Case Management’s Role in Managing Denials and Appeals in the New Healthcare Environment
By Toni Cesta, PhD, RN, FAAN
Introduction
Revenue is defined as the sum earned by the provider, measured in dollars. The revenue cycle is defined as the series of activities connecting the services rendered by a healthcare provider with the methods by which the provider receives compensation for those services. Case management plays an integral role in managing revenue and the revenue cycle in the denials and appeals processes. This month, we will discuss the case manager’s role in the revenue cycle as it relates to the management of denials and appeals.
Start With Medical Necessity
As case managers, we must ensure that our patients meet medical necessity as it relates to care. Your role in utilization management supports the revenue cycle by determining medical necessity prospectively, concurrently, and retrospectively. The American College of Medical Quality defines medical necessity as the accepted healthcare services and supplies provided by healthcare entities.1 These services must be appropriate to the evaluation and treatment of a disease, condition, illness, or injury, and must be consistent with the applicable standard of care.
Key Functions of Denial Management
Case managers should ensure that the clinical information available in the medical record is accurate and reflects the care rendered to the patient. To ensure accuracy, you should work with your clinical documentation specialists to confirm that they are aware of any deficits in the documentation. You also must ensure that this information is provided, when necessary, to a third-party payer in a timely manner and based on nationally established guidelines. Per the CMS Conditions of Participation for Utilization Review, each hospital may choose the criteria they would like to follow when conducting clinical reviews. A hospital can use different criteria for different payers. Finally, we must ensure that the patient transitions to the next level of care as quickly as possible once he or she no longer meets the clinical criteria for the current level of care.
In terms of clinical reviews, we prevent denials by performing one of the following three types of reviews:
- Prospective Review: Occurs before care is rendered;
- Concurrent Review: Occurs while services are rendered;
- Retrospective Review: Occurs after services have been rendered.
During the concurrent review process, the third-party payer’s case manager will approve or deny payment for the hospital stay, or a portion of the hospital stay. You most likely will be informed of this information during the review, or by an “end of day” report, or via mail.
Once a denial occurs, an appeal should take place. As per the hospital’s contracts, as well as the insurance and public health laws, there are time limits to this process. You generally have between 30 and 60 days to appeal a denial of payment. The insurance company must respond to your appeal within similar parameters. An appeal may result in confirmation of the entire denial, denial of a portion of the stay, or complete reversal of the denial. As an acute care case manager, you may be directly involved in the written formulation of an appeal. This function may be performed by the admitting physician or by designated nurses in the case management or finance departments.
To prevent denials, the best defense is always a good offense. Ultimately, the goal is to prevent denials. This improves the revenue cycle and reduces the amount of paperwork needed to appeal to a third-party payer.
Reasons for Third-Party Payer Denials
Each organization may categorize its denials in various ways. Categories generally fall into either clinical or nonclinical groupings. Clinical denials are related to the patient’s condition and are decided based on the appropriateness and medical necessity of the clinical care delivered. An example might be a denial of reimbursement for a diagnostic or therapeutic procedure, such as endoscopy that is not justified or precertified as an inpatient procedure. The nonclinical reasons include those that are unrelated to the patient’s clinical situation or need for care. They usually indicate factors in the organization’s contracts that were not met, such as delays in submitting claims.
Nonclinical (Administrative) Reasons for Denials
• Technical: Medical record not produced by requested deadline.
• Appropriateness of setting: Procedures that should be performed in outpatient setting (e.g., ambulatory surgery, ED). These cases can be billed to these settings.
• Delay in service/treatment: Primarily on weekends when patients are waiting for tests.
• Initial noncovered services: Services usually not covered by payer (e.g., cosmetic surgery, dental care for Medicare fee-for-service [FFS] patients).
• Pre-certification: No prior authorization from third-party payer. Emergency admissions require notification to payer within 24 hours.
• Code 44: Admission downgraded to observation or outpatient.
• DRG: Payment for a different DRG than originally billed.
• Untimely billing: Bill submitted more than 60 days after discharge.
