Managing Denials:Covering all the Bases

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HFMA 2017 Texas State ConferenceMarch 26th, 2017

PwC

Presenting Today

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Jacob Shurbet – Manager, Revenue Performance Management

Jacob is a Manager in the PwC Health Industries Advisory Revenue Performance Management practice. Jacob hasspent most of his career specializing in revenue cycle strategy, redesign and workflow software implementation. Hehas worked extensively with several nationally recognized healthcare systems assisting with shared service designand implementation as well as co-leading several large scale transformational initiatives. Jacob has specifically beeninvolved in complex redesign engagements focused on process reengineering and organizational restructuring in aneffort to achieve significant financial improvement. Most recently, Jacob has been a part of several engagementsfocusing on A/R reduction, business office consolidation and process improvement to reduce cost and improverevenue for a prominent outpatient physician network. This work involved understanding the operational structureof large-scale health systems and working with clients to make critical changes in order to drive sustainable value.

Jon Souder – Director, Revenue Performance Management

Jon is a Director in PwC’s Health Industries Advisory practice focused on Revenue Cycle Management. He is aseasoned healthcare executive with over 16 years of consulting experience focused entirely on healthcare. In hiscareer Jon has led back office centralizations for large, multi-hospital health systems, led post-merger integrationsfor large business process outsourcing groups, and worked with private-equity firms to improve performance intheir healthcare portfolios. Most recently, Jon has focused his attention of helping established integrated deliverysystems and new healthcare entrants to understand changing consumer expectations and the anticipated impact onhow we manage the revenue cycle process from pre-access functions like scheduling and financial clearance throughthe back-office collections process.

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The Challenge

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Source:1. Modern Healthcare2. HFMA – Creating a Healthy,

Unified Revenue Cycle3. Health Care Compliance

Association – HIPAA &Revenue Cycle Compliance: ANew Approach to DenialsManagement

Most health systems

lose between 3and 5 percent of

their net revenue as aresult of paymentdenials1

Most health systems

lose between 3and 5 percent of

their net revenue as aresult of paymentdenials1

The cost to denialsmakes up an

estimated 20% ofrevenue cycleexpenses2

The cost to denialsmakes up an

estimated 20% ofrevenue cycleexpenses2

90% of denials arepreventable3 whenfeedback from denialsmanagement isimplemented withassociated departments

90% of denials arepreventable3 whenfeedback from denialsmanagement isimplemented withassociated departments

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Scope of the Challenge

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At 3-5% of NPSR, the State of Texas is leaving $2.3B on the table as a result ofdenied claims. And this doesn’t even include the cost of working these denials.But we have clients that are operating as low as 0.12% denial write-offs.

Source: FY16 PwC Consortium Benchmarking Data

$255B Gross

$76.5B*NPSR

$2.3B lefton thetable

*Assumes 30% net to gross

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Why so much $$$ left on the table?

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Decentralized/dispersed accountability

Informal processes around the prioritization of prevention initiatives

Non-standardized practices to work denials

Informal status reporting and progress monitoring processes and tools

Triaged by denials team to functional area that owns the underlying root-causeprocess error (owner based distribution)

Appeals researched and worked by staff with other competing responsibilities

Separate reporting by entity

• Simply managing denials does not correct the problem.Instead, organizations must prevent denials. Everytime a claim gets denied, dollars leak from the Texashealthcare ecosystem (foregone revenue and additionalorganizational spend).1

• Simply managing denials does not correct the problem.Instead, organizations must prevent denials. Everytime a claim gets denied, dollars leak from the Texashealthcare ecosystem (foregone revenue and additionalorganizational spend).1

Big Picture:

Source:1. AHIMA – Don’t Deny the Denials

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So how do we prevent these denials

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• Joint operating councils (cross-functional) to provide feedbackto payers, managed care, anddepartments

• Aggressive appeals• Managed care strategy

• Embrace it, don’t hide it• CARC and RARC code based

taxonomy• Visually trend data to more

easily find patterns andprioritize work

• Proactivemanagement/analytics

• Formalized feedback processesand tools

• Formalized management ofprevention initiatives

• Escalation processes forinitiative road-blocks

• Centralized initiative statusreporting

• Formally chartered, cross-functional teams

• Formalized processes• It starts at the top - CFO• Accountability that flows

through the organization

Culture ofAccountability

Focus onPrevention

PayerRelations

TransparentReporting

It’s the fundamentals - Successful denials prevention is pegged tosuccessful implementation of 4 fundamental strategies

