Denial Management
Successful denial management requires appealing all denials with a justified basis for appeal, analyzing denials to determine internal weakness in the organization, and developing action plans to avoid future denials. McBee Associates has developed a team of experts in revenue cycle, operations, clinical, information systems/technology, and collections to effectively reduce losses from denials.
With health care profit margins shrinking, denials and underpayment from managed care companies can pose significant threats to financial stability. At the same time obtaining fair payments from managed care companies has become more difficult. This combination of financial factors makes tracking denials and underpayment, and aggressively moving to resolve their causes critical.
The causes of payment disputes range from verification questions and contract interpretations to medical necessity definitions. While some issues are managed care based, some are provider-based.
Providers must objectively analyze their denials/underpayments in order to identify and correct their institutional issues. Then providers can appeal and aggressively follow-up their denials/underpayments with the managed care companies.
- What are some of the provider based issues?
- What is the first step in resolving denials/underpayments?
Managed Care Denial Losses
Managed care denials act as a "black hole," pulling financial success
from the provider and forcing the next round of cost cutting. This
drain on revenue will continue to grow as Medicare begins its
initiative to move more beneficiaries into managed care.
According to a recent study by the Health Insurance Association of America,
14% of all claims submitted to payers are denied - that's one in seven that
need rework, resubmission, and possible appeal by the provider. The same
study found that six percent of EDI claims are rejected even before entering
the payer's claim system, and these are not even counted as denials.
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Financial Success
Financial success in today's environment requires a denial avoidance
program that targets all aspects of denial management. The program
must coordinate various departments to achieve a common goal - denial reduction.
The four major functions of denial management are:
- Clinical appeals
- Technical appeals
- Denial avoidance
- Denial tracking
Clinical appeals - Based on McBee Associates' managed care denial benchmarks,
76% of clinical denials have an insufficient basis for the denial and should
be appealed. The provider appeal process must identify clinical denials,
screen all denials for appeal potential, develop a compressive appeal,
and aggressively pursue the appeal until cash collection.
Technical appeals - McBee Associates has obtained an average overturn rate of
40% when pursuing technical denials within one year of the initial denial date.
The key to this success is an organized process and extensive use of technology.
Denial avoidance - McBee Associates' benchmarks indicate that 48% of denials,
both clinical and technical, are due to provider operational issues. A
comprehensive avoidance program will significantly reduce denials by
correcting operational issues that caused the loss.
Denial tracking - The cost of denial tracking is insignificant when compared
to losses incurred by denials. The first step in denial management is to
categorize a provider's denials to understand the causes, measure the
financial impact, and measure results of operational improvement efforts.
Denial tracking is the primary tool utilized by the Denial Avoidance Committee.
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Denial Avoidance Committee
The mission of the Denial Avoidance Committee is to reduce denials that result
from provider operational issues. The committee aggressively analyzes the root
cause of these issues, designs operational improvements to avoid future denials,
and implements these improvements.
The success of the committee is directly related to its committee members and
the data available for analysis. The committee needs to be composed of a cross
section of the provider's leadership and have access to a comprehensive database
for analysis of the root cause of the denial.
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McBee Associates' Services
McBee Associates provides a full range of solutions for managed care denials
services. Health care organizations call on the experience and expertise of
McBee Associates to:
- Provide a comprehensive diagnostic of the institution's denial process
- Provide both clinical and technical appeals outsourcing services
- Implement the most advanced denial management and monitoring system in the industry
- Use experienced clinicians to provide root cause analysis to identify, categorize, and challenge each denial
- Provide the structure, data, root cause analysis, and support to organize and conduct a successful denial avoidance program
- Recommend process improvement activities to support a Denial Avoidance Committee
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McBee Associates' Denial Management Group
McBee Associates formed the Denial Management Group in 1999 to service
the needs of New York City hospitals. Since its inception, the group
practice has grown to provide service to seven of the 10 largest academic
medical centers in New York City. The average overturn rate of clinical
claims appealed exceeds 40%. McBee Associates' growth in New York City
is due to the high overturn rate achieved for clients, responsive service,
and detailed reporting.
The Denial Management Group's core expertise is the firm's Registered Nurses.
The nurses are experts in providing care, determining medical necessity,
and drafting successful appeals. Our nursing staff has experience with
direct patient care, worked for managed care organizations in claims review,
and been members of providers' Utilization Management Departments.
The depth of experience and expertise of the clinical staff is accentuated
by the McBee Associates team approach. The team collaborates to develop
strategies for appealing denials. The strategy utilized is based on the
combined expertise and experience of the whole team. The developed appeal
undergoes a comprehensive review process to ensure the most compelling
case is prepared for the appeal.
The unique benefit of the McBee Associates Denial Management Group is the
coding of the root causes of the denial in the McBee Denial Management System (MDMS).
The root cause analysis and the MDMS are powerful tools that provide over
80 metrics to analyze the cause of a denial. This information gives the
Denial Avoidance Committee a detailed understanding of the issues and challenges.
McBee Associates' Registered Nurses routinely serve as members of the Denial
Avoidance Committee at clients. Their external perspective and knowledge of
trends in the industry help ensure the success of the committee.
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Diagnostic Review
The diagnostic review examines the three major functions of a denial management process:
- Review of appeal process
- Review of denial avoidance process
- Review of denial management information system
Review of appeal process - During this diagnostic review, McBee Associates
examines clinical and administrative denials - tracking, processing, and
analyzing - to identify specific opportunities to improve the client's
current appeal process. Many of the opportunities for improvement can
be implemented for immediate results.
