Category: Technology

Difficult and sometimes treacherous for ships at sea, navigating in the dark can be equally perilous for hospitals struggling to comply with Medicare’s murky two-midnight inpatient admissions rule.

The rule was created by the Centers for Medicare and Medicaid Services (CMS) five years ago as means of assisting hospitals in determining whether patients should be admitted as in-patients or placed in observation as outpatients, if ordered by the physician. CMS’ goals were to reduce unnecessary admissions and help ensure patients received quality care at the appropriate time and place.

But despite the passage of time and multiple rule modifications, confusion continues to surround the regulation for many. This uncertainty has translated into a substantial risk of denials for inpatient admissions CMS does not consider justified. It also can lead to lost revenue on legitimate inpatient admissions down-coded as observational.

To minimize two-midnight denials and optimize collections, hospitals must ensure that both clinicians and utilization management staff have a concise understanding of how the rule works. As part of this effort, they need to be sure all relevant medical necessity documentation is provided to support the clinician’s inpatient determination.

Replaced severity and intensity of service

Developed as part of the 2014 Inpatient Prospective Payment System Final Rule, the two-midnight rule states that a hospital admission is generally considered reasonable and necessary if the physician or qualified practitioner orders the admission based on the expectation that the patient will require medically necessary hospital care that spans at least two midnights.

Patients that aren’t expected to require a stay extending through two or more midnights are classified as outpatients receiving observation services (OBS) and the hospital is reimbursed at outpatient rates. If, however, care for patients in OBS status extends toward a second midnight, they may be formally admitted as inpatients. The rule replaced previous inpatient guidelines that were based on severity of illness and intensity of service.

Since the rule was implemented, some hospitals have continued to rely primarily on severity and service intensity as the key factors in deciding whether or not to admit. Others erroneously have assumed that the shift to a time-based admission calculus means that documenting medical necessity is no longer necessary.

Knee replacement confusion

Although uncertainty surrounds the interpretation of the two-midnight rule across a range of procedures and morbidities, CMS policies regarding total knee arthroplasty (TKA) have resulted in confusion. Effective Jan. 1, 2018, CMS removed TKA from the Impatient Only List (IPO) and assigned the procedure an Ambulatory Payment Classification. But even though removal from the IPO means the procedure is paid as an outpatient service, it still must be performed in a hospital.[1]

At the same time, CMS has noted that shifting to the IPO “does not require the procedure to be performed only on an outpatient basis.” Yet the agency provided no guidance on how hospitals should determine which cases can be performed inpatient.[2]

A good first step in resolving this dilemma is to review the historical length of stay for TKA patients to determine if the two-midnight rule is met. Even with this information, however, the rules can be tricky: According to published reports, if physicians routinely have kept patients over two midnights in the past, that doesn’t mean they automatically are meeting medical necessity requirements for inpatient level of care now.[3]

Adding to the uncertainty, CMS will allow cases with less than two midnights to be paid at inpatient rates if the admitting physician indicates a need for inpatient hospital care in the documentation.[4]

To ease the confusion, experts recommend that orthopedic surgeons and health system utilization management staff create detailed protocols for designating inpatient and outpatient procedures immediately after the fact. These rules should consider pre-operative history and comorbidities, signs and symptoms severity, anesthesia risks, as well as unanticipated surgical events and any post-procedure complications.[5]

Proposed changes in the 2020 OPPS Proposed Rule

CMS has proposed the removal of total hip arthroplasty, CPT code 27130, from the IPO list and has requested public comment by September 27 on the potential removal of the following procedures from the IPO list:

Table 23: IPO List of CPT Codes to be Potentially Removed from the IPO List [6]

CPT Code	Long Descriptor
22633	Arthrodesis, combined posterior or posterolateral technique with posterior interbody technique including laminectomy and/or discectomy sufficient to prepare interspace (other than for decompression), single interspace and segment; lumbar;
22634	Arthrodesis, combined posterior or posterolateral technique with posterior interbody technique including laminectomy and/or discectomy sufficient to prepare interspace (other than for decompression), single interspace and segment; lumbar; each additional interspace and segment
22635	Laminectomy for excision or evacuation of intraspinal lesion other than neoplasm, extradural; cervical
22636	Laminectomy for excision or evacuation of intraspinal lesion other than neoplasm, extradural; thoracic
22637	Laminectomy for excision or evacuation of intraspinal lesion other than neoplasm, extradural; lumbar
22638	Laminectomy for excision or evacuation of intraspinal lesion other than neoplasm, extradural; sacral

CMS is also “proposing to establish a 1-year exemption from Beneficiary and Family-Centered Care Quality Improvement Organizations (BFCC-QIOs) referrals to Recovery Audit Contractors (RACs) and RAC reviews for “patient status” (that is, site-of-service) for procedures that are removed from the inpatient only (IPO) list under the OPPS beginning on January 1, 2020.”[7]

Utilization management must take the lead

Regardless of the illness or procedure, it’s essential that clinicians provide detailed documentation surrounding the initial assumption that the patient will likely require a minimum of 24-to-48 hours of care, depending on the time of admission.