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Culture of accountability – Formally chartered,cross-functional teams

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DenialsGovernance

Denials Prevention Denials Recovery Denials Support

• Rev Cycle leadership• Vice Chairs of each Rev Cycle functional area• Representation from IT, Denials Reporting, Denials

Project Support, payer contracting, & clinicalrepresentation

Responsibilities:• Denial root cause research• Accountability assignment

and work planning• Communication with

major payers• Implementation of

prevention projects• Monitoring, review, and

report outs to governance

Responsibilities:• Denials appeal• Denials follow up• Denials closure (rebilling,

write-offs, or nextresponsible party)

Responsibilities:• Denials Reporting

Denials categorizationmaintenance

• Denials trendinganalysis

• Prevention projectimplementationsupport

• Develop denial KeyPerformanceIndicators (KPI’s)

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Analyze Data Segment Data Identify Root Cause Prioritize

Monitor &Review

Implement Fix

IdentifyPrevention

Strategy

CharterPrevention

Team

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Analytics &Reporting Team(ART) works withDenial Recovery staffto identifyhomogenous rootcause denials

ART conducts further researchto validate underlying rootcauses for each denial

Segments are prioritized for preventionbased on net revenue loss, net write-offs / recovery ratio, and resourcerequirements

A leadership sponsor isassigned to each projectand a team is assembledwith representationfrom appropriatefunctional areas

The prevention teamworks with functionalareas to execute theproject workplan Multiple prevention

projects launchedsimultaneously

Data ismonitored toensure successof intervention

Denials Recoverystaff sampleaccounts tovalidate initialsegmentation andadjust as necessary

Data AnalysisData AnalysisPrevention

ImplementationPrevention

Implementation

LEGEND:

The prevention teamcollaborates to identify aPeople, Process, orTechnology fix and draftthe project workplan

Culture of accountability – Formalized processes

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Culture of accountability – Accountability thatflows through the organization

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Regardless of how you develop your governance or workflow, accountabilityhas to flow through your organization so denials don’t fall through thecracks.

Remittanceadvice postedfrom payerswith ANSI

denials codes

ANSI codesmapped to

customcategorization

Patient billingPatient billingsystem

distributesdenials to workqueues basedon mapping

Denials teamworks to

recover mostdenials

Denials teamtriages some

denials tofunctionalareas when

needed

PatientAccess

Coding

Concentrating denials recovery to a specificteam within follow-up allows forspecialization and optimal staff resourceallocation (flexing). These staff work 100% ofdenial volume

Denialsare

routed

Denialsare

worked

LEGEND:

Rev Cycle functional area staff only workdenials where necessary (i.e. not all Accessdenials are worked by Access staff). Access &Coding will each be staffed to work anadditional 3% of denial volume

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Culture of accountability

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A CFO who is passionate about the Revenue Cycle

Based on root cause denial analytics, every denial isassigned to a single individual for resolution

Very transparent financial reporting of denials – externalaudit-proofed

Closed feedback loops to follow up on denials and initiativesthat must be pushed down to the departments for follow-upor implementation

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Focus on prevention

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Denial Type

Non-coveredService

MissingDocumentation

Untimely Filing

Ineligible onDate of Service

MissingAuthorization

Duplicate Claim

Coordination ofBenefits

Invalid CPT orHCPCS Code

Lo

wH

igh

Med

ium

Pr

ev

en

tab

ilit

y

Probability of Collection

Low Medium High

Source:1. HFMA

Fixing the root cause of denials has a much larger financial impact thanoverturning them.

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Focus on prevention – Formalized feedbackprocesses and tools

As denials are reviewed and root causes are identified, formalized processesand tools ensure they get to the right step along the claims journey.

Patient Access /Financial Clearance

Patient AccountingSystem Rules

Billing Rules Initial Denialsand Write-offs

Long-termProcess Fixes

Short and Long-term Stops and

Technology

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Focus on prevention – Formalized management ofprevention initiatives

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The file is organized by processphases

Root cause outlined for eachsegment

Each reason code divided in tohomogenous segments

A Denials Management Repository tracks denials prevention initiativesthrough their multiple phases and serves as an enterprise-wide knowledgebase for denials.

Progress monitoredon ongoing basis

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Transparent reporting – CARC and RARC codebased taxonomy

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One of 300+ Claim Adjustment Reason Codes (CARC) code helpsorganizations tie a denial category to a specific service / department.

