How Do I: Reduce Revenue Cycle Denials?

As healthcare faces mounting financial pressures in 2024, revenue cycle executives are under increasing pressure to reduce denials; but how?

One significant challenge is the growing burden of denials, which, if left unchecked, can critically impact a hospital's bottom line.

Recent studies indicate that denials, especially those related to prior authorizations, have escalated, leading to costly consequences for health systems.

According to a 2024 benchmarking analysis, denials now account for 13% of all claims, a jump from 11% reported in 2022. For an average-sized health system, this figure translates to 130,000 unpaid claims annually.

As denials continue to rise, many systems face significant operational and financial challenges that are compounded by increased payer scrutiny.

Why are they happening? According to the report, the top reasons for an uptick in denials remain consistent with past trends.

These include:

• Insufficient data analytics to flag issues in submissions (65%)
• Lack of automation in the claims and denials management process (64%)
• Inadequate staff training on claims submission and denial prevention (49%)

Operational inefficiencies and insufficient resources are primary barriers that hospitals need to overcome to better manage their revenue cycle.

So How Can You Reduce Denials?

To combat the growing challenge of denials, revenue cycle leaders must take a data-driven, proactive approach to claims management.

Here are three strategies to help reduce denials and improve financial outcomes:

1. Invest in Advanced Data Analytics
   With denial rates climbing, having the right data at hand is essential. Health systems should leverage analytics tools to identify patterns in denied claims, root causes, and the most common submission errors. These insights allow teams to address and rectify problem areas before claims are submitted, reducing the likelihood of denials.
2. Implement Automation in Claims Processing
   Beat payers at their own game. Automation can streamline claims processing, improving accuracy and speeding up submission times. Automated systems can also flag potential denials before they happen, such as missing documentation or incorrect coding, enabling teams to fix issues early. Hospitals that have implemented automation report fewer manual errors and a decrease in denial rates.
3. Enhance Staff Training and Expertise
   A well-trained revenue cycle team is a crucial component in reducing denials. Providing ongoing education on best practices in claims submission and payer requirements can help staff avoid common pitfalls. Additionally, building in-house expertise on navigating payer appeals can lead to faster and more successful resolutions of denied claims.

Rev cycle leaders must adopt a multi-faceted approach to address the increasing challenge of denials. Through enhanced data analytics, automation, and staff training, hospitals can not only reduce their denial rates but also improve their overall financial performance.

This article is part of HealthLeaders’ How Do I? series.