Utilization management should take the lead in ensuring that clinicians are aware of their responsibilities with respect to appropriate documentation. They should also make it a priority to keep up with the latest interpretations of the two-midnight rule, and immediately convey this guidance to clinical staff. Additionally, all admissions should be reviewed during or after discharge to confirm that inpatient admission was justified, based on documented risks, complications, need for therapy or need for inpatient skilled nursing care.[8]

When inpatient admission cannot be justified, hospitals can attempt to change the claim to outpatient status by following the condition code 44 process. Or they can simply self-deny and rebill as an outpatient service. In these cases, the patient and physician must be notified.[9]

Your AR specialists

ParaRev specializes in accounts receivable recovery and resolution and serves as a virtual extension of your hospital central billing office to help you quickly resolve and collect more of your insurance accounts receivable.

We utilize proprietary intelligent automation and staff specialization to efficiently process all claims regardless of size or age. In addition to our resolution capabilities, ParaRev also can provide denial management assistance by conducting root cause analysis and recommend process improvements to help decrease aged and denied claims going forward.

Contact ParaRev today to learn more about how we can help you with your hospital’s accounts receivable management.

1. Debbie Sconce, “Total knee arthroplasty – No longer inpatient only,” Becker’s Hospital Review, April 17, 2018.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. “Medicare Program: Proposed Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs,” ederal Register 84 FR 39398. Aug. 9, 2019.
7. Ibid
8. Ronald Hirsch, MD, “Two-midnight Rule Remains Confusing; Total Knee Replacements Frustrating to Many,” RACmonitor, May 16, 2018.
9. Ibid.

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For physicians, being forced to obtain insurance company prior authorization (PA) before providing or ordering a specific treatment or drug probably feels a lot like needing a permission slip from your parents in high school. Not only does the process cause frustration and resentment, it can also lead to treatment delays and substandard care.

A 2018 physician survey by the American Medical Association (AMA) highlighted the negative impact PAs can have on the practice of medicine. According to the survey, 91 percent of responding physicians said PAs delayed access to necessary treatment, with 65 percent saying they waited, on average, one business day for PA approval and 26 percent reporting they waited at least three days.[1]

More critically, 28 percent of physicians said the PA process had led to a serious adverse event (e.g., death, hospitalization, disability/permanent bodily damage, or other life-threatening event) for a patient under their care.[2] More than 90 percent said PAs had a significantly negative or somewhat negative impact on clinical outcomes, and 75 percent said the PA process had resulted in patients abandoning their recommended course of treatment.[3]

According to the survey, practices are required to complete 31 PAs per physician, per week, on average, and nearly 40 percent of practices have staff working exclusively on authorizations.[4] Beyond adding to administrative overhead, PAs can have a significant impact on provider cash flow if a claim for a service requiring prior authorization is denied or delayed.

Legislative relief coming?

In releasing the survey results earlier this spring, the AMA decried insurers’ “foot-dragging and opposition” around implementation of proposed PA process advances developed through a consensus effort involving the AMA and other national groups representing hospitals, medical groups, pharmacists and health plans.[5]

The good news is that the five areas of improvement identified and articulated in the groups’ consensus statement have now formed the basis for newly proposed federal legislation that would streamline the PA process for Medicare Advantage (MA) plans.

Known as the Improving Seniors’ Timely Access to Care Act (HR 3107), the bill was introduced in early June in the House of Representatives with sponsorship from two Democrats and two Republicans.[6]

Under the act, the Centers for Medicare and Medicaid Services (CMS) would foster greater transparency around the PA process by requiring MA plans to report to CMS a list of all items and services that are subject to PA, the percentage of PA requests approved during the previous plan year by service and/or prescription, and the average amount of time elapsed between the PA request and final determination.[7]

In addition, HR 3107 would reduce the administrative burden of PAs by requiring that plans accelerate the development of an electronic process to replace the primarily phone-and-fax-driven approach currently used in most instances.

Finally, the act would require that PAs adhere to evidence-based guidelines and are developed in consultation with physicians. MA plans would likewise be required to conduct annual reviews of items and services for which PAs are mandated. The reviews would reflect input from physicians as well as an analysis of past PA requests and current clinical criteria.[8]

CORE recommendations

The introduction of HR 3107 follows the release in May of parallel guidelines developed by the Council of Affordable Quality Healthcare (CAQH) CORE aimed at strengthening the accuracy and consistency of the PA process.

Noting that 88 percent of prior authorizations currently are conducted either by phone or fax, the CORE recommendations are designed to standardize data shared between plans and providers, eliminate unnecessary back-and-forth and accelerate adjudication timeframes. According to CAQH, full adoption of a standardized electronic prior authorization process could result in savings of 70 percent per transaction.[9]

CAQH CORE is an industry-led consortium that supports the creation and adoption of healthcare operating rules that support standards, accelerate interoperability and align administrative and clinical activities among providers, payers and consumers.

