Denial Management Software for Healthcare Organizations

Denials are hitting revenue cycle management teams harder than ever these days. 

A recent denials survey of 516 hospitals across 36 states, finds that “about 15% of all claims submitted to private payers for reimbursement are initially denied.” This figure reflects a 20% rise from 12% in 2022’s denials rate of 12% and a 67% rise from 2016’s denials rate of 9%. While 54.3% of these denials were ultimately overturned and paid, getting it done took “multiple, costly rounds of provider appeals."

Denial management software is emerging as a crucial tool for healthcare providers to combat the rise of claim denials and optimize net revenue. By automating the identification, tracking, and resolution of denied claims, these solutions streamline the revenue cycle process. 

A robust denial management strategy can increase the claim acceptance rate to better than 95%, increasing revenue and efficiency. Review denial management software options and best practices for its use here. 

What is denial management software? 

Denial management software is a specialized tool designed to streamline the handling of denied insurance claims within healthcare organizations. It automates the tracking, analysis, and resolution of claims, enabling providers to identify patterns and root causes of denials more efficiently. 

Operating on advanced technologies such as artificial intelligence and machine learning, this software not only corrects errors but also proactively prevents future denials. Additionally, it ensures compliance with changing payer regulations. Denials management software plays a crucial role in optimizing the revenue cycle by minimizing revenue leakage from claim denials.

Claims management software and denial management software

While claims management software and denials management software can be related, they are distinct tools in healthcare revenue cycle management. 

Claims management software:

• focuses on the entire lifecycle of a claim, from submission to payment
• handles claim creation, submission, tracking, and processing
• often includes features for claim scrubbing and error checking before submission
• may incorporate basic denial prevention features

Denial management software:

• specifically targets the handling of denial prevention 
• provides tools for analyzing denial patterns and root causes
• offers workflows for appealing denied claims
• often includes predictive analytics to identify high-risk claims before submission
• identifies and ranks high to low-opportunity claims based on the likelihood of recovery

Some vendors offer integrated platforms that combine both claims and denials management functionalities, as they are closely related in the revenue cycle. Vendors who focus on healthcare revenue recovery rather than operations may specialize in denials management and underpayments – two areas that can render substantial revenue quickly. 

Denial management software for both reworking and appealing denials

Denial management software supports staff in handling denials that need to be reworked due to an internal organizational error, as well as those that need to be appealed based on the payer’s decision. Denial appeals and denials reworking are two distinct processes in managing denied claims, each with its own focus and process. 

Denial appeals involve formally challenging a payer's decision to deny a claim. It typically requires submitting a written appeal that outlines the reasons for the denial and includes supporting documentation to substantiate the claim's validity. The appeal may reference specific insurance policy provisions or medical necessity guidelines to strengthen the case. Appeals can be internal (handled within the insurance company) or external (involving an independent review) and often require adherence to strict timelines and procedures.

Denial reworking, on the other hand, refers to the process of correcting and resubmitting denied claims. This can involve fixing coding errors, providing missing documentation, or addressing any other issues that led to the denial. Reworking is more about operational adjustments to ensure that claims meet payer requirements before resubmission. It focuses on identifying the root causes of denials and making necessary changes to prevent similar issues in the future.

In summary, denial management software helps with both contesting a denial decision and correcting the claim itself for resubmission after staff errors. Both processes are essential for effective denial management, but they serve different purposes in addressing denied claims.

9 ways denial management software improves revenue

Denial management software can significantly improve financial performance in healthcare organizations through several key mechanisms:

1. Eligibility optimization:  Forty-one percent of denials occur due to patient access issues. Eligibility and registration with the insurer are major causes of these front-end denials. Using denial management software as a proactive measure can help ensure claims are only submitted if they are eligible. This saves time and resources and avoids the cost of submitting a claim that will be rejected because of ineligibility. According to Becker’s Hospital CFO Report, reworking and resubmitting a claim can cost $44 each. 

Appealing is even more expensive since legal fees can drive the cost to $100 per claim.

1. Increased revenue recovery: As noted above, by efficiently resubmitting denied claims, healthcare providers can recover up to 54% of previously denied claims, directly boosting their cash flow. 

2. Enhanced cash flow: The software streamlines the reimbursement process by promptly addressing denials, resulting in faster payments and improved overall cash flow for healthcare organizations.