• Hospital-Issued Notice of Noncoverage (HINN) issued incorrectly: HINN letter given to Medicare patients when services are no longer covered by Medicare (e.g., custodial care or awaiting home care). PRO decides if the patient is still covered by Medicare.
• Preoperative days: All elective cases should be admitted on the day of surgery/procedure.
• Pass day: When a patient is discharged and later readmitted for treatment of the same medical condition within 60 days, hospitals should bill the two admissions as one (e.g., the patient was either admitted with or develops an infection that must be resolved before surgery).
• Payment inconsistent with service: Payment is determined contractually (i.e., case rate, HIV, or psychiatric per diem rate, when such contractual billing agreements are not followed).
• Two-Midnight Rule: Rules and documentation incomplete and noncompliant with this rule.
Clinical Reasons for Denials
• Continued stay: Patient no longer meets acute care criteria.
• Medical necessity on admission: Admissions and treatments that do not meet inpatient care criteria.
• Necessity of procedure: No documentation to support the need for the surgical procedure.
• Premature discharge: Patient readmitted within 31 days. The CMS Quality Improvement Organization denies second admission if they decide the patient was discharged prematurely on first admission.
• Alternate level of care: Patient no longer meets acute care criteria but could not be discharged without continued services (e.g., nursing home, home care).
• Level of care reduction: Payer decreases payment to subacute rate for inability to meet acute care criteria.
Appealing Nonclinical Denials
Nonclinical denials are much more difficult to appeal. Because the denial is based on the contract with that insurance company, the basis of an appeal may be rather limited. Your department must decide whether it will take the time to appeal. One must weigh the odds of winning such an appeal against the cost of generating the appeal. It is very difficult and rare to win nonclinical appeals.
Appealing Clinical Denials
The case manager, or other person writing the appeal, should review the case against the established review criteria. When possible, the criteria should frame the argument for the appeal. It should refer directly to how the patient met the criteria. These criteria will form the greatest likelihood of a reversal. If the criteria are not met, the appeal may be much more difficult to win. Other arguments may need to be introduced, such as the unavailability of subacute care beds or home care services. These arguments generally do not win an appeal. The case manager in the acute care setting needs to know the philosophy of the organization to know whether there is an expectation that such appeals will be written. Once again, the likelihood of winning such an appeal must be weighed against the cost of the labor spent on writing it when those resources might be better spent on writing an appeal with a greater likelihood of success.
When Can Denials Occur?
To prevent denials, you must be aware of where they most commonly occur. Be aware of these situations so that you can prevent a denial whenever possible.
The admission assessment should be completed on the day of admission to ensure the correct level of care from the beginning of the stay. The patient then should then be reassessed each day of the hospitalization. During this process, be sure that the correct level of care has been selected by the admitting physician and that the documentation supports it.
During the admission process, ask these questions:
• Is this patient sick enough to be in the hospital?
• Is this patient receiving care at a level requiring admission?
• If the patient is on Medicare, will he or she be in the hospital for at least two midnights?
Denials also can happen for any of the following reasons:
• Inaccurate payer information entered during the registration process;
• Inpatient-only procedure, but patient not placed in inpatient status;
• Physician is not asked to supplement documentation before a Code 44 process is initiated;
• Physician advisor is not included in the Code 44 process.
These reasons all must be monitored by the case manager.
Continued Stay Process
Many things can occur during the inpatient stay that can result in a denial of payment. Clinical reviews must be sent to the payer as requested. If your managed care contracts have a cut-off time for submission of reviews, a late review also can result in a denial.
Delays in care can trigger a denial if the patient is not receiving an acute level of care each day, called “carve-outs.”
During the hospital stay, be sure that you collaborate and communicate with the patient’s physician of record as well as the interdisciplinary care team. Lack of collaboration and communication can result in delays in care that can trigger denials.
Ask the following questions during the continued stay process:
• Is this patient receiving care at a level that requires the patient to continue to stay in the hospital?
• Is the patient responding to treatment?
• Does the documentation in the medical record support medical necessity?