PA denial expertise

As new regulations are enacted to streamline the PA process, it will still be important to understand the reason behind PA denials. ParaRev works with a range of provider clients to identify and mitigate denial root causes for emergent, inpatient, outpatient and ancillary services. From this experience, we’ve determined that failure to obtain PAs represents one of the most common reason for denials.

Overcoming PA denials requires that hospitals be well-versed in an insurance company’s clinical policy bulletins, which describe what the carrier will and will not cover, what they consider to be medical necessity, and the treatments and drugs that require prior authorization.

In addition to helping providers identify and mitigate denials, ParaRev relies on trained personnel, including RNs and registered health information technicians (RHITs), to assist with denial appeals. Contact ParaRev today to learn more about how we can help you identify the source of your PA denials and develop a process to help prevent them from happening again.

1. “2018 AMA Prior Authorization Physicians Survey,” American Medical Association, 2019.
2. Ibid.
3. Ibid.
4. Ibid.
5. “Health insurance industry slow to adopt prior authorization reforms,” American Medical Association press release, March 12, 2019.
6. “Legislation introduced to streamline prior authorization in Medicare Advantage,” Gastro.org, June 5, 2019.
7. Ibid.
8. Ibid.
9. “CAQH CORE Releases Operating Rules to Promote Automation for Prior Authorization,” CAQH press release, May 5, 2019.

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Because clinical laboratory claims typically are low-dollar amounts generated in large volume, many hospitals have concluded it’s simply not cost-effective to aggressively pursue laboratory denials when they occur, given the resources required to work them and the nominal returns resolution can produce. This results in an often-significant number of write-offs.

However, hospitals that shift their thinking and no longer view laboratories as simply cost centers can generate a substantial source of new or “found” revenue by taking a more aggressive and systematic approach to lab denials. Strong denial management programs are especially important for hospitals that seek to expand their outreach business and transform the lab into a profit center.

Comprehensive lab denial management includes intelligent automation processes that can resolve the simplest denials without human intervention while supporting detailed analysis and identification of denial root causes.

Healthcare Financial Resources (HFRI) partners with hospitals to address denials and identify denial root causes for emergent, inpatient, outpatient, laboratory and other ancillary services. From this experience, we’ve determined that the failure to obtain prior authorizations and medical necessity confirmations, as well as inaccurate or incomplete documentation, represent the most common reasons for laboratory denials.

Verifying prior authorizations

Because prior authorizations typically are the responsibility of either the referring physician practice, the emergency department or the hospital’s precertification department, making sure authorizations are obtained is usually beyond the control of the pathology group and laboratory. But unless the testing is conducted during emergent care, it is probable that the test is pre-scheduled. Therefore, pre-authorization can and should take place when the lab work is scheduled.

It admittedly can be difficult for the laboratory or hospital staff to keep track of the many and varied insurance company pre-authorization guidelines. But most carriers provide links on their websites that identify the procedures or tests requiring pre-authorization, and hospitals should be able to consolidate these links for easy access or create their own documents for internal use.

In any case, laboratories should develop their own pre-authorization check systems to confirm decisions from the referring physicians. They should avoid simply relying on oral assurances from the referring doctors, particularly if the physician practice has been a significant source of denials in the past.

Like the failure to secure prior authorizations for commercially insured patients, neglecting to document medical necessity or submitting claims without specific or appropriate diagnosis codes can have a major impact on reimbursement.

Documentation

Toxicology tests is another category that continues to generate significant numbers of denials. According to the Centers for Medicare & Medicaid Services (CMS), the majority of the denials for the category of “Laboratory Tests – Other,” which includes urine drug screenings, are due to insufficient documentation.[1]
Specifically, denials in this category are triggered by:

• Insufficient or no documentation to support the intent to order the test
• Insufficient or no documentation to support the medical necessity for the test of the individual patient
• Unsigned medical record documentation by the treating physician or non-physician practitioner

LCD, NCD criteria

A combination of local coverage determinations (LCDs) and national coverage determinations (NCDs) usually will enable staff to determine medical necessity criteria for specific diagnosis codes and tests. The most current information is available online and should be checked by referring staff before exams are ordered, especially for those tests that have historically high denial rates. In addition, providers should build rules into the EHR system to identify diagnoses and reduce manual follow-up.

Finally, providers should make sure all patients are provided with, and sign, an Advanced Beneficiary Notice of Non-Coverage (ABN) before treatment. This ensures that the pathology group or lab will be able to bill the patient directly if the service is not payable by Medicare.

Your denial specialists

ParaRev specializes in AR recovery and resolution and serves as a virtual extension of your hospital central billing office to help you quickly resolve and collect more of your insurance accounts receivable. We’ll help improve operating margins through a seamless and collaborative partnership with your internal team.

To expedite the capture of revenue for large-volume, low-dollar claim denials, we utilize intelligent automation technology that reduces the human touches necessary to isolate the root causes of payment delays, underpayments and denials. These systems also can resolve the simplest denials or payment delays with no human intervention whatsoever. The net effect of these breakthrough capabilities is that claims resolution is accelerated, write-offs are reduced and hospital cash flow is improved.

