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Coding & Billing
Dealing with Denied or Partially Paid Claims
Deborah Krohn
Publish Date: October 10, 2007   |  Tags:   Financial Management

Deborah Krohn, RN, Esq. Few ASCs or office surgery centers have systems in place to appeal denied or partially paid claims. Most hospitals have such mechanisms but rarely pursue all the appeal avenues available by law or individual contracts, including arbitration, administrative hearings and litigation.

Deborah Krohn, RN, Esq.\

Surgical facilities write off tens or even hundreds of thousands in collectable revenue annually. Of $1.5 trillion in healthcare-claims transactions in 2002, $422 billion were denied, paid incorrectly or not paid promptly, according to industry estimates. But it doesn't have to be that way. Here's how you can minimize denials.

Steps you can take
1. Analyze payer contracts. Many contracts contain standardized language that seems harmless but increases denial risk. For example, do you have a meet-and-confer clause that allows discussion on disputed claims? How is medical necessity and appropriate care level determined? For example, if you perform disc-decompression surgeries, don't let your contract leave you prone to hold ups or denials stemming from disputed pre-op tests (such as discography interpretation by the insurer's medical reviewers) or level of care (if conservative treatments such as bed rest and analgesics fail, could you be denied because a reimbursed non-surgical treatment such as physical therapy may be more appropriate?). Have your legal counsel identify potential pitfalls and suggest language to optimize reimbursement.

2. Trend your denials. Track denials by insurer, denial rationale and monetary amount. You might spot vulnerabilities in your billing system and red flags with payers.

3. Articulate persuasive medical arguments. Airtight diagnoses and operative reports help defend the CPT code(s) used and the medical evidence backing the legitimacy of the claim that help overturn a denial. The resources you invest to educate your coding and medical personnel are small relative to writing off needless denials and glacial turn-arounds.

4. Be persistent. Perseverance is key to overturning denied claims. In my experience, about one-fourth of appeals are overturned on first appeal; another one-fourth on the second. The more vigilantly your denial management team pursues the payer - via daily phone calls and documented correspondence - the more likely the insurer will take corrective action. Go up the chain of command and insist on speaking to the representative's supervisor if you're told nothing further can be done to resolve the dispute.

5. Arbitrate or litigate. If a final written appeal has been rejected, many facilities feel they must accept the unfavorable decision. However, depending on contract provisions, many such denials can be overturned through binding arbitration and/or litigation in state and federal courts. For example, a national hospital system's Pennsylvania hospitals had exhausted all appeals for 24 disputed denials (for lack of medical necessity, untimely filing and disputes over payment at incorrect contractual rates) with one insurer. The hospitals filed collectively for arbitration; the insurer paid five claims in full before arbitration. After arbitration, the hospitals were awarded reimbursement for 16 more claims (with interest penalties added on three).

Taking action
Insurance companies deny thousands of claims a year with what appears to be substantial evidence to support non-payment. They know most denials are accepted because many providers don't have the manpower or experience to investigate denials and pursue appeals. But you can significantly improve your reimbursement with a modest investment of time and effort.

Fight the Good Fight

Few insurers want to fight reimbursement arbitration or litigation. The plaintiff's recovery odds are about 50-50, and it behooves the insurer to avoid potential negative publicity from having its denials overturned. Consider these cases:

  • A hospital system's Texas, Missouri, Arkansas and Tennessee hospitals had more than $200,000 in denials from one national insurer. On the eve of arbitration, the insurer's legal counsel decided to settle 14 of 15 claims for payment in full.
  • A hospital system with more than $100,000 in unresolved claims sent a letter of intent to file arbitration for nine claims; the insurer agreed to fully pay eight.
  • An insurer significantly reduced a Tennessee hospital's reimbursement based on a line-by-line claim audit, saying many of the charges lacked supporting documentation. Through aggressive correspondence with the carrier, the hospital's counsel persuaded the carrier to process an additional $11,000 in payment.
  • A Maryland provider exhausted all appeals with a Delaware insurer over many claims partially denied for medical necessity and/or level of care. Taking advantage of a meet-and-confer clause in the contract, the facility counsel recovered more than 80 percent of the denials with a detailed clinical defense of the claims.

- Deborah Krohn, RN, Esq.