Denial Management in Value-Based Care: A Changing Landscape

denial management February 21, 2024

The transition to a value-based care model has revolutionized the healthcare industry by focusing on patient outcomes and delivering high-quality and cost-effective patient care.

Under the current U.S. administration, the Centers for Medicare & Medicaid Services (CMS) emphasize health equity as a fundamental component of value-based healthcare. Research shows that social determinants of health (SDOH) significantly influence health outcomes.

Presently, healthcare providers actively seek ways to incorporate SDOH into their healthcare delivery strategies. Yet, according to a 2022 survey by The Physicians Foundation of American doctors, 60% of physicians report needing more time for patient consultations to address SDOH. This indicates challenges in the integration process.

In addition, the shift to value-based care also brings about a change in the billing and reimbursement landscape, where claim denial management significantly impacts revenue cycles. 

Healthcare organizations must be aware of the healthcare technology tools available to them to maintain good financial health, operational efficiency, and effectively adopt a value-based framework. 

Common Reasons for Claim Denials in a Value-Based Care Model

According to a recent study, around half of all healthcare providers reported a rise in their rate of denials compared to the previous year. Another survey revealed that there has been a substantial increase in the denial of claims, with rates climbing between 10–15%. 

The question arises: What factors contribute to this significant volume of denials?

Below are some of the most notable factors that impede efficient denial management in healthcare.

1. Lack of Authorization or Pre-Certification

In a value-based care model, payers often require prior authorization or pre-certification for specific procedures, treatments, or services to ensure they are medically necessary and they align with care standards. Failure to obtain this authorization before service delivery may lead to automatic claim denials. 

2. Insufficient Documentation

Documentation is the backbone of claim submission in value-based care. It must comprehensively detail the care provided (including diagnoses, treatments, and outcomes) to justify the medical necessity and align with payer-specific guidelines. Insufficient or unclear documentation that fails to support the necessity or the level of care provided often results in denials, as payers cannot verify that the services were appropriate and necessary.

3. Coding Errors

Accurate medical coding is vital in the claim process, as codes communicate patient diagnoses, procedures performed, and equipment used. Errors in coding, such as outdated codes, incorrect procedure codes, or lack of specificity, can misrepresent the care provided, leading to denials. Moreover, value-based care models often rely on precise coding to assess the quality of care, outcomes, and adherence to clinical guidelines.

4. Missed Filing Deadlines

Timeliness is a critical factor in claims management. Each payer sets specific deadlines for claim submission following the date of service. Missed deadlines are a straightforward reason for claim denials, as late submissions breach contractual agreements between providers and payers. 

5. Incorrect Patient Information

Simple errors in patient demographic information (e.g., name spelling, date of birth, gender) lead to claim denials. Accurate patient information is essential for claim processing, as the details must match the information the payer has on file. Such errors reflect the need for meticulous attention to detail during patient registration and data entry.

6. Incorrect Insurance Information

Like patient information, accurate insurance data, including policy numbers and payer details, is crucial. Incorrect or outdated insurance information leads to denials because payers only process the claim if it matches the payer’s records. 

7. Non-Compliance with Policy Rules

Each insurance payer has its own set of policies, guidelines, and coverage limitations. Understanding and adhering to each payer’s policies is critical in a value-based care model. Claims that do not comply with these specific rules, such as those for covered services, referral requirements, or service locations, are prone to denials.

Strategies for Managing Denials in Medical Billing

Addressing the common reasons for claim denials involves a multifaceted approach, including staff training, process improvements, and the use of technology. By focusing on these areas, healthcare providers reduce the frequency of denials, streamline their revenue cycle, and dedicate more resources to patient care and the pursuit of value-based care objectives. 

Here are ten strategies proven to be effective in claims denial management

1. Implement Proactive Authorization Management

Proactive authorization management helps prevent denials related to lack of authorization, ensuring that services provided are pre-approved and covered. It’s vital to develop a comprehensive system to track and manage all authorization requests.