Contact HFRI today to learn more about how we can help you identify the source of your laboratory denials and develop a process to help prevent them from happening again.

1. Provider Compliance Tips for Laboratory Tests – Other-Urine Drug Screening,” CMS Medicare Learning Network, September 2016.

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Radiologists face unique challenges when it comes to getting paid. Coding for imaging is complex and multi-faceted, and documentation must be thorough and precise. In addition, unlike most other specialists, radiologists are usually dependent on the referring physician’s office or emergency department to document medical necessity or ensure that any required prior authorizations are obtained.

Given these challenges, it is not unusual for a large portion of hospital denials to originate in the radiology department. That’s why attacking the problem is essential for stabilizing cash flow and improving collections.

Ultimately, reducing radiology denials hinges on accurate demographic and insurance eligibility information, appropriate coding, complete documentation, and the creation of systems that can ensure prior authorizations and medical necessity confirmations are obtained before the imaging exam is conducted.

Root cause analysis

Reducing denials begins by developing a comprehensive understanding of the root causes of previously denied claims. This can be accomplished through a careful analysis of denial reports and should highlight where, when and why denials are occurring. Radiology denials generally fall into four categories:

• Patient eligibility problems
• Failure to obtain prior authorization for the procedure
• Failure to document medical necessity for the exam
• Inaccurate or incomplete coding and documentation

1. Eligibility

Patient eligibility is an issue that plagues not just radiology, but most physician practices to a greater or lesser extent. Given the financial risks associate with denials, it is important to ensure that accurate information about the patient’s insurance coverage, or lack thereof, is obtained as quickly as possible. Ideally this should occur before the exam is performed and certainly before any claim is submitted.

Practices can implement edits in their billing systems to block claims from dropping if there is no active insurance. Staff likewise needs to be trained in the appropriate steps to take if patients present without active coverage. Too often, personnel submit claims to the insurance company on record, even if automated rejections in the radiology information or billing systems already have indicated the insurance is no longer in force.

Eligibility problems also can be triggered by listing the incorrect site of service or by inaccurate patient demographic information. For those reasons, systems should be established to double-check each detail relating to the patient’s information, their coverage and the location and nature of the exam.

2. Prior authorization

An increasing number of commercial insurance companies in recent years have required prior authorization for imaging exams, particularly for more expensive procedures like MRI, CT and PET imaging.

Healthcare Financial Resources (HFRI) works with a range of provider clients to identify and mitigate denial root causes for emergent, inpatient, outpatient and ancillary services. From this experience, we’ve determined that failure to obtain prior authorizations represents the most common reason for radiology denials.

Because prior authorizations typically are the responsibility of either the referring physician practice or the hospital’s precertification department, making sure they are obtained is usually beyond the control of the radiologist. But unless the exam is conducted during emergent care, it is probable the procedure is a pre-scheduled service. Therefore, the pre-authorization can and should take place when the exam is scheduled.

It admittedly can be difficult for physician or hospital staff to keep track of the many and varied insurance company pre-authorization guidelines. But most carriers provide links on their websites regarding what requires pre-authorization, and hospitals should be able to consolidate these links for easy access or create their own documents for internal use.

To underscore the impact that failure to obtain pre-authorizations can have, radiology groups should list pre-authorization denials by type of procedure, carrier, referring physician and dollar value, and then convey this information to the physician practice, hospital pre-authorization office, and if necessary, hospital administrators. Educating those further upstream about the impact of their actions (or inactions) ultimately is the most effective way to reduce pre-authorization denials.

3. Medical necessity

Failure to prove and document medical necessity can have a major impact on radiology reimbursement when it comes to commercial payers as well as Medicare and Medicaid.

In addition to confirming medical necessity based on the initial diagnosis, groups should build rules engines that identify imaging services that Medicare will not reimburse. Frequently, these services can be identified through NCDs and LCDs. Similarly, many commercial payers publish experiential clinical policy bulletins that identify services they will not reimburse. Rules can also be created to flag these procedures to reduce unnecessary follow-up, balance bill the patient or write off the balance if no other option exists.

4. Coding and documentation

Because coding and documentation requirements for many imaging procedures are becoming more complex, it is important that processes be established to help ensure both clinicians and coding staff remain current on the latest guidelines. For example, failure to add modifiers that reflect the appropriate chronology of the imaging studies often will lead to denials.

Omitting essential details in the imaging report can also prevent coders from submitting complete and accurate claims. According to the American College of Radiology, all imaging reports must have the following:

• Exam name
• Clinical indication
• Description of exam, sequences and/or technique
• Comparison studies if applicable
• Finds
• Conclusion and recommendations, if indicated
• Physician signature

Your denial specialists

ParaRev specializes in AR recovery and resolution. We work as a virtual extension of your hospital central billing office to help you resolve and collect more of your insurance accounts receivable faster and improve operating margins through a seamless and collaborative partnership with your internal team.

