5 Steps to Uncovering Lost Revenue – Taking Control of your Denials

September 22, 2021

Kevin Lee
President of STAT Revenue

The COVID-19 pandemic has had a dramatic impact on many providers’ revenue cycles, with sharply lower patient and procedure volumes triggering major cash flow problems across a range of organizations. Although the situation has stabilized for most, finding ways to reduce denials and ensure you’re paid every dollar you’re entitled has never been more important.

Denial Reality

Even before the pandemic, denials were a major and costly problem in healthcare. Consider:

  • Denial volume increased by 79% for the average hospital between 2011 to 2017 [1]
  • A recent survey of hospital executives found that 30% of responding facilities had bad debt of between $10 million and $50 million, while 6% reported bad debt of greater than $50 million [2]
  • 9% of $3 trillion in U.S. hospital claims ($270 billion) were initially denied in 2016 [3]
  • Hospitals expend $9 billion annually in administrative costs for rework denials [4]
  • It takes 5-12 minutes per claim to check status manually [5]
  • The average cost of each claim status check by providers is $5.40 [6]

Despite the growing prevalence of denials, the fact remains that 90% of claims are preventable and 66% are recoverable. Even so, 65% of claim denials are never corrected and resubmitted for reimbursement. [7]

Here are five ways to take control of your denial problem:

Step 1: Optimize the Effectiveness of Your Current AR Process

While hospitals continue to face rising accounts receivable (AR) balances due to denied, unpaid and underpaid commercial insurance claims, adding staff to pursue denials can be costly and may still result in many low-dollar, high-volume claims going unworked.

A virtual extension of your central billing office’s resources can help bolster your efforts with a dedicated, knowledgeable, and responsive team of experts who have specific experience with your payers. This additional capability, integrated seamlessly with your systems, can decrease cycle time, and help ensure all claims, no matter the age or balance, are effectively worked to 100% resolution.

Step 2: Develop a Hard Dollars Collection Strategy

An effective AR management strategy should incorporate processes to pursue claims at key aging intervals, so no denials fall through the cracks. Typically, hospitals can task their primary AR management firm with claims that have aged from 30 to 90 days before sending older claims to the pre-write-off insurance collection specialist. Alternatively, hospitals can task internal staff with new claims, then turn any remaining inventory over to a pre-write-off insurance collection vendor.

Ultimately, you want to develop a strategy to collect the extremely aged hard dollars or dollars already written off (zero balance) so that you can improve collections and verify that claims are truly uncollectable and may be removed from the balance sheet.

Step 3: Pursue Pre-write-Off Insurance Collection

Secondary assigned accounts or second placement AR services for pre-write-off insurance collections provide a critical safeguard to ensure no insurance payments legitimately due to the hospital go uncollected, regardless of age. The benefits of enlisting this kind of outsource capability include:

  • The establishment of an AR management process that offers a systematic approach to obtaining 100% claims resolution
  • A reduction in write-offs, a commensurate increase in cash flow and a decrease in bad debt reserves caused by aging accounts
  • The creation of incentives that push primary AR vendors to optimize their processes
  • Greater transparency to enable hospitals to evaluate performance across the entire revenue cycle

To learn more about reducing write-offs, click here.

Step 4: Conduct Zero-Balance Reviews

Specialized, forensic audits of written-off (zero balance) claims compare payments received to anticipated revenue based on episode-of-care specifics, coding best-practices, and payer-provider contractual terms. Any underpaid claims are resubmitted, per the payer’s terms, for reimbursement.

Recovered underpayments from zero-balance reviews can total up to 1% of a hospital’s annual Net Patient Revenue, an amount that may be significant for large hospitals and health systems that generate hundreds of millions of revenue annually. A zero-balance audit and recovery process should include training or education to help hospital staff mitigate systemic or reoccurring coding and process errors uncovered during the initial review.

Click here to learn more about how zero-balance claims reviews can be a critical backstop for AR management strategies

Step 5: Develop a Process to Identify the Root Cause of All Denials

No matter where collections are pursued in the revenue cycle, one of the most important steps you can take in developing a robust accounts receivable strategy is determining the root cause of delayed, underpaid or denied claims. Unfortunately, hospital personnel and many primary vendors frequently don’t have the time or technology to determine the precise underlying reason for the denial.