CARC Description Denial Type Department Denial Category1 Deductible Amount Information Patient Liability Patient Liability

2 Coinsurance Amount Information Patient Liability Patient Liability

3 Co-payment Amount Information Patient Liability Patient Liability

4The procedure code is inconsistent with the modifier used or a required modifier is missing. Note: Refer tothe 835 Healthcare Policy Identification Segment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Modifier

5The procedure code/bill type is inconsistent with the place of service. Note: Refer to the 835 HealthcarePolicy Identification Segment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Procedure

6The procedure/revenue code is inconsistent with the patient's age. Note: Refer to the 835 Healthcare PolicyIdentification Segment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Procedure

7The procedure/revenue code is inconsistent with the patient's gender. Note: Refer to the 835 HealthcarePolicy Identification Segment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Procedure

8The procedure code is inconsistent with the provider type/specialty (taxonomy). Note: Refer to the 835Healthcare Policy Identification Segment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Procedure

9The diagnosis is inconsistent with the patient's age. Note: Refer to the 835 Healthcare Policy IdentificationSegment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Diagnosis

10The diagnosis is inconsistent with the patient's gender. Note: Refer to the 835 Healthcare PolicyIdentification Segment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Diagnosis

11The diagnosis is inconsistent with the procedure. Note: Refer to the 835 Healthcare Policy IdentificationSegment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Diagnosis

12The diagnosis is inconsistent with the provider type. Note: Refer to the 835 Healthcare Policy IdentificationSegment (loop 2110 Service Payment Information REF), if present.

Preventable Coding Diagnosis

13 The date of death precedes the date of service. Preventable Billing Claim Error

14 The date of birth follows the date of service. Preventable Billing Claim Error

15 The authorization number is missing, invalid, or does not apply to the billed services or provider. PreventableFinancialClearance

Authorization

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Claim/service lacks information or has submission/billing error(s) which is needed for adjudication. Donot use this code for claims attachment(s)/other documentation. At least one Remark Code must beprovided (may be comprised of either the NCPDP Reject Reason Code, or Remittance Advice Remark Codethat is not an ALERT.) Note: Refer to the 835 Healthcare Policy Identification Segment (loop 2110 ServicePayment Information REF), if present.

Preventable Billing Missing Information

18Exact duplicate claim/service (Use only with Group Code OA except where state workers' compensationregulations requires CO)

Information Duplicate Duplicate

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Transparent reporting – Visually trend data tomore easily find patterns and prioritize work

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Control charting can be used to identify outlier clinics/departments/providers.This information can then be used to prioritize prevention initiatives anddenial recovery efforts.

2 StandardDeviations

2 StandardDeviations

1 StandardDeviations

1 StandardDeviations

AverageComparison

Department A: 6%A

Department B: 4.7%A

Department C: 4.4%A

> 5% 4% 3% 2% < 1%

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Transparent reporting – Visually trend data tomore easily find patterns and prioritize work

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Transparent reporting – The evolution topredictive analytics

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Data Analytics andBenchmarking

What happened?

Root Cause Analysis

How and why did ithappen?

Predictive Modeling

What will happen ifthis changes?

Proactive DecisionMaking

What is the next bestaction?

Traditional Approach

Future Approach

Source:1. HFMA

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Payer Relations – Joint Operating Councils

Dedicated DenialSpecialists

Utilization ManagementRNs

Physician Advisors Legal Professionals

Joint OperatingCommittee

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Culture of accountability – Helpful tips

19Source: AHIMA

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Utilize automation to route denied claims to a staff’s worklist

Develop a denial management guide with detailed policy and procedures for employees (i.e. how toassign manually recorded denials to the appropriate denial code, how to appeal by denial type, etc.)

Provide periodic refreshers to educate staff on payer trends, updates in the insurer’s requirements forresubmitting claims, etc.

Utilize a write-off approval process with established dollar thresholds and management level approvals

Implement a formal escalation process by denial type and dollar value for when staff need to resolve anissue or receive a response from a department (i.e. provide an example of the escalation process)

Perform root-cause analysis to determine needed process changes and /or educate departments toprevent future denials

Enable employees to work denials more efficiently by providing technology and training to effectivelywork denials

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3

4

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6

7

8 Establish automated adjustments for low dollar denials and analyze using reporting to reduce denialcosts

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Questions

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?

