How healthcare providers can implement a denials management program utilizing internal audit

Healthcare providers see a tremendous amount of lost revenue through the denial of claims or the lack of management over denied claims. This is due to strict insurance or payer criteria that cause the number of denied claims to increase year over year. Healthcare providers are constantly battling to manage their counts of denied claims as insurance companies regularly change their policies resulting in new denial appearances. Now more than ever, implementing and maintaining a mature and adaptive denials management program should take priority in any healthcare organization.  

How internal audit plays a role 

Internal audit can play an important role in this implementation through the analysis of denials and overall improvement of monitoring and resolving the denials timely process.  

Internal audit can assist healthcare providers evaluate the denials, determine the effectiveness of the current processes to mitigate risk, identify process gaps and provide recommendations for improvement over the denials management process. 

When evaluating a healthcare provider’s denials management program, internal audit should assess the following: 

• Has the provider assigned responsibility for denials management? 
• What denial management policies and procedures are in place? 
• Is the timeline of a denied claim from inception of denials, appeal, and write-off analyzed and monitored closely? 
• How are issues traced back to their root cause and is there a system in place to prevent these issues from recurring? 
• How are denials communicated back to the party/parties responsible? 
• What plans are created to address systemic issues? 
• Has the provider implemented an ongoing training/reeducation program to prevent denials from happening? 
• Has the provider assigned responsibility for the research and communication with payers to maintain compliance with insurance criteria? 

Internal audit and data analytics 

Internal audit should also perform data analytics related to the population of denied claims to further understand trends and root causes. The data analytics should be performed for a minimum of a 6-month period to capture an accurate representation of all denials and should address the following in both count of denials and dollar amount of denials: 

• Number of denials per department compared to their number of encounters 
• Percent of all encounters that get denied 
• Average time from denial date to collection date or write-off date 
• Average time of follow up activities performed on denied encounters 
• Analytics on work queues related to denials 
• Percent of denials that are written-off 

Categorizing denials both in total population and by department in the following groups:  

• Denials by reason 
• Denials by charge type 
• Denials by payer 
• Denials by provider 
• Denials by department 

Key takeaways to analyze denials and assess the denials process