Partnering with a vendor that utilizes intelligent automation can help systematically isolate denials by type, age and size before all claims are worked to resolution. This time-saving process also helps identify exactly where in the revenue cycle the initial problem occurred so proactive measures can be taken to prevent it from happening again.

To learn 7 strategies for preventing up to 90% of denials, click here.

Protect Your Revenue

While it’s best to resolve and collect outstanding accounts receivable before they become highly aged, this isn’t always practical in today’s challenging reimbursement environment. By adopting a comprehensive and aggressive accounts receivable strategy to ensure hospitals receive all the money they’re due from payers, facilities can experience significant reductions in bad debt and write-offs and a corresponding increase in cash flow and margins.

Pararev can help you progress toward the goal of zero-percent write-offs through our comprehensive AR solutions. We’re able to resolve all claims, regardless of size or age quickly, and conduct zero-balance reviews to ensure you’re collecting every dollar you deserve. Contact us today to learn more.

  1. Kelly Gooch, “4 ways hospitals can lower claim denial rates,” Becker’s Hospital CFO Report, Jan. 5, 2018.
  2. Bad Debt Exceeds $10M at a Third of Organizations, But Lack of Confidence Exists in How Much is Recoverable,” Cision PR Newswire. June 19, 2918.
  3. Philip Betbeze, “Claims Appeals Cost Hospitals Up to $8.6B Annually” HealthAffairs, March 16, 2021.
  4. ibid.
  5. ibid.
  6. ibid.
  7. Chris Wyatt, “Optimizing the Revenue Cycle Requires a Financially Integrated Network,” HFMA, July 7, 2015.

Overcoming the denial dilemma with intelligent automation. Learn how by downloading our whitepaper.

Related Posts

CMS Raises the Stakes on Price Transparency Compliance: issues new civil monetary penalties

September 8, 2021

Randi A Brantner, MBA-HA
Director, Financial Analytics

In effect since January 1 of this year, recent studies are showing low compliance with meeting all aspects of the Health Care Price Transparency Act. JAMA Internal Medicine published an article in June that showed 75 percent of the 100 top-grossing hospitals didn’t comply with at least one of the rule’s requirements while 86 percent had a price estimator tool. Fifty percent of 100 randomly sampled hospitals had a price estimator tool and of those 100 hospitals, 83 percent failed to comply with at least one of the rule’s requirements.[1] In another study of 5,288 hospitals, it was found that only 48.5 percent had chargemaster data on their websites with only 138 hospitals having an online price estimator.[2] A study based on bed count and published in HealthAffairs, found 65 percent of the 100 largest hospitals in the U.S. were not in compliance and 12 of the noncompliant hospitals had no files or links to searchable databases.[3]

CMS implements civil monetary penalties for noncompliance

As a result of this widespread noncompliance, the American Hospital Association (AHA) released a Member Advisory regarding noncompliance with the Centers for Medicare & Medicaid Services (CMS) Hospital Price Transparency requirements. In it, they noted that CMS has launched proactive audits of hospital websites and have evaluated complaints presented to CMS by consumers. According to the publication, CMS started with auditing larger acute care hospitals and have now expanded their examination of random hospitals. The first set of warning letters were issued the week of April 19th. However, CMS has indicated that they will not announce the list of hospitals that have received warning letters but will publish the identities of the hospitals that remain non-compliant and receive a monetary penalty if they have not addressed the issues within 90 days.

Number of Hospital BedsMaximum Annual Civil Monetary Penalty
<30$109,500
50$182,500
100$365,000
200$730,000
300$1,095,000
400$1,460,000
500$1,825,000
500+$2,007,500

A Special Edition from the Medicare Learning Network states that CMS is updating the civil monetary penalty amount. The current minimum civil monetary penalty of $300/day would apply to smaller hospitals with less than 30 patient beds. However, for hospitals with more than 30 beds, the penalty will be $10/bed/day, not to exceed a maximum daily dollar amount of $5,500. “Under this proposed approach, for a full calendar year of noncompliance, the minimum total penalty amount would be $109,500 per hospital, and the maximum total penalty amount would be $2,007,500 per hospital.”[4]

Patients and hospitals can submit a complaint to CMS if they believe a hospital doesn’t have the appropriate information posted online. For more information on Hospital Price Transparency, click here. If you have any other questions regarding Hospital Price Transparency, email the hospital price transparency team.

