if there are any policy updates on the horizon. Make it a standard question asked in just about every interaction, and document the response. That way, you at least have a paper trail to contest an inevitable non-payment. 

Prioritize Regular Training 

To effectively keep staff updated on insurance policies and reimbursement practices, consider implementing a focused training program. This might mean a dedicated person or team responsible for organizing regular training sessions, ideally on a monthly or quarterly basis, depending on the frequency of policy changes. Use a mix of external resources, such as webinars and workshops from healthcare associations, and in-house sessions tailored to your organization’s specific needs.

Training materials should be customized, incorporating real-world case studies and interactive learning methods. This structured approach to training ensures staff are well-equipped to navigate the ever-changing landscape of insurance policies, which will help reduce claim denials and underpayments.

Of course, I recognize that a training program like this isn’t realistic for many organizations. If you don’t have the resources to allow for this, start with the tip above; simply make it standard to ask in virtually every insurance interaction, “Are there any policy changes coming in the next month?” That should at least keep the changes on your radar and allow your team some time to adjust and prevent an influx of denied or underpaid claims.

Investing in Technology

Advanced healthcare IT solutions can go a long way in helping organizations adapt to changes in insurance policies and coding updates. Key solutions include revenue cycle management software like Quadax, as well as integrated health information management systems with billing capabilities, like Epic Systems, Meditech, and Cerner. These systems can provide real-time alerts for policy updates, integrate with insurance databases, offer customizable notifications, and in general go a long way towards helping you automate denial management.

While the initial investment includes costs for implementation and training, the potential return on investment makes it a worthwhile denial management solution due to reduced administrative burden, decreased claim denial, and improved operational efficiency. 

Still Overwhelmed by Denial Management? Give Us a Call! 

While the denial management strategies outlined above definitely minimize denials, rectify underpayments, and go a long way towards denial prevention, they do require a lot from your team (who are no doubt already stretched thin).

Another option is to partner with us as your full-service denials management team. We’ve been excelling at revenue cycle management for two decades; we know the ins and outs of how insurance companies operate and how to get them to cough up your dough, and we offer tailored, flexible denial management services and solutions based on your specific needs.

For instance, we can handle all aspects of denial management and take it completely off your plate. Or, if you need help only in particular areas, we can offer stand-alone services such as ongoing staff training, setting up denial management procedures, guidance in setting up your fee schedule, customized denial prevention strategies, analytics to identify denial trends, or anything else you may need.

If you’re concerned about the cost of working together, consider that a typical healthcare organization loses approximately 3.3 percent of their net patient revenue due to denied claims. For a standard hospital system as an example, that works out to an average of $4.9 million per year, far more than you’ll pay working with us to retrieve what’s rightfully owed.

Also consider that around 90% of claim denials are preventable, while about half of denied claims are never even resubmitted. For those that are, it costs an average of $118 per claim to handle denial management.

With these numbers, it just makes sense to have a chat with us and see how our denial management team can help.

Are you ready to fight back against insurers’ dirty tricks and pad your own bottom line in the process? Let’s talk!

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