In addition to our resolution capabilities, ParaRev also can provide denial management assistance by conducting root cause analysis and recommending process improvements to help decrease aged and denied claims going forward.

Contact HFRI today to learn more about how we can help you identify the source of your radiology denials and develop a process to help prevent them from happening again.

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Because hospital emergency departments (ED) serve as important gateways for inpatient admissions, it is essential that patient information, especially insurance data, is captured accurately at the time of service.

Unfortunately, the hectic pace and critical nature of ED services often means that confirming coverage takes a back seat to more pressing concerns. But with emergency volume rising and two-thirds of all admissions coming through the ED,[1] hospitals risk growing denials and write-offs if they can’t effectively collect payment information at the outset of the care event.

Mistakes or omissions that occur during the initial encounter affect not only payment for emergent services, but also can flow downstream to impact reimbursement opportunities along the entire continuum of care.

ED denial causes

ParaRev works with a range of hospital clients to identify and mitigate the root cause issues that trigger denials for emergent, inpatient, outpatient and ancillary services. From this experience, we’ve determined that inaccurate or invalid insurance information is the most common cause of denials in the ED.

The problem is extensive: Internal analysis has shown that around 40 percent of ED patients have invalid insurance or no insurance when they present for care. In one case, almost 75 percent of patients who presented at a hospital emergency room had expired or non-existent insurance.

Changing payer policies also are contributing to ED denials. In 2015, one major payer began retrospectively denying ED claims it deemed unnecessary based on a prespecified list of nonemergent conditions. A subsequent study concluded that as many as one in six adults could face denials for ED coverage if similar policies were adopted by other insurers.[2]

Given the financial risk denials present for hospitals, it is imperative that accurate information about that patient’s coverage, or lack thereof, be obtained as soon as possible and before any claims are submitted.

After-care meetings

Specifically, hospitals should implement edits in their intake systems that can block claims submissions if there is no active insurance. Staff also needs to be trained in the appropriate steps to take. Too often, we’ve seen hospital personnel submit claims to the insurance company on record, even if an automated rejection has already indicated that the coverage is no longer in force.

A second important step is to create an intervention process that allows staff to discuss the issue of payment with patients who do not have appropriate insurance. This can be impractical and even ill-advised before coverage is provided. But it should be undertaken as soon as possible once the patient is stable or discharged.

A brief post-care meeting allows hospital staff to inform the patient that their coverage isn’t valid and to ask for their assistance in determining if another policy might be available. If there is no other insurance, a payment plan can be discussed.

When post-care meetings are not practical or the opportunity to meet passes, the hospital may need to balance-bill the patient if there isn’t an accurate insurance policy on record. This is something many facilities don’t like to do. However, when practical, it should gain the patient’s attention and potentially compel them to seek out their existing insurance, if available. If there is no insurance, the invoice again creates an opportunity for the hospital and patient to jointly discuss a reasonable plan for payment.

Return on investment

Ultimately, reducing denials in the ED comes down to developing systems that immediately flag expired or non-existent coverage and then establishing a process to identify available insurance or develop alternative payment plans. Supporting this approach requires appropriately trained and motivated intake personnel.

In our experience, many hospitals seem inclined to view registration staff as lower-level employees and therefore pay them accordingly. But the reality is that a hospital’s health and survival depend on how effectively these employees perform. As a result, investments in both human and technological resources that streamline the intake process inevitably produce a worthwhile return on investment.

ParaRev capabilities

ParaRev specializes in AR recovery and resolution. We work as a virtual extension of your hospital central billing office to help you resolve and collect more of your insurance accounts receivable faster and improve operating margins through a seamless and collaborative partnership with your internal team.

ParaRev utilizes proprietary intelligent automation and staff specialization to efficiently process all claims regardless of size or age. Clients can gain a 25 percent improvement in resolution cycle time and cash recovery rates that often exceed 75 percent on problematic AR claims ̶ double the performance of most legacy AR management vendors.

In addition to our resolution capabilities, ParaRev also can provide denial management assistance by conducting root cause analysis and recommending process improvements to help decrease aged and denied claims going forward. Importantly, ParaRev is HITRUST CSF-certified to help ensure the highest levels of protected health information (PHI) security and compliance.

1. James J. Augustine, MD, “Long-Term Trends in Emergency Department Visits, Patient Care Highlighted in National Reports,” ACEP Now, Jan. 11, 2017
2. Gina Shaw, “Studies Rebut Anthem’s Retrospective ED Denials,” Emergency Medicine News, February 2019

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Despite a high probability for success, just one percent of Medicare Advantage (MA) reimbursement and pre-authorization denials were appealed by providers and beneficiaries between 2014 and 2016, a recent federal report stated.

During that same time period, 75 percent of the denials that were appealed were overturned by payers themselves, according to a report produced by the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) and released in September 2018.
“The high number of overturned denials raises concerns that some Medicare Advantage beneficiaries and providers were initially denied services and payments that should have been provided,” the report states.