The best way to do this is to invest in a denial management software solution that automates the pre-authorization and pre-certification processes. This includes features for tracking authorization statuses in real time, automatic alerts for pending authorizations, and integration with payer systems to streamline the authorization process.

You must also train staff to understand payer-specific requirements and regularly review authorization processes for efficiency and effectiveness.

2. Accurate and Up-to-Date Coding

Ensure coding accuracy by providing your coding staff with ongoing education on the latest coding guidelines, updates, and changes in ICD-10, CPT, and HCPCS codes. Utilize coding audits to identify and correct patterns of errors and implement feedback loops to educate coding personnel. 

You should also implement denial management software solutions, including advanced coding tools, such as coding validation checks and automatic code updates and suggestions. These tools help reduce human error and ensure codes are up to date.

3. Thorough Documentation

Foster a culture of comprehensive and detailed documentation among healthcare providers. Leverage EHR integration with medical billing software to ensure thorough and accurate documentation. Use templates and prompts that guide providers to include all necessary details to justify medical necessity, with automatic checks for documentation completeness and compliance with payer-specific requirements.

4. Regular Training and Education

Conduct regular training sessions and educational workshops for billing staff, coders, and healthcare providers to inform them about the latest billing practices, payer policies, and compliance requirements. Ongoing education is critical in adapting to changes in the healthcare landscape and reducing errors that lead to denials.

5. Utilize Data Analytics

Utilize the denial management software’s data analytics and reporting capabilities to identify trends and root causes of denials. Customizable dashboards provide insights into denial patterns, success rates of appeal efforts, and areas for denial management process improvement. This data-driven approach allows for targeted interventions and continuous monitoring of denial management efforts.                 

6. Effective Communication with Payers

Establish and maintain open lines of communication with insurance payers. This step involves understanding payer-specific requirements and policies, resolving disputes through dialogue, and negotiating contracts that align with the provider’s capabilities and services. Effective communication helps clarify billing requirements and resolve issues that may lead to denials.

7. Collaborate Across Departments

Encourage collaboration between clinical teams, billing departments, and administrative staff to ensure a unified approach to managing denials. Interdepartmental meetings, and integrated processes help bridge gaps and ensure that everyone contributes to minimizing denials.

Some integrated EHR systems offer collaboration tools that enable seamless communication and workflow management across departments. Features such as shared worklists, notification systems, and role-based access ensure that everyone involved in the denial management process is aligned and able to contribute effectively.

8. ANSI X12 837 Claims Management

The ANSI X12 837 transaction set is a crucial component in the healthcare industry, serving as the standard for electronically submitting healthcare claim information. 

Adopt and optimize the use of ANSI X12 837 electronic claims submissions. This strategy standardizes the format and content of healthcare claims, reducing errors and processing times. Training staff on the specifics of electronic claims submission and ensuring compliance with this standard streamlines billing processes and reduces denials.

9. CMS 1500 / HCFA 1500 Claims Management

For organizations that still deal with paper claims, healthcare denial management software systems offer digital processing tools for CMS 1500 forms, including scanning, data extraction, and error checking. This strategy minimizes manual entry errors and streamlines the submission process for paper-based claims. You should also have regular training on how to accurately complete these forms, coupled with checks and balances, to catch errors before submission.

10. Continuous Quality Improvement

Implement a continuous quality improvement (CQI) program focused on denial management. This step involves regularly reviewing denial data, implementing process improvements, and measuring the effectiveness of interventions. 

Tap Into Our Expertise 

Managing claims and avoiding denials are crucial for ensuring financial stability and delivering high-quality patient care in today’s healthcare landscape. 

Stay ahead of the curve with 5 Star Billing! With our expert medical billing services and advanced medical billing software, you can streamline your revenue cycle management processes and significantly reduce the risk of claim denials.

Don’t let claim denials hinder your practice’s financial health and patient satisfaction.

Schedule a call with us today to learn how we can empower your organization to achieve greater efficiency, profitability, and success in the value-based care era.

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