CMS study shows 20% of all claims are denied
Whitepaper | Laura McIntire, RN, BSN, MA
AVP, Customer Experience Change Healthcare
Laura is responsible for helping healthcare organizations optimize their utilization and care management programs with InterQual. In her 13 years at Change Healthcare, Laura has held various roles in clinical product management and clinical development. In her previous role as Director of Product Management, she brought the voice of the customer to enhance the InterQual suite of content products as well as new content initiatives. Prior to Change Healthcare, Laura worked for 13 years as a clinical nurse in a range of care settings, including Intensive care, medical/ surgical, and home health. Laura is a registered nurse with a Bachelor of Science degree in nursing and a Master of Arts in Health Care Administration.
Every day, someone at a health system or hospital asks me a variation on this question: How can I better manage denials?
There's tremendous pressure to reduce denials. According to CMS, 20% of all claims are denied, 60% of lost or denied claims will never be resubmitted, and 18% of claims will never be collected.1 Reworking each claim costs around $25.2
The problem is worsening as the complexity of claims processing intensifies. Our population is aging rapidly, care needs are increasing, Medicare enrollment is rising, comorbidities and chronic conditions are more prevalent, and population health management is also taking hold. Health systems are transitioning more patients across multiple settings and specialists, requiring multiple claims.
No wonder CFOs, CNOs and CMOs are working to better understand what's driving denials at their hospitals. Many are devoting significant resources and leadership time into developing denials and appeals management programs. They want solutions that will improve performance and ensure they're reimbursed promptly, efficiently, and for every dollar they're legitimately owed.
Myriad issues drive denials, but there's one area that denial management programs can overlook: issues related to medical necessity. According to Change Healthcare research, while medical necessity only accounts for about 5% of denials nationally, those numbers and the revenue they represent add up and can be significant for any health system.
Moreover, medical necessity is foundational for a broader set of process opportunities that can reduce denials and help improve care quality. As such, the care management system must be examined to identify gaps that cause denials. Once done, processes that reduce denials must be put in place along with programs to support and enhance the appeals process for denials that still occur.
When you're asked, "How can I better manage denials?," respond with a focus on these ten steps that identify common gaps that can cause medical necessity denials.
1. Make a Case for Case Management Leadership
A hospital needs strong case management leadership with a clear vision, focus and goals. Case management isn't just a department. It's an organizational philosophy. It requires an enterprisewide approach to reduce variation and provide a forum to use best practices.
Are nurses, physicians and ancillary departments vested in length-of-stay and transition management? Are they aligned around priorities and strategies? Is there a case management plan with documented workflows that integrates utilization and case management functions? Is there transparency between case management and the CFO? In particular, does leadership help the CFO understand what case management is, what case managers do, how their work helps close gaps, and how the CFO can help from a data perspective?
Case management is often seen as the case manager's problem and isn't owned by anyone else in the organization. In fact, every stakeholder has a significant impact, and needs to understand their role.
2. Beef Up Your ED Case Management Program
Every hospital needs a robust ED case management program. That means ensuring admissions are appropriate at the time the decision to admit a patient is made. Attention must be directed toward the nurse case manager and the role of social workers.
Ensure that ED physicians understand key concepts, such as the Two-Midnight Rule, case management's role (see tip #1), the role that evidence-based content (such as InterQual®) has in admissions, the importance of documentation, the correct level-ofcare assignment, and the existence of an onsite ED Case Management Model that functions 24/7.
Spend time with ED physicians discussing what an ideal case management model looks like, how they should be working with case management more effectively, and how to ensure entry points are covered not only in the ED, but for direct admissions and transfers.
3. Ensure Observation Management Works
The review of observation patients should be a priority. When a patient arrives at the ED, they go through triage and are admitted for observation or as an inpatient. Observation requires a rapid course of treatment. But many hospitals don't do much testing after 5 p.m. or on weekends.
When observation management isn't effective, patients who would have been discharged after tests are conducted are instead kept in short-stay units, despite the fact that the evidence shows it's not necessary.
No matter which vendor’s guidelines or decision support criteria a payer is using, an organization can use InterQual to support the medical necessity of care provided. InterQual provides specific and objective evidence-based guidance, so there’s no gray area in determining whether a patient meets the criteria for necessary care.