To ensure providers receive every dollar they’re entitled to, hospitals and other organizations may wish to partner with a qualified accounts receivable (AR) recovery and resolution firm for assistance in pursuing the four-level MA appeal process.

Rapid growth of MA plans

MA plans have surged in popularity in recent years by offering relatively low-cost coverage that includes hospitalization and prescription drug benefits, as well as coverage options not provided with original Medicare, such as dental, fitness and vision.

About 34 percent of all Medicare beneficiaries, or about 20 million people, currently are enrolled in MA plans, nearly double the number enrolled 10 years ago, according to the Kaiser Family Foundation.[1] The Congressional Budget Office (CBO) projects that MA enrollment will exceed 40 percent of all Medicare beneficiaries by 2028.[2] At the state level, MA penetration currently is as high as 56 percent in Minnesota and 40 percent or more in five other states: California, Florida, Michigan, Pennsylvania and Oregon.[3]

According to the OIG report, “a central concern about the capitated payment model used in Medicare Advantage (also known as Medicare Part C) is the potential incentive for insurers to inappropriately deny access to services and payment in an attempt to increase their profits.”

Appeals confusion

The OIG examined 448 million requests to payers made in 2016: 24 million preauthorization requests and 424 million payment requests for service already provided. Of these, about one million preauthorization requests and 36 million payment requests were denied, equating to denial rates of four percent and eight percent, respectively.

“Because Medicare Advantage covers so many beneficiaries (more than 20 million in 2018), even low rates of inappropriately denied services or payments can create significant problems for many Medicare beneficiaries and their providers,” the report states.

The report noted that while beneficiaries receive notice with denials that they have a right to appeal and request that the denial be overturned, confusion often surrounds the process.

“Although there are resources available to help beneficiaries navigate the appeals process, advocacy groups report that the process is often confusing and overwhelming for beneficiaries, particularly those struggling with critical medical issues,” the report states.

Nor is it just beneficiaries that are evidently confused about appeals, given the low appeal rate by providers. The MA appeals procedure includes initial review by the managed care organization, then subsequent administrative reviews by independent review entities, administrative law judges and ultimately, the Medicare Appeals Council.

“When beneficiaries and providers chose not to appeal denials, the beneficiary may have gone without the requested service, the beneficiary may have paid for the service out of pocket, or the provider may not have been paid for the service,” the report notes.

Audits raise red flags

Of the 75 percent of denials overturned on appeal between 2014-16, 82 percent were for services already delivered and 18 percent were for preauthorizations, the report states.

“Although overturned denials do not necessarily mean that [Medicare Advantage organizations] inappropriately denied the initial request, each overturned denial represents a case in which beneficiaries or providers had to file an appeal to receive services or payment that are covered by Medicare,” the report states. “This extra step creates friction in the program and may create an administrative burden for beneficiaries, providers and [Medicare Advantage organizations].”

The findings of the OIG report dovetail with results from the Center for Medicare and Medicaid Services’ (CMS) annual program audits of Medicare Advantage plans. In 2015, CMS cited 56 percent of 140 audited Medicare Advantage organizations for two types of violations related to inappropriate denials of preauthorizations and/or payments. These included making the wrong clinical decision based on available information and/or not conducting appropriate outreach before making clinical decisions.

Additionally, nearly half of audited Medicare Advantage contracts were cited for sending incorrect or incomplete denial letters, which may inhibit the ability of beneficiaries and providers to appeal.
The OIG report recommended increased oversight of Medicare Advantage contracts, particularly those with high overturn rates and/or low appeal rates. They also suggested that CMS address persistent problems related to inappropriate denials and insufficient denial letters. Finally, the OIG recommended providing beneficiaries with clear, easily accessible information about serious violations by Medicare Advantage organizations.

ParaRev can help you appeal MA denials

Although MA policies are structured and marketed differently than original Medicare, they must still follow Medicare rules and guidelines when it comes to minimum benefits, medical necessity, denials and appeals. Monitoring payer performance and making sure these rules are followed is essential to ensure providers are fully and properly reimbursed for the services they provide.

Partnering with a firm that that understands the MA payment, denial and appeals process can be enormously beneficial, not only to help address denials when they occur but equally important, to analyze the entire coding, claims and billing cycle to prevent denials in the first place.

ParaRev has determined that most MA denials stem from coding and billing-related problems, such as crosswalks that haven’t been set up correctly to bill the appropriate codes. Other factors that trigger denials include incorrectly loaded contract details and failure to pre-certify patients across the care continuum. Incorrectly classifying patients as original Medicare beneficiaries and not MA enrollees also is a common source of denials.

Because MA accounts frequently represent a significant portion of a hospital’s Medicare volume, it is important to partner with a vendor that not only understands MA denials but also can process high numbers of claims quickly and consistently. ParaRev can help you in these areas by providing denial management assistance as well assistance with all your AR recovery and resolution needs.

Contact HFRI today to learn more about how we can help you defeat denials.

