Preventing Claim Denials Through Hospital Utilization Management

HCOs can reduce unnecessary costs and prevent claim denials by using data analytics to manage resource use.

Comprehensive hospital utilization management is a strategy employed by health care organizations (HCOs) to ensure the best use of resources at their disposal within their facilities. It can prevent unnecessary insurance claim denials and keep costs down while allowing the delivery of high-quality care. Hospital utilization management is becoming even more important as HCOs switch over to value-based reimbursement models.

It includes such interactive components as risk management, hospital utilization review, and quality assurance — integrating them seamlessly into the overall management of resources and facilities.

Utilization review is especially crucial, helping prevent denials and encouraging successful appeals. Close scrutiny of claims can reveal improper reimbursement due to non-covered, duplicate, or incorrectly coded services. Three types of assessment — prospective, concurrent, and retrospective — are used to determine if care is medically necessary for an insured patient.

Hospital utilization management assesses the appropriateness and the accuracy of:

1. Prior authorizations
2. Case management (length of stay, care coordination, discharge planning)
3. Services provided (procedure, setting, timing, billing)

Claim Denials on the Rise

Medical record requests and denials are on the rise, costing HCOs time and money. So, it’s important to streamline all aspects of utilization review and management. A December 2016 report by the American Hospital Association looked at reviews of Medicare payments to health care providers conducted by the Centers for Medicare & Medicaid Services (CMS) Recovery Audit Contractors (RACs), which had 683 participating hospitals.

AHA found that:

• Hospitals reported receiving an average of 1,504 medical record requests by the end of 2016 (up from 1,424 in the first quarter of 2014)
• 56 percent of hospitals received a “complex denial based on inpatient coding”
• 27 percent had a denial reversed
• 43 percent spent more than $10,000 managing the RAC
• During the 3rd quarter of 2016, 24 percent spent more than $25,000 and 4 percent spent over $100,000

Advisory Board, a consulting firm, reports that HCOs’ annual losses from denial write-offs can be as high as 4 to 5 percent of net patient revenue. And recent data also show that technical and demographic errors accounted for significantly more denials since 2013: 36 percent versus 61 percent.

It’s not just initial denials, either. When a claim comes back it has to be reworked or appealed. Even when successful, the process still requires HCOs to devote staff, time, and resources.

Prior Authorizations Too Complex

Prior authorization requirements are also to blame for health care processes becoming burdensome and negatively impacting essential, potentially life-saving treatments. A report published in August 2017 by the nonprofit Doctor-Patient Rights Project revealed that more than 50 million Americans with health insurance were denied chronic disease treatment or had their treatment delayed due in large part to a complex prior authorizations process. As a result, almost a third of patients reported their condition worsened, and one of three either put off treatment or abandoned it altogether.

For utilization management to be truly effective, HCOs need to implement a strategy of best practices for all procedures and policies. These include staff responsibilities, and range from inpatient admissions (one of the major areas of claim denial due to inpatient coding errors) to discharge. Keeping the review process concurrent and consistent, and documenting every step in detail should help HCOs decrease the number of denials and increase the success rate of appeals.

How Data Analytics Can Help

The Performance Analytic Application from d2i can help HCOs improve by monitoring resource utilization, identifying outliers, and reducing practice variability, among other things. By monitoring outcomes and adopting standardized protocols, HCOs can reduce costs, claim denials, and unnecessary treatments and testing, as well as poor patient outcomes.

With d2i’s tools, HCOs can monitor performance, standardize clinical protocols, and quickly identify opportunities for improvement and training. Our cloud-based dashboard can identify documentation deficiencies and down-coding, providing web-based access to current and historical key performance metrics. Deploying data analytics solutions can help flag claims likely to be denied, improve inter-departmental communication, and prevent errors that cause denials.

Hospital utilization management is not a new concept, and programs have evolved considerably, reducing denial claims and maximizing reimbursement. They’ve been helping providers reduce costs and deliver high-quality health care, and they can be streamlined even further with the use of data analytics. If you are interested in improving the quality of your data contact us for more information, or to schedule a 30-minute demo.