Measuring Revenue Cycle Health Through Denials Management

An organization's denial rate is a good barometer of its overall financial health and the soundness of its revenue cycle. A recent survey details how organizations stack up.

Although most organizations do a good job of tracking denials by reason, payer, and volume, they miss the mark when communicating information about appeals, appeal success rates, and how—or even if—denials and appeals data is passed on to payer contracting staff, according to the results of HCPro’s HIM Briefings’ 2022 Denials Management Survey.

The battle against denials gained new urgency due to the financial fallout of the COVID-19 pandemic. Revenue shortfalls, combined with staff and budget cuts, meant it was crucial for revenue cycle leaders to make the best use of available resources, make strategic decisions, and protect appropriate revenue.

The majority (77%) of respondents in the HCPro survey indicated their organization dedicates certain revenue cycle staff and resources to denials management: 36% have a denials management team, 28% have a denials management department, and 12% have a denials management program.

Although a formal denials management department might be out of reach for a smaller organization, a dedicated team or program will still produce good results and can make strategic use of resources.

Denials management is a truly interdisciplinary task, and a robust denials management program draws in experts from a variety of departments of the revenue cycle.

To learn more, the survey asked respondents to indicate what departments are responsible for denials management by selecting all that apply from a list.

HIM was the most common answer, with 43% of respondents reporting that department is responsible for denials management. Other common contributors to denials management include patient financial services (PFS)/billing (39%), revenue integrity (36%), and denials management (34%).

Some (21%) respondents selected “other” and shared additional departments and professionals their organization draws into denials management, such as utilization management/utilization review, CDI, and case management.

Denial rates and types

Organizations need to know what claims are being denied and how many denials they receive. This data is the foundation of a denials management strategy, answering the who, what, when, where, and why of denials.

Most (70%) respondents indicated they track denials by reason/type. To gain insight into that process, respondents were asked to indicate what departments are responsible for this task by selecting all that apply from a list. The top three responses were as follows:

·       Denials management (44%)

·       HIM (32%)

·       PFS/billing (32%)

Thirteen percent selected “other” and noted additional departments involved in tracking denials, including CDI and case management.

However, some organizations are still struggling to collect data. “We do not have a good tracking system,” one respondent said.

So, what are some of the common denial reasons/types organizations are seeing? To find out, respondents were asked to rank denial types by whether they see a high, medium, or low volume of them.

Unsurprisingly, medical necessity led the pack with 20% of respondents reporting a high volume of this denial type. Missing authorizations are also a pain point, with 12% of respondents indicating they receive a high volume of these denials.

What’s the lowest volume of denials? Charge entry/CDM error: 45% of respondents ranked this denial type as low.

Overall, although most organizations are tracking their denials, they may not be communicating the full picture. More than half (67%) of respondents said they don’t know what their organization’s average denial rate is.

An organization’s denial rate is a good barometer of its overall financial health and the soundness of its revenue cycle. The average national denial rate is between 6% and 13%, but a denial rate of over 10% is a clear warning sign and a call to action.