1. Gretchen Jacobson, et al, “A Dozen Facts About Medicare Advantage“, Kaiser Family Foundation, Nov. 12, 2018
2. Ibid.
3. Ibid.

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Like an injury that won’t heal, claim denials represent a chronic and growing financial problem for hospitals and other providers, both in terms of lost revenue and the ongoing costs of remediation.

Approximately 9 percent of $3 trillion in U.S. hospital claims were initially denied in 2016, with the administrative costs of denial rework and appeal now estimated at nearly $9 billion annually.[1] Moreover, denial volume keeps increasing: The average 350-bed hospital saw denial write-offs jump by 79 percent between 2011 and 2017, from $3.9 million to $7 million.[2]

Most denials are preventable

The enormous numbers underscore the challenges providers face both in preventing denials and handling the rework and appeals process efficiently and successfully. Despite available technology that can automate and expedite denial management, it is telling that nearly one-third of providers continue to rely on labor-intensive manual denial remediation, according to a HIMSS survey from 2016.[3]

With the average cost of reworking a claim at $25, administrative expenses can multiply quickly if denials continue to pile up. As it stands, 65 percent of payer rejections are never reworked and resubmitted to begin with.[4]

Fortunately, about 90 percent of denials are preventable, and two-thirds are recoverable, according to a 2014 Advisory Board study.[5] So how can intelligent automation help prevent denials in the first place while expediting the successful recovery of payments when denials do occur?

Intelligent automation and root cause analysis

Root cause analysis is essential for identifying denial causes and what changes are necessary to prevent them from occurring again. However, it takes more than just a spreadsheet to obtain this critical information. Digging deep to retrieve meaningful data in a timely manner requires intelligent automation (IA), an essential component in the most effective denial management programs.

ParaRev is a leading accounts receivable (AR) resolution and recovery firm with more than 20 years’ experience helping hospitals address rejected and aging AR. Through a significant investment of time and resources, we’ve developed advanced IA capabilities that help us quickly understand how, why and where payment delays are occurring.

Here’s how IA works: Bot applications are programed via proprietary software to scrape denied claims, hospital billing systems, EDI applications and other transactional data for all available information relating to a specific account. This can include everything from denial codes and payment and service history to contractual information and filing deadlines.

From this data aggregation, common, relatively simple barriers to account resolution, such as misallocated remittances, can be identified and addressed automatically through automated applications, thereby dramatically reducing cycle time. Once these areas are identified, corrective action can take place to help keep the denial from happening again.

Here are some of the most common denial causes we’ve identified:

• Utilization: This category includes the clinical areas of medical necessity, pre-authorization, DRG downgrades and experimental treatments. Insurance companies will often challenge whether a specific treatment was medically required, whether the level of care provided corresponded to the underlying morbidity, or whether the length of stay was justified.
• Coverage: Unresolved claims due to coverage issues make up about 21% of denied charges for ParaRev clients. As the name implies, coverage denials involve real or perceived errors or omissions surrounding health plan coverage limits.
• Contractual: Payment delays and rejections stemming from contractual issues make up the third-largest category of denied charges. Contractual denials can involve a wide range of issues, but one of the most common entails payer underpayments for specific services like surgery, emergency department, laboratory, radiology, therapies and observation.
• Coding and Billing: Coding and billing issues result in about 15% of all denied charges among HFRI’s client base. A common problem involves Reason Code 97 rejections triggered by the failure of hospital coders to properly include National Correct Coding Initiative (NCCI) edits.
• Submission/Re-billing: Denials triggered by submission problems are responsible for about 15% of all denied charges. Failure to include the primary EOB, crossovers between supplemental and primary insurance and missing medical records are common rejection reasons.
• Cash Posting: This category of issues produces about 4% of denied charges and frequently involves determining the appropriate allocation of unapplied cash.
• Process Delays: Process issues account for 3% of denied charges and usually involve payers taking an excessive amount of time to process a claim for reasons unrelated to the claim itself.

Automated resolution

In addition to automating root cause analysis, ParaRev uses IA – along with robotic process automation (RPA) and staff specialization — to streamline and accelerate the AR recovery and resolution process.

RPA software replicates manual human activity through easily programmed bots that can accomplish basic tasks across a range of areas. IA takes these capabilities a step further by incorporating decision-making logic into the process.

IA also categorizes denials by root cause into separate buckets or work queues and produces succinct summaries of all relevant information for each denied, delayed or underpaid claim.

Working from category-specific, prioritized work queues, ParaRev remediation specialists access the claim summaries, which include recommended actions for each denied or delayed claim. The detailed information provided by our IA process, combined with the specialist’s knowledge about how best to resolve a specific type of issue, allows the specialist to expedite rework and secure resolution for both low- and high-value claims much more quickly and accurately.

Automating root cause analysis and the accounts receivable recovery and resolution process through AI represents the cutting edge in denial prevention and management. Given the ongoing revenue loss and administrative expense associated with denials, deploying these tools through an experienced partner can produce a rapid return on investment. Contact HFRI today to learn more about how we can help you defeat denials.