Hospital price transparency requirements

As a reminder, the CMS Hospital Price Transparency rule requires that hospitals publish detailed pricing information online to help consumers make accurate cost comparisons for a range of treatments and procedures. The rule contains two types of price transparency requirements:

  1. Hospitals must post their entire array of standard charges online in a machine-readable file that is easily accessible from their public website
  2. Hospitals must publish a document listing pricing for 300 specific shoppable healthcare services. Of these 300 items, 70 have been pre-defined by CMS, while the remaining 230 can be selected at the discretion of the hospital.

For both requirements, a range of different price categories must be shown, including gross charges, payer-specific negotiated rates, self-pay discounted rates, and de-identified minimum and maximum negotiated charges. The files also must contain any ancillary charges that are customarily included for the specific shoppable service, such as the costs associated with additional related procedures, tasks, allied services, supplies, or drugs, as well as any professional fees billed separately from the facility bill.

These requirements present challenges when it comes the sheer data mining and payer contract analytics required to deliver on the mandates. A hospital’s payer contract modeling system must be able to accommodate a variety of settlement methodologies by patient type including MS-DRG, APR-DRG, EAPG, ASC Levels, APC packaging, and percent of charge, among others. This means that for a typical hospital with a 10,000-line chargemaster, seven patient types, and 20 payer contracts, over 1.4M calculations are needed to fulfill the mandate. Meeting the regulatory requirements of the Health Care Price Transparency Act could require a hospital to spend an extraordinary amount of time and resources that they might not have. An alternative would be to contract with a partner that could provide the expertise with a cost-effective solution.

PARA HealthCare Analytics can help

PARA HealthCare Analytics, an ParaRev Company, is among the leaders in supporting hospitals in achieving readiness for CMS Price Transparency regulations, which will help consumers make more informed healthcare purchasing decisions. To ensure consumers will be able to browse for healthcare services in the same way they shop for other goods and services online, PARA has developed robust and accurate pricing capabilities for area healthcare consumers. The PARA solution includes a patient-facing estimator that delivers user-friendly, procedure-level estimates reflecting patients’ specific coverage limits and is updated quarterly for the facility with a payer contract system that can accommodate a variety of settlement methodologies.

PARA’s Price Transparency Tool, which uses the actual payer contract language as outlined in the CMS requirements to make those millions of calculations, is the most cost-effective and comprehensive solution on the market today.

To see how this solution would work for your hospital, click here to view a short demo.
And for more detail on the CMS requirements 1 and 2, watch our Becker’s Webinar: Price transparency – clarifying the unknown.

We can help you refine your pricing to improve revenue capture and strengthen margins while remaining competitive in your market. Contact us today to learn more about how we can help your organization prepare for the transparency transformation ahead.

  1. Suhas Gondi, BA1,2; Adam L. Beckman, BS1,2; Avery A. Ofoje, BA3; et al., “Early Hospital Compliance With Federal Requirements for Price Transparency,” JAMA Internal Medicine, June 14, 2021.
  2. Waqas Haque, MPH, MPhil1; Muzzammil Ahmadzada2; Hassan Allahrakha, BS3; et al, Eman Haque4; David Hsiehchen, MD, “Transparency, Accessibility, and Variability of US Hospital Price Data.,” JAMA Network, May 14, 2021.
  3. Morgan Henderson, Morgane C. Mouslim, “Low Compliance from Big Hospitals on CMS’s Hospital Price Transparency Rule” HealthAffairs, March 16, 2021.
  4. CMS Proposes Rule to Increase Price Transparency, Access to Care, Safety & Health Equity” mlnconnects, July 19, 2021.

Overcome the challenges of hospital pricing and revenue cycle management for improved revenue capture and better margins. Download our whitepaper to discover 3 ways to accelerate your financial transformation!

Related Posts

None found