Denial-management systems can bring cleaner claims

Shari Reynolds, practice administrator of Paluxy Valley Physicians in Glen Rose, Texas, said she had nothing to lose when she decided in 2003 to turn to a Web-based denial-management system.

"Denial management" is the catch-all phrase for any process that practices hope can lead to cleaner claims and fewer denials from insurers. Experts say denial management can be part of an entire electronic medical record/billing system, or it can be a "bolt-on" to an existing system. It can be a Web-based system that reviews claims. It can also be a manual, retroactive review of denied claims. It can be paid for through the up-front purchase of software, or by giving a claims-review service a percentage of collections.

Given that most surveys find physicians undercode to ensure claims get through, denial management also offers the promise of greater collection from insurers.

Better collection is what Reynolds' group hoped for.

The four-physician family practice had more than $500,000 in outstanding claims, and two of the doctors already had taken out a $100,000 loan to keep the practice afloat.

"We were working harder and getting paid less and less and less," she said. "I knew I had to do something."

Paluxy Valley had been using an electronic billing service but was still getting denials because of a lack of coding alerts built into the system. Claims were going out with errors.

As the practice got busier, Reynolds said the pile of denied claims continued to build, and she didn't have time to keep resubmitting claims -- sometimes five or six times -- before they were paid.

Reynolds found a Web-based billing system with a built-in denial-management component. Reynolds thought, at the very least, she could buy the practice another six months as she tried to increase revenue and recoup some of the old debt.

Within 45 days, she said, the practice had recouped nearly all outstanding claims.

Finding the right system for you

Experts say every practice should have some sort of system in place to review and challenge health plan denial of claims. But what system you need depends on what infrastructure you have in place and what you can afford up front.

Donna Knapper, president and owner of Phoenix-based DRK Billing, said just as each practice's needs are different, so are the denial-management software options.

The practice must first know its needs to get the most out of any system, she said. Those needs include all aspects of practice management. Some systems allow running of accounts receivable reports, or reports on amounts of co-pays collected per day, week or month.

Cindy Dunn, a consultant with the Medical Group Management Assn., said it is in the practice's interest to do regular payer reviews to find out what is being denied by which payers, but that doesn't mean each practice should jump to a new system.

"You need internal processes in place to make sure you are capturing every dollar you are entitled to. No matter what solution they select, they need to have some meaningful discussion and thought."

Billing companies offer help to paper-based practices as well as to electronic practices without a denial-management system. The companies can take the piles of unpaid claims, use "rule engines" specific to each payer to determine the errors and collect retroactive payments on their clients' behalf.

Experts could not give cost estimates, as these services generally charge a percentage of claims collected. But many experts say most practices would be better off with some sort of electronic system. There are many Web-based services that handle claim review, and most of these can be used in conjunction with existing electronic, office-based systems.

Some sites charge initial setup fees tied to the size of the practice, but experts say these fees are substantially lower that licensing fees associated with independent, stand-alone systems. The monthly fees vary by practice size, number of physicians and number of contracted payers, but it's generally a percentage of the amount collected. Reynolds said her four-physician practice pays 3.3% of what is collected each month.

Cleaner claims a win-win situation

Knapper said a practice's revenue will likely increase as software systems alert the billing staff to better coding, and that could, in turn, alert plans, which have their own denial-management software. But Knapper said her experience has shown that plans appreciate having more clean claims.

After all, it costs both insurer and practice every time a claim needs to be resubmitted.

"The goal for everyone is accurate and appropriate reimbursement," said Susan Pisano, spokeswoman for America's Health Insurance Plans, a trade group for the nation's largest insurers. "Getting things right the first time -- that's a win for everybody."

Then again, there have been cases where plans have reacted against physicians who have found ways to improve their coding, such as Anthem's short-lived attempt in 2006 to blend Level 3 and 4 codes in the Cincinnati area.

But experts say it's better to code correctly and risk a backlash than to undercode in hopes insurers leave you alone.