3. Predictive analytics: Advanced denial management software utilizes AI and predictive analytics to forecast potential claim denials by analyzing historical data, allowing administrators to proactively address issues before they impact cash flow[2].

4. Automated claim tracking: Integration with EHR systems enables automatic monitoring of submitted claims, helping to identify patterns behind denials and improve claim submission accuracy.

5. Operational efficiency: By reducing the number of claim denials, the software frees up administrative resources, allowing staff to focus on patient care and other high-priority tasks, leading to reduced overhead costs.  

6. Real-time denial tracking: Denial management software provides real-time monitoring of denials, enabling healthcare providers to quickly identify and resolve issues, minimizing revenue loss.

7. Data analytics: The software offers comprehensive data analysis capabilities, helping organizations identify the root causes of denials and recognize recurring issues, leading to process improvements and reduced denial rates. Once your system is set up, you can monitor and compare each payer's performance. Each company has its own preferences and quirks, and understanding what each wants enables you to negotiate future contracts more readily.

8. Customizable workflows: Denial management software allows for the creation of tailored workflows, optimizing the denial management process for each healthcare organization's specific needs. Claim denial management software can reduce your staff's workload and increase denial management workflows by automatically flagging aging accounts and submitting claims as they are due. Automating the submission and resubmission process with claim denial management tools reduces manual input.

Staff errors that denial management software catches

Do the same claim submission errors come up time after time at your organization? Common issues like new billing staff inexperience and/or staff overburden underlie these mistakes. Denial management software unleashes the same meticulous work on every claim without tiring. What if your organization had oversight to catch these common staff errors? 

• Coding errors: This includes incorrect use of CPT (Current Procedural Terminology) or ICD (International Classification of Diseases) codes. Errors may involve up-coding, under-coding, or using the wrong coding system for the insurer.
• Missing or invalid information: Claims that lack essential information such as patient details, diagnosis codes, or required documentation are flagged. For instance, missing modifiers or authorization numbers can lead to denials.
• Duplicate claims: The software can detect when the same claim is submitted multiple times, which is a common reason for denials. Duplicate claims are often rejected as they may be seen as potentially fraudulent.
• Lack of prior authorization: A Kaiser Family Foundation study of ACA Healthcare.gov data finds that missing or lacking prior authorizations caused 36% of all denials. Denial management software helps ensure that necessary prior authorizations are received before services are rendered.
• Registration errors: Errors related to patient registration, such as incorrect patient names, addresses or ID numbers, can also trigger denials. The software can flag and correct these details before claims are submitted.
• Coding errors: Denial management software can help prevent initial coding errors by spotting mismatches between ICD and CPT codes before claims are sent out. It will also automatically spot the specific errors marked by the denial and flag them for review.
• Timeliness issues: The software can monitor submission deadlines to prevent denials due to late claims, ensuring that all submissions meet payer timelines. It can also alert staff to impending deadlines so that they are met. 

By catching potential staff errors early in the claims process, denial management software reduces the likelihood of claims denials. 

Features of denial management software to insist upon

As you evaluate your denial management software options, keep in mind that it takes the following features to achieve a robust revenue recovery program:

• Automated workflows: Choose software that automates the creation of custom worklists and intelligently routes denials to the appropriate staff, enhancing efficiency and reducing manual errors in claim processing.
• Real-time claim tracking: Insist upon real-time monitoring of claims, allowing providers to track the status of submissions and identify issues as they arise, which helps in timely resolution.
• Advanced analytics: Make sure you’ll be able to leverage data analytics to identify denial patterns and root causes, enabling healthcare organizations to implement proactive strategies that improve clean claim rates.
• Integration with EHR systems: Seamless integration with existing electronic health record (EHR) systems ensures a unified workflow, minimizing disruptions and improving overall operational efficiency.
• Customizable reporting: Management dashboards and customizable reports allow organizations to track key performance indicators (KPIs) related to denials, providing insights that drive continuous improvement.

Many denial software options exist. Select the solution that addresses your organization's most critical denials issues at the most affordable price. 

4 steps in unleashing denial management software  

By implementing effective denial management software, healthcare organizations can avoid expensive staff hires, improve workloads for current staff, and work toward cutting their denial rate to that sought-after 5%. Consider these steps:

1. Establish a denials management team: Form a dedicated team responsible or individual for overseeing the denial management process. This team should focus on identifying trends, analyzing root causes, and implementing strategies to reduce denials.