Discharge Process
During the discharge process, consider whether the patient meets medical necessity for movement to a lower level of care. Delays — and, therefore, denials — can occur if you do not begin the discharge planning process as early in the stay as possible.
In addition to performing an early assessment, you also should develop a professional relationship with the patient and family, if available. Discussing the discharge process early in the stay will help prevent delays and/or denials as the patient progresses toward discharge.
Government Contractors
Case managers must manage more than just third-party payers, commercial denials, and appeals. CMS has implemented a variety of initiatives to prevent improper payments by identifying and addressing coverage and billing errors by employing contractors to process and review claims using the Medicare rules and regulations. In many hospitals and health systems, outside vendors complete the appeals for these denials. In any case, it is important to be familiar with the names of the most common contractors currently working with CMS.
Medicare Contract Reviewers
• Medicare Administrative Contractors (MACs): Process claims submitted by physicians, hospitals, and other healthcare professionals. Submit payment to those providers following the Medicare rules and regulations, including the identification of underpayments and overpayments;
• Zone Program Integrity Contractors: Identify cases of suspected fraud and take corrective actions;
• Supplemental Medical Review Contractors: Conduct nationwide medical reviews, including underpayments and overpayments;
• Comprehensive Error Rate Testing Contractors: Collect documentation and perform reviews on a random sample of records of Medicare FFS claims and produce an annual improper error rate;
• Recovery Auditors: Identify under- and overpayments as part of the Recovery Audit Program.
Prepayment and Post-Payment Reviews
Some Medicare claims reviewers perform post-payment reviews using samples of records that are selected using statistically valid sampling processes. The sample allows the reviewer to estimate underpayments or overpayments without reviewing all records of the provider in question.
The MAC also may place providers on prepayment reviews. This typically occurs when a provider is identified as having a disproportionately high error rate. In the prepayments process, a percentage of claims will go through prepayment review. This delays the rate at which the provider will be paid for claims, and negatively affects the revenue cycle. The process continues in a specific facility until the MAC deems that the billing practice has been corrected.
The Recovery Audit Program reviews past Medicare fee-for-service claims for potential over- or underpayment. The auditors use the Medicare rules and regulations, including national and local coverage determinations, billing instructions, and other coverage provisions. They analyze claims data using software that identifies claims that may contain over- or underpayments and request the records accordingly.
Providers must respond to an auditor’s request for medical records within 45 days of receiving the request or be subject to a denial. The provider has the right to appeal these and other other Medicare program overpayment denials.
Methods for Reducing Denials
The following list describes some concrete ways in which one can work toward reducing denial rates:
• Employ a gatekeeper at each entrance point in the hospital;
• Give feedback to case managers regarding denials;
• Meet with payers regularly to work out issues;
• Ensure physician processes are sound;
• Provide accurate and appropriate documentation;
• Use escalation process to attending and/or physician advisor;
• Create effective physician advisor role;
• Ensure excellent documentation;
• Employ knowledgable staff;
• Train case managers and social workers;
• Use a strong medical record for case management process;
• Include utilization management notes (not in medical record);
• Use strong interdisciplinary processes;
• Employ interdisciplinary care rounds;
• Implement walking rounds;
• Ensure the hospitalist and other physicians actively involved;
• Track avoidable delays;
• Hardwire concurrent appeal process;
• Monitor the effectiveness of your physician advisor;
• Review records to ensure admission status is correct;
• Share denial and appeal data with the utilization management committee monthly;
• Maintain case manager competencies;
• Develop a denial dashboard.
Summary
The best way for any case management department to reduce its denial rate is to prevent denials. Take a look at your own processes and be sure to hardwire them whenever possible.
REFERENCE
- Definition and Application of Medical Necessity, American College of Medical Quality, 1995,5(1):6.
Revenue is defined as the sum earned by the provider, measured in dollars. The revenue cycle is defined as the series of activities connecting the services rendered by a healthcare provider with the methods by which the provider receives compensation for those services. Case management plays an integral role in managing revenue and the revenue cycle in the denials and appeals processes. This month, we will discuss the case manager’s role in the revenue cycle as it relates to the management of denials and appeals.
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