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Dedicated Analytics and Reporting Teams

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A special Analytics and Reporting Team was created to support reportingfunctions, including categorizing CARC codes, compiling, distribution, andmaintaining denials reports, and supporting denials prevention teams.

• Mapping of ANSI CARC and RARCcodes to custom client denialscategories that are indicative of theunderlying root cause

• Recommended mapping of allCARCs, as well as some RARCsand differentiation by payer wherenecessary

1. Categorization

CARC12345678

CategoryABCDEFGH

Note: CARC mapping will be reviewed and approved by the DenialsGovernance Committee

• Data analysis to recommend preventioninitiatives and prioritization

• Project management support fordenials prevention initiatives:• Team chartering / goal setting• Workplan & milestone

development• Metric tracking

• Denials Recovery review andmanagement

3. Prevention Support

• Denials reporting maintenance &administration, includingdistribution lists, distributionplatforms, and maintenance ofaccountability assignments

• Regularly cadenced denialssurveillance and trend analysis

• Denials overview presentations

2. Reporting

Note: Denials reporting will be prioritized, reviewed, andapproved by the Denials Governance Committee

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Recommended Organizational Structure forDenials Committees

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Consider a future state organizational structure that more effectively alignsfunctions across the revenue cycle, and consists of a cross-functional DenialsManagement team.

Denials Management LeadershipDenials Management LeadershipDenials Management Leadership

Patient Access

RevenueIntegrity

Billing andReimbursement

ReportingDepartment

Contracting /

Payer Relations

Medical Group(If Applicable)

Su

b-C

om

mit

tee

s1

IT Support

Su

pp

or

t

1. Sub-Committees should include clinical and medical representation, e.g. casemanagement, physicians, etc.

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Next Steps

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1. Complete a denials assessment

• Claims denied by reason

• Dollars denied / adjusted

• Claims denied and reworked

• Dollars / claims appealed and recovered

• Cost of rework

• Review / update denial processes

2. Identify organizational staffing opportunities

3. Streamline processes to optimize workflow

4. Engage and educate physicians and staff on improvements

5. Develop and implement prevention strategies

6. Set reduction goals!

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Case Study in Preventing Denials

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Denials Governance

Responsibilities:• Denials reporting prioritization and

approval• Goal & target metric setting• Prevention project prioritization &

chartering• Resource assignments• Approval of policies and procedures

Composition• Rev Cycle leadership• Vice Chairs of each Rev Cycle functional area• Representation from IT, Denials Reporting,

Denials Project Support, payer contracting, &clinical representation

Organizational Department• Separately assigned committee

OR• Subset or designated time in RCLT

meetings (IT/Reporting/Supportinvited)

Responsibilities:• Development of workgroups and detailed workplans

for each denials prevention project• Establish lines of communication with major payers• Implementation of prevention projects• Monitoring, review, and report outs to governance on

prevention status• Reviewing detailed reports drilling into the cause of

denialsComposition:• Each Denials prevention initiative will be assigned an

owner by the governance committee• Individual team group members will be appointed by

the project owners• Revenue Cycle Operations Analysts can be involved as

neededOrganizational Department:• Prevention teams are staffed from the functional area

where the project is focused• Includes representation from Analytics Reporting

Team (ART) to support prevention initiative

Responsibilities:• Denials appeal• Denials follow up and root cause research• Denials closure (rebilling, write-offs, or next

responsible party)Composition:• Denials will primarily be worked by dedicated denials

team• Denials that the team are unable to work, due to lack of

access or competencies, will be automatically routed ormanually triaged to other functional areas

• Governance will approve the routing and triaging ofdenials, and receiving departments will formally acceptresponsibility for recovery

Organizational Department:• Denials staff located in the Enterprise Denial

Management team will work most denial appeals• Some resources in other Revenue Cycle functional

areas dedicated to denials

Responsibilities:• Denials Reporting (regularly cadenced dashboards)• Denials categorization maintenance• Denials trending analysis• Prevention project implementation support, including

project management• Develop denial Key Performance Indicators (KPI’s)Composition:• Reporting expertise (Clarity, SQL, Epic Graph Package,

Reporting Workbench, Cleopatra)• Prevention support expertise, including staff

specializing in project management and performanceimprovement

Organizational Department:• Housed in the Denials Management and Analytics

Reporting Team (ART) within BAR

Denials Prevention Denials Recovery Denials Support