Revenue cycle administrators need a dynamic and adaptive approach to navigate increased clinical denial rates.
There’s no sugarcoating it: Clinical denials are on the rise. In the commercial and managed healthcare sector in particular, the clinical initial denial rate for inpatient claims has increased by more than 53%, from 1.4% in 2020 to more than 2.2% in 2023.1 In addition, final denial write-offs have increased by nearly 73% since 2020, and there is no sign of denials slowing down.
In 2024, these trends likely will have significant implications for revenue cycle management and organizations’ financial stability. Now might be the time to meet these challenges with a dynamic and adaptive approach.
What causes increased clinical denials?
Several changes in the payor environment can contribute to increased clinical denial rates. Payor scrutiny has increased overall since the start of the coronavirus pandemic, and this heightened level of review likely will remain elevated. Some areas receiving increased attention from payors include:
- Medical necessity denials and appropriateness of inpatient admissions
- Denials occurring concurrently, prior to payment (and with retrospective audits)
- Changes ahead of Medicare managed care payors’ transition to the two-midnight rule starting January 2024
In addition, payors’ enhanced use of technology is affecting clinical denial rates. For example, payors are increasingly deploying more sophisticated claims processing systems, which could be capable of identifying provider organizations’ noncompliance with payor policies.
What can healthcare organizations do?
These troubling trends call for healthcare organizations to strategically overhaul how they manage clinical denials. To navigate increased denial rates, organizations should:
- Adopt enhanced technologies. As payors’ technological abilities become increasingly sophisticated, healthcare organizations will want to make sure theirs do, too. It is essential to invest in and take advantage of technology solutions that confirm compliance with payor requirements and can stand up to payor scrutiny.
- Have access to accurate insights. Shifting from monthly to weekly or even daily monitoring of denials trends can help organizations identify and respond to new information more quickly. Understanding issues in real time also can result in faster claim resolution times.
- Engage in strategic staffing. Amid continued workforce shortages, it’s more important than ever for revenue cycle teams to focus the right people in the right places when working to overturn denials. To allow in-house staff to prioritize the highest value accounts, organizations can consider working with a third-party vendor to help manage accounts with a lower dollar amount or lower overturn rate.
Case study: UnityPoint Health
One healthcare organization that has experienced success reducing clinical denials by implementing these types of strategies is UnityPoint Health. The 17-hospital health system serves nearly 8 million patients in Iowa, Illinois, and Wisconsin. It recently engaged with Kodiak Solutions to enhance and standardize patient status processes across the system.
Working together, UnityPoint Health and Kodiak evaluated and benchmarked clinical denials performance at the facility level to determine a set of goals that would result in every unplanned admission receiving appropriate clinical review. Both organizations worked together to develop a set of initiatives to achieve those goals, which led to marked improvements in the health system’s clinical denial rate.
Goals
- More proactive handling of patient status denials, ideally concurrent to the patient’s stay
- A standardized strategy for physician advisers across the health system
- Increased insight for clinical and revenue cycle leadership into performance trends
Major initiatives
- Created utilization management (UM) processes to quickly identify and respond to clinical denials, including:
- Forming a centralized UM team to support standardization of unplanned admission authorization data
- Building work lists and dashboards to support prioritization of outstanding authorizations
- Deploying facility- and system-level reporting to identify at-risk, unplanned admissions
- Restructured the health system’s physician adviser team to enhance the advocacy of level-of-care selection by:
- Creating a physician adviser team to manage internal resources and vendors
- Refreshing hospitalist and attending physician education
- Engaging an industry-leading, specialized vendor for additional, on-demand capacity
- Developed clinical denials reporting to deepen leadership’s understanding of performance by:
- Standardizing authorization and appeal statuses and reporting
- Implementing initial and final denials performance reporting
- Performing targeted auditing of denials
Outcomes
As a result of these initiatives, UnityPoint Health experienced several positive impacts on its clinical denials performance rate, including:
- Increased inpatient admission rate (with minimal increase in initial denials)
- Lower-than-national-average inpatient authorization denial rate trend (see exhibit)
- Accelerated appeals process for clinical denials
- Leaders’ ability to identify trends more efficiently, which allows them to provide timely guidance to physicians
- Increased alignment within the revenue cycle team and with stakeholders across the health system (see exhibit)
