$12M CHC claims denied in ’04-’05

In the past two years, some 41,508 processed claims representing over $12 million were denied or returned to the Commonwealth Health Center’s Collections Office for further processing due to errors, incomplete paperwork, late billings, or ineligible patients. This number is 35 percent of the 118,594 total processed claims in 2004 and 2005.

Of the $22 million claims filed in fiscal year 2005, $12 million were returned without payment because of the following reasons: further documentation and corrections required and third-party payer denied responsibility for the claim.

These were the findings of a team consisting of representatives from the CHC Business Office and the Collections Office that worked to identify a process in the revenue cycle that could be improved to create the greatest impact in improving overall revenues for the hospital.

The team, composed of CHC Business Office acting supervisor for Billing Section Denise Prosser, Collections manager Rosa C. Sorensen, and Business Office manager Esther L. Muna, evaluated the registration, payment, coding and billing processes at CHC.

The research found out that the denial of claims by third-party payers was a major issue that has the biggest impact on the cash flow problem. The research findings also showed that denials were not closely monitored as they were considered a routine task of the Collection Office.

Claims are the billings of patients who are covered by health insurance or Medicaid/Medicare—also called third-party payers. Once these patients are treated at the hospital, the bill for the treatment is sent to the insurance providers so that the hospital can be paid. A “clean claim” is where the paperwork is complete. Incomplete paperwork results in the denial of the claim and the return of the documents to CHC for re-working.

The team looked at data starting from 2004. They presented the results of their project to CHC personnel and medical staff members in November 2005.

“With only seven full-time employees, overtime hours had always been necessary to process denials as staff had to do excessive re-work and provide missing information and documentation that should have been provided at first submission of the claims,” said the report.

The most common causes of denials were coding errors, incomplete pre-certifications, ineligible patients, and late billings, said Muna.

TQI tools were used to analyze the denials issue and aided in starting a tracking system that listed the causes and the accountable parties. The report said that from October 2004 to March 2005, it was identified that the major contributors to the denial problems were the Business Office and the Physicians and Nurse groups.

“The Business Office is responsible for patient registration, admitting, and cashiering,” said Muna, adding that this section has the “best opportunity” to obtain and gather the required information in order to process a clean claim.

The team found out that 10.13 percent or $1 million of denied claims within the three-month period from October 2004 were denied due to errors from these two groups.

“This is money that should have been paid to CHC the first time it was submitted to the payers and does not include hidden labor costs of re-working the claims and the lost dollar value of the services. This is money that would be extremely helpful in the provision of health care services,” said the report.

The team found out that the two groups account for 79 percent of the denials. The research focused on these groups first so that major improvements could be made.

The research said the errors committed by these groups resulted in the re-working of claims that led to increased personnel cost and a slowdown in the cash flow at the hospital.

With this data, Muna said the hospital has made changes that improved the process of coming up with clean claims. The team held meetings with the nursing staff in October last year to discuss processes that needed to be completed to reduce the CNMI’s denial rate.

“In-service was provided to all Business Office staff to review insurance requirements and stress the importance of eligibility verifications,” said the report, adding that an orientation package was prepared and fax machines provided to all clinics for more effective verification and pre-certification processes.

Moreover, all third-party payer eligibility lists were updated and a new verification tool replaced a broken one. Finally, a pre-registration process was also implemented last year.

Muna said by the end of 2005, the team was able to exceed its target and reduce denials from these two groups to 2 percent. She added that the dollar amount for the denied claims was reduced to $290,915 by the end of 2005.

Other trends for denials will be evaluated in the future to further reduce the overall denial rate.