1. Philip Betbeze, “Claims Appeals Cost Hospitals Up to $8.6B Annually,” HealthLeaders, June 26, 2017
2. Kelly Gooch, “4 ways hospitals can lower claim denial rates,” Becker’s Hospital CFO Report, Jan. 5, 2018
3. Jacqueline LaPointe, “31% of Providers Still Use Manual Claims Denial Management,” RevCycle Intelligence, July 5, 2016
4. Chris Wyatt, “Optimizing the Revenue Cycle Requires a Financially Integrated Network,” HFMA, July 7, 2015
5. “An ounce of prevention pays off: 90% of denials are preventable,” Advisory Board Research, Dec.11, 2014

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Like costly home improvement projects gone awry, electronic health record (EHR) and revenue cycle management software implementations don’t always pan out as intended for hospitals and health systems. But with the right tools and proper planning, potential issues can be minimized.

Several troubled EHR or revenue cycle software installations have recently underscored the enormous financial risks hospitals face when deploying information systems that generate mission-critical claims and billing data.

The costly missteps highlight the importance of adopting a two-prong approach for handling accounts receivable (AR) during and after a system conversion. By assigning internal staff with just new system billing activities, provider organizations allow in-house personnel to more quickly develop the skills required to submit claims in an accurate and timely manner.

Legacy accounts, meanwhile, can be outsourced to a qualified, third-party AR recovery and resolution vendor that specializes in AR conversion projects. This approach not only reduces the burden on internal staff, but also helps ensure aging denials will be worked thoroughly and consistently to resolution.

AR Financial Issues

Hospitals can easily encounter financial challenges if major problems surround the implementation of systems that collect not only clinical information but billing and financial data as well. Consider these recent situations:

• Glen Falls Hospital, in Glen Falls, New York, lost $38 million in 2017 as the direct result of problems surrounding an EHR deployed in August 2016. The new system replaced several legacy EHR platforms.[1]
• The former management company of Tulare Regional Medical Center in Tulare, California, cited problems with the hospital’s EHR implementation as partly responsible for ongoing cashflow problems that led the medical center to file for bankruptcy in 2017.[2]
• An EHR implemented at Western Missouri Medical Center in Warrensburg, Missouri, in 2016 “created a multitude of issues,” including the inability to bill patients in a timely manner. The hospital hired a third-party firm to help overcome its billing problems in 2018 and said it would likely write off several hundred thousand dollars in aging, unsubmitted patient bills.[3]
• In Tennessee, Vanderbilt University Medical Center said an EHR implementation “put pressure on clinical volumes in the post-live period” that contributed to a $66 million reduction in operating income in fiscal 2018.[4]
• Agnesian Healthcare Inc. in Wisconsin sued an EHR vendor in 2017, alleging the company’s scheduling, billing and claims software was responsible for “pervasive errors” that led to more than $16 million in losses.[5]

Reducing risk

The success of a major IT implementation obviously is contingent on a multitude of factors, some of which may be beyond the control of the hospital. Nonetheless, hospitals can take steps to reduce their exposure by tasking a third-party with legacy AR accounts ahead of the deployment.

ParaRev specializes in legacy AR recovery and resolution. HFRI, a leader in accounts receivable recovery and resolution, works as a virtual extension of your hospital central billing office to help you resolve and collect more of your insurance accounts receivable faster and improves operating margins through a seamless and collaborative partnership with your internal team.

ParaRev utilizes proprietary intelligent automation and staff specialization to efficiently process all claims regardless of size or age. Clients can gain a 25% improvement in resolution cycle time and cash recovery rates that often exceed 75% on problematic AR claims — double the performance of most legacy AR management vendors.

In addition to our resolution capabilities, ParaRev also can provide denial management assistance by conducting root cause analysis and recommending process improvements to help decrease aged and denied claims going forward. Importantly, ParaRev is HITRUST CSF-certified to help ensure the highest levels of protected health information (PHI) security and compliance.

Hospitals and health systems need to do whatever is necessary to reduce financial risk ahead of major EHR or revenue cycle system implementation projects. By partnering with ParaRev for AR conversion projects, you’ll be able to focus on the new deployment, confident in the fact that legacy AR accounts will be resolved fully and effectively.

1. Kate Monica, “Billing Problems Caused By Cerner EHR Costs NY Hospital $38M,” EHR Intelligence, March 18, 2019.
2. Kate Monica, “Cerner EHR Partly Blamed for Hospital Billing Issues, Bankruptcy,,” EHR Intelligence, April 20, 2018.
3. Kate Monica, “Cerner Implementation at MO Hospital Causing Billing Problems,,” EHR Intelligence, Feb. 28, 2018.
4. Jacqueline LaPointe, “VUMC Sees Operating Income Decrease After EHR Implementation, RevCycle Intelligence, May 30, 2018.
5. Kate Monica, “WI Health System Suing Cerner for $16M for Faulty Software,” EHR Intelligence, Sept. 25, 2017.

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