What Is Denials Management in Healthcare Revenue Cycle Management?

June 21, 2024
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In the complex landscape of healthcare revenue cycle management (RCM), effective denials management plays a crucial role. It ensures that healthcare providers can efficiently and effectively capture the revenue they are owed for services rendered. At its core, denials management is the systematic process of identifying, analyzing, and then addressing and even preventing the denial of claims by payers, who are made up of insurance companies and government agencies. It is an expensive, resource-intensive process. In 2023, healthcare providers spent approximately $19.7 billion dollars on adjudicating claims through the denials management process with payers.

Rejected claims can occur for numerous reasons, such as incorrect or missing data, coding errors, lack of prior authorization, and ever-changing payer guidelines. Denials occur when a payer categorizes a claim as unpayable. Denials cause huge administrative and financial burdens and are a significant source of abrasion for providers and decreased satisfaction for patients.

Effective denials management helps recover lost revenue and streamlines the overall billing process, reducing the administrative burden on healthcare providers and preventing future rejections. RCM denials management requires a team of legal, clinical, and technical experts to effectively analyze vast amounts of data such as medical records, payer guidelines, and legal contracts, identify trends, appeal or prevent claim denials, and to utilize the right technologies to identify problem areas and automate resolution.

Key Aspects of Denials Management

  1. Identifying and Analyzing Denials and Rejections

The first step in managing denials is to identify the drivers of denied claims. This involves thorough scrutiny of each denial to categorize the root cause—whether it is due to missing information, insufficient documentation, incorrect coding, perceived lack of medical necessity, duplicate claims, eligibility, or other issues. Advanced analytics and artificial intelligence (AI)-driven workflow tools play a vital role in this stage by helping healthcare providers understand trends and patterns in denials.

  1. Claims Correction and Resubmission

Once you’ve identified the reasons behind a denial, the next step is to rectify the issues. When these are due to process errors, such as an incorrect unique patient identifier or CPT code, coding and clinical staff must invest significant time and resources to rectify the documentation and resubmit the claim.

  1. Appeals and Resolution 

If denials are more complicated and require a formal appeal, providers undertake a multidisciplinary and labor-intensive approach to appeal. This involves legal experts, clinical staff, and coding specialists who research the denial, and gather and construct the necessary required appeal documentation and legal arguments in order to nurture the appeal through a payer’s appeal process. Effective appeal strategies involve a structured presentation of clinical facts, compliance and coverage details, and legal arguments to demonstrate the claim validity. Commercial, Medicaid, and Medicare plans have different and often complex appeal processes. Using AI-enabled scoring models helps level the playing field in the appeals process.

  1. Prevention Strategies

A crucial aspect of denials management is preventing future denials. This involves deep analysis of existing denials and claims to identify and address the underlying issues leading to denials. After these issues are identified, you can take several steps to ensure they don’t happen again, including:

  • Ensuring you have the right mix of coding specialists, clinicians, insurance experts, and legal specialists to improve your RCM workflow
  • Ongoing staff education around preventing common mistakes
  • Improving documentation practices of staff and clinicians
  • Fostering collaboration with your payers

Advanced AI technologies—specifically machine learning (ML) and large language models (LLMs)—are becoming an integral piece in the early detection of potential denials and have streamlined the claims process.

  1. AI Technology and Automation Drive Insights and Optimize Workflows

The sheer volume of billions of claims, combined with detailed plan eligibility and coverage rules, means that most hospitals and health systems do not have the capability to manually perform root-cause analyses and fix provider-side process errors, much less appeal the nearly 15% of provider claims that are denied each year.

AI-driven denials management and automation provide the swift and accurate analysis needed by healthcare providers to process large volumes of data, identify patterns, and provide real-time insights into fixing the claims process. When implemented correctly, an AI-accelerated approach, combined with the insights and skills of experts, reduces manual errors, speeds up the resolution process, and improves the revenue cycle performance.

  1. The Importance of a Skilled Denials Management Team

Denials management is a complex issue. It requires a sharp, seasoned, and competent team, filled with legal experts, clinicians, and claims specialists to understand the clinical, regulatory, and compliance issues across commercial, state, and federal plans. Ensuring that your staff has the right skills and knowledge to navigate these often challenging appeals cases can mean the difference between a successful or unsuccessful appeal.

Benefits of Effective AI-Enhanced Denials Management

Implementing a robust, AI-driven denials management strategy offers several benefits:

  • Increased Revenue: By using an AI approach to effectively analyze and overturn denials, healthcare providers can recover significant amounts of revenue that would otherwise be lost
  • Reduced Administrative Costs: Automation and streamlined RCM processes reduce the time and effort required to manage denials, lowering staff shortages
  • Improved Cash Flow: Timely resolution of denials ensures a steady flow of revenue, improving financial stability
  • Enhanced Compliance: Proper documentation and adherence to regulatory requirements minimize the risk of denials and ensure compliance with payer policies
  • Reduced Patient Pain Points: Fewer denials mean better patient relations and higher patient satisfaction
  • Improved Collaboration: Improving processes provides an opportunity for a provider’s RCM team and payer to work together
Find an Experienced Vendor Partner You Can Trust

Ineffective denials management continues to be a serious issue. In 2021, nearly 17% of in-network claims were denied by HealthCare.gov plans. Revenue cycle denials management is vital for healthcare providers seeking to optimize their revenue streams, reduce administrative burdens, and increase profit margins. By focusing on identifying, resolving, and preventing claim denials and leveraging advanced technologies, providers can significantly improve their operational efficiencies and financial outcomes.

External vendors like Aspirion offer AI capabilities either as a service or as a product to be integrated into workflows, which are two distinct approaches. Vendor partners can offer specialized and quicker solutions, but internal teams may provide more tailored implementations. Aspirion offers award-winning denials management services powered by advanced technologies to help hospitals and health systems successfully navigate the complexities of denials management. We want to ensure you can focus more on patient care and less on administrative challenges.

Want to boost your profit margins with AI-powered denials management? Take the first step today—contact us here.

Aspirion

Aspirion

For over two decades, Aspirion has helped healthcare providers maximize their hospital revenue recovery by focusing on their most challenging reimbursements. Aspirion’s experienced team of healthcare, legal, and technical professionals combined with industry-leading technology platforms help ensure providers receive their most complex RCM revenue so that they can focus on patient care.

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