Review of denial avoidance process - The review documents the processes
in place, organizational structure, effectiveness of initiatives to reduce
denials, and potential opportunities for additional savings. Specific
recommendations are then made for improvement.
Review of denial management information system - The reports generated
are reviewed to assess if they provide the root cause analysis required
by the Denial Avoidance Committee. The system's ability to monitor and
track the appeal process is reviewed. The system is tested to determine
that it captures all denials.
Once the opportunities are identified, McBee Associates has the expertise
to develop and improve the internal process. McBee Associates works with
provider staff to implement recommendations.
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Clinical Denial Outsourcing
McBee Associates provides complete or partial outsourcing of the appeal
process, and project support to resolve backlogs. The clinical denial
group routinely achieves a reversal rate exceeding 40%. The group
has successfully reversed millions of dollars in denials for clients.
McBee Associates' extensive clinical knowledge, coupled with years of
experience at numerous clients, results in a high denial turnover rate
and improved cash flow. The clinical denial management process uses
first and second level appeals and a patient advocate process for
the highest rate of reversal.
Once a denial is reversed, aggressive collection techniques are
utilized to obtain the correct (contracted) revenue amount.
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Technical (Administrative) Denial Outsourcing
Technical or administrative denials, just like clinical denials,
erode the bottom line. Pre-authorization of procedures, timely submission
of information to health plans, and contractual compliance are required
for reimbursement. Without the appropriate processes and staff in place,
these requirements are sometimes missed and the claims denied. McBee Associates
works to overturn these denials and recommends strategies for long-term success.
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Development of a Denial Avoidance Program
McBee Associates helps organizations establish a denial avoidance program,
recommending the organizational structure, developing procedures, and offering
training for the Denial Avoidance Committee. The MDMS provides the committee
with a database to track appeals processing, collect denial data, and determine
root cause of denials.
McBee Associates has technical experts to supplement the committee's expertise
and offer guidance on accomplishing its mission. Investing in these committees
can significantly reduce operational issues and improve cash flow.
The MDMS is the principal tool utilized by the Denial Avoidance Committee.
A Registered Nurse reviews all medical records for clinical denials. The denials
are coded by the nurse in the MDMS. The system captures approximately 80 different
metrics from the medical record and the case, which are then developed into a
comprehensive series of reports that identify issues and causes. From this
information, the committee can determine the financial impact of these issues
and establish priorities for corrective actions.
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Root Cause Analysis
On net revenue of $100 million, denial losses range from $6 million up to $14 million.
McBee Associates can appeal and reverse more than 40% of these denials. The remaining
percentage is usually not reversible due to provider operational issues - such as
procedures not scheduled in a timely manner, incomplete documentation, issues in
medical records, and late discharges.
To minimize denials, the root cause of denials and an estimate of financial impact
must be determined. All denials for a specific period are reviewed and coded in the
MDMS for the denial cause. Reports are generated that identify issues and the potential
financial impact.
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McBee Denial Management System
MDMS is the most advanced denial management system available. Developed to meet
the needs of McBee Associates' client base, the system provides an unprecedented
amount of detail on every denial - tracking and monitoring each appeal through
the numerous steps of this process. The root causes of denials are easily determined,
categorized, and the financial impact calculated.
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McBee Associates' Client Experience
One of the many reasons to utilize a denial management firm is results. McBee
Associates believes there is no other firm that can match its average overturn rate
exceeding 40% for clinical denials. An inner city health system put McBee Associates
to the test. Comparing four different firms in its hospitals, they monitored results.
After six months, the number of firms was reduced to two, and after a year, all the
work was awarded to McBee Associates.
A Vice President of Revenue Cycle Management struggled with providing detailed information
to his Board of Directors on managed care denials. The VP needed to prepare a presentation
on the cause of millions of dollars of denial losses. The reports generated from MDMS
provided documentation needed to prepare the presentation. The VP was able to confidently
and fully explain the causes of the denials.
A CFO struggled with establishing an effective Denial Avoidance Program. Without a detailed
database to identify denial causes, the CFO was unable to provide information to direct the
efforts of the committee. McBee Associates supplied the database, the root cause analysis,
and management reports that concisely explained the operational issues related to the denials.
McBee Associates also provided a Registered Nurse to meet with the committee, explain the reports,
and help to develop corrective actions for improvements. The result is a denial recovery rate of 87%.
A utilization manager developed a backlog of cases due to vacancies and medical leave.
The department was fighting an uphill battle to keep cases timely. The manager turned
to the McBee Associates Denial Management Group for outsourcing of the backlog. The
team successfully resolved the backlog issue within six months. The utilization manager
was able to stay current once the backlog was resolved.
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McBee Associates' Team Approach
Providers are appealing inpatient denials, some in excess of $50,000 or even $100,000.
Developing a strategy to appeal these denials requires the experience only found in a
team of experts with a broad knowledge base, who have processed thousands of appeals.
This approach results in the development of a successful denial management program.
McBee Associates' team is comprised of Registered Nurses, other clinicians, revenue
cycle experts, and senior management to research and appeal every denial. Each denial
is reviewed using this group approach to ensure that all relevant documentation is
included and the best case is presented for denial reversal. The McBee Associates team
has developed best practices based on thousands of appeals.
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