2. Implement proactive prevention strategies: Shift the focus from reactive measures to proactive prevention. Utilize the software to monitor claims for potential issues before submission, ensuring that claims are as clean as possible.

3. Utilize real-time analytics: Leverage the software's analytics capabilities to gain insights into denial patterns and trends. This data can help inform decision-making and guide targeted interventions to address recurring issues.

4. Automate workflow processes: Use automation features within the software to streamline workflows for tracking, appealing, and resolving denied claims. Automation reduces administrative burdens and accelerates the appeals process.

5. Conduct regular training and updates: Ensure that staff is well-trained in using the denials management software effectively. Regular updates on payer policies and software functionalities can help maintain high levels of efficiency and compliance.

By following these best practices, healthcare organizations can enhance their denial management processes, improve claim acceptance rates, and ultimately optimize revenue cycle performance.

How denial management software integrates with your EHR

Denial management software integrates seamlessly with existing Electronic Health Record (EHR) systems to create a unified workflow and improve efficiency across the revenue cycle. This integration enables several key functionalities:

Real-time data sharing: The software connects with EHR systems to facilitate real-time data exchange, improving accuracy and operational efficiency. The Healthcare Financial Management Association (HFMA) and McKinsey emphasize the importance of real-time visibility for proactive management of payer relationships and revenue cycle optimization.

• Automated claim tracking: By integrating with EHRs, denial management software can automatically monitor submitted claims and identify patterns behind denials.
• Streamlined workflows: The integration creates a cohesive ecosystem that reduces inefficiencies and enables faster claim resolutions.
• Enhanced compliance: With access to EHR data, the software can ensure claims are submitted correctly and comply with changing payer regulations.
• Improved data analytics: The integration allows for more comprehensive data analysis, enabling the software to detect trends and predict future denials more accurately.
• Reduced redundancies: By connecting directly with EHR systems, the denial management software eliminates the need for duplicate data entry and reduces the risk of errors.
• IoT integration: Advanced denial management systems can also integrate with IoT sensors in healthcare, creating a more connected ecosystem for data collection and sharing.

This seamless integration between denial management software and EHR systems ultimately leads to more efficient operations, reduced claim denials, and improved revenue recovery for healthcare providers. 

What about underpayments?

Healthcare underpayments are another place where claims are often mishandled, causing a reduction in your income that can be difficult to spot.

Denial management automation software can detect and flag underpayments from insurers by comparing the returns to the bills and the codes applied. The same system that sets up workflow schedules for denial management will set up a schedule for underpayment detection and review incoming payments for manual review if necessary.

Underpayment software suites can also automatically notify your chargemaster or billing staff to rebill the insurer in case of underpayment and track patterns of underpayment so that specific payers can be monitored.

Cost of denial management software

When you add up the lost revenue from claim denials, resubmissions, and underpayment, not having denial management software is more costly than implementing it. But a practice needs to ensure they get the best software program for their needs instead of going with the first one they find.

The cost of denial management software is keyed on "encounter volume." Encounter volume is similar to claim volume and depends on how many denials the system tracks or "encounters" in each pass. Practices experiencing a high volume of denials and returns will have higher costs, but this will be offset by the returns from catching errors and resubmitting the claim promptly. Denial management software is scalable to your needs, so as the direction of denials changes, the cost may be affected.

The specific features your practice wants will affect the overall cost as well. Basic features will cost less than the full suite, including underpayment and other workflow systems. A practice looking for a denial management system should look for a software company willing to sit down and discuss their areas of lost revenue and other needs before discussing costs and features.

Automate denial management with MD Clarity's RevFind

When denials can consume up to five percent of net patient revenue, it’s no surprise that healthcare leaders prioritize tackling this issue. The AHA estimates that American healthcare organizations lose $20 billion annually due to claim denials. 

As Aaron Wesolowski, the AHA’s vice president of research strategy explains, 

"What we've seen in the last few years — particularly since the pandemic — is a really drastic increase in the rate of denials, as well as the broad application of prior authorization requests. This has had an impact on hospitals' ability to provide care..." 

With denials continuing to increase, now is the time to get support in denials prevention and management. MD Clarity offers denial management software that also identifies and analyzes payer underpayments. It enables you to monitor all your contracts and compare payer denials, late payments, and more. You'll need this information when it's time to renegotiate your contract with insurance companies.

Get a demo to see how RevFind can assist you reduce your denials and find all of your underpayments so you can optimize revenue and reduce costs to collect. 

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