For Orlando Health, boosting revenue meant focusing on claims denials
While reducing claim denials is an important, ongoing challenge for any health organization, sometimes it takes a wake-up call to focus resources and take a strategic approach to denial reductions and management. For Orlando Health, a 2,000-plus bed health system in central Florida, that moment came after a consultant’s study showed we were averaging a 5 percent initial claims denial rate, compared with an industry benchmark of 2-4 percent. This 1 to 3 percent gap made us realize it was time to carefully assess and fix issues systematically.
This was part of a broader assessment of the financial health of our health system, but it emerged as one of the most significant issues. With a lot of hard work, we were ultimately able to improve claim acceptance by 15 percent and revenue by $7-8 million per month. But to achieve this, we had to get a handle on what wasn’t working. Fortunately, we were able to use the complementary strengths of our skilled team of about 34 people to help identify the holes in our process.
Over the past three years, Orlando Health has significantly tightened its process for preventing claims denials. Just as importantly, the system now has a plan for ongoing strategic denial management.
Although many of the initial claim denials were resolved over time, that process required a great deal of resources and expense. Reducing this burden meant uncovering small paths where claims were hitting a tripwire, as well as rethinking how patient interaction with the healthcare system could be changed to effect better first-time claim approval.
Starting in December 2012, Orlando Health began an eight-month assessment of the system and a plan to transform our organization to improve the initial claim submission process, which we discovered required changes to the patient's interaction with the system. In the ensuing months, our team reviewed revenue versus expenses and the assessment plan, presented the plan for approval to the executive team, reviewed their systems, selected a core implementation team, then began implementation in July of 2013. The initial review presented almost 248 areas of potential improvement.
Our initial assessment of the revenue cycle found many positives, including a collaborative work environment focused on continuous improvement–a definite plus for implementing future changes. Some key functionality, such as a call center for multiple facilities, and software for eligibility verification, data mining, and claim scrubbing, were standardized and centralized, which eases implementation for future workflow improvements. We also found that the majority of claims were posted and stored electronically.
Specifically, we needed to find the problems that were causing between $7 to $11 million in full denials and $2 to $4 million in partial denials. First, we focused on what areas had a high volume of denials: coordination of benefits (COB), non-covered services, missing authorizations, system mismatch between when authorizations are needed, medical necessity oncology services, coverage not in effect, and additional information. Partial denials often were missing the provider number or other credentialing issues, typically in third-party liability and out-of-network claims.
Orlando, being an international tourist destination, has an unusually high number of international claims, $1.5 million of which were denied, then written off annually. Often, the authorization of payment was below what was pre-determined as necessary, and $2.1 million of claims were not paid by either the insurance company or the patient. Overall, underpayments represented a $10-12 million opportunity for revenue recovery.
Types of denials were broken down into the revenue that they represented. Missing or invalid authorizations accounted for $5.7 million, or nearly one-third of the $18.3 million in denials for the analyzed period. Additional information requested was the next most frequent category, representing $4.2 million in denials, followed by medical necessity ($3.5 million), non-covered benefits ($3.2 million), and COB/primary care coverage ($1.7 million).
On many of the problem claims, the 835 EDI document returned from the payer with an explanation of benefits was missing. Sometimes this was due to receiving paper forms, so a system was implemented to translate paper claims and remits into 835s. There were also a good number of coordination of benefits denials that pushed expenses to patient responsibility. Other times we would receive a code 96, “uncovered charge,” which is non-specific.
As we went through the assessment, we looked for opportunities to make fundamental changes, but we also looked for quick wins. We already had a robust claim scrubber, but we found we didn’t have all the payer rules turned on in the software. We knew the importance of keeping the coding and eligibility rules up to date—and that helped us prevent more denials up front, rather than having to address them on the back end.
We also created team inboxes for categories of denials, such as Medicaid and pharmacy, which were monitored by teams of our internal experts. If a denial comes back saying the claim is missing a modifier, who is responsible for adding that? A team approach helped us resolve questions like that.
Data and software are important, but so is collaboration – within our own staff, with physicians, and with payers. You have to understand the payer’s processes as well as you can. Every other Monday, we have an accounts receivables meeting that includes the CFO, the contract director, and all the managers where we go through the top issues with all the payers and discuss what’s causing delay and denial in payments.
Beyond those steps, we saw a need for a more complete transformation that would make securing claim approval everyone's business. I will discuss that transformation in my next post.
To learn more, listen to Reducing Denials and Increasing Revenue with Workflow Design an educational session recorded at HFMA ANI 2015. Or, read the case study “Orlando Health Gains Insight into Denials and Reduces A/R Days” which discusses the use of analytics to achieve some of these results.
About the author: Bridget Walters is the corporate director of patient accounting at Orlando Health
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