Every hospital department deals with financial denials. Understanding the volumes of those denials for your outpatient therapy department can improve the net revenue of the department. A financial denial is when an insurance company or carrier refuses to pay for the healthcare services the individual receives.
Within an outpatient therapy department, the level of denials might be considered below the level of materiality for the entire hospital organization but decreasing the denial volume will increase net revenue and improve cash flow.
Common Causes of Financial Denial within Outpatient Therapy
Again, a financial denial is a service that should have been paid for but did not get paid for by the insurance provider or individual receiving that service. Within outpatient therapy departments, some of the common causes of financial denial are:
Initial Authorization – Since outpatient therapy is a recurring service, there are some nuances to the authorization process versus a one-time procedure. Most commercial insurances pay for the initial evaluation and the authorization for treatments is based on the evaluation.
Ongoing Authorization – It is not uncommon for the therapist to need more visits than were originally authorized. For example, the patient could be on their eighth scheduled visit out of ten that were authorized. The outpatient therapist realizes there need to be more appointments and lets the front desk know. If the continued authorization is not completed in a timely manner, it could result in 2 to 3 visits occurring that are not authorized.
Medical Necessity – Either the medical diagnosis or the impairment diagnoses should support the initial need for therapy. Often, the impairment diagnoses do not make it to the claim. Also, in the category of medical necessity, the therapist’s evaluation and ongoing documentation must reflect the need for skilled services from the appropriate therapists.
Financial Denial Prevention and Management Plan 101
The Outpatient Therapy group at Blue & Co. has created Denial Prevention and Management Plans for several hospital systems to help lower the financial denial volume. We have found that in most cases, the increase in net revenue would have paid for some of the salaries of the hospital staff.
Does your outpatient therapy department have a financial denial prevention and management plan in place? Understanding the true dollar amount of the financial denials can help your organization increase net revenue and improve cash flow.
With a financial denial prevention and management plan in place you will have access to accurate and timely information when it comes to financial denials. The plan will also allow your department to understand the source of these denials so steps can be taken to reduce them in the future.
Blue & Co.’s Outpatient Therapy Business Advisory Services provides both Assessment and Implementation Guidance to help hospitals understand their revenue and growth opportunities and facilitate changes in processes and behaviors to achieve them. These engagements are not about FTE reduction.
Contact John Britt or your local Blue & Co. Advisor to learn more about Outpatient Therapy Denial Prevention and Management.
John Britt, Senior Manager