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avoiding killers in your revenue cycle | Part 1

Updated: Nov 21, 2023



Navigating prior authorizations and pre-certifications sitting at the front-end of the revenue cycle.


At Oasis Claim Management Solutions, when we have discussions around insurance accounts receivable, we classify claim denials into one of three different stages within the revenue cycle management process. They are:


Front-End – Patient registration, prior-authorization or pre-certification, and medical necessity.

Mid-Cycle – Services not covered, medical coding, and avoidable care.

Back-End – Medical records requests, missing or invalid claim data, untimely filing.


For purposes of this discussion, we’ll discuss the most expensive and highly avoidable claim denial occurring with prior authorizations or pre-certifications sitting at the front-end of the revenue cycle. Most of us believe that prior authorization or pre-certification share the same meaning. However, they represent two distinct definitions which require either permission or further review from the insurance company.


A prior authorization is when an insurance company refuses to cover the billed services unless the provider obtains prior permission to render the service to the patient. A pre-certification is when the insurance company requires a review of the proposed service to determine whether the procedure is deemed necessary given the patient’s diagnosis, condition, or medical history. A pre-certification is more common with patients wanting to have an elective surgery.

The lack of prior authorization or pre-certification is the third most prevalent claim denial behind patient eligibility and missing or invalid claim data provided at claim submission. While these denials are 100% avoidable, they present the highest financial risk since they are non-recoverable. To be safe, all prior authorizations must be processed and authorized no later than on the day the procedure was performed. However, since a pre-certification requires the carrier to review the patient circumstances giving justification for the treatment, it should be submitted well before the scheduled procedure.


In either scenario, the payer will deny payment for services and if you are an in-network or participating provider (“PAR”) provider then you may not be permitted to balance bill the patient and could have to sustain a complete loss for services, supplies, etc. According to The Change Healthcare Revenue Denials Index (“Index”), during 2020 payers denied 11.6% of claims for lack of authorization. This metric climbed to 13.0% in 2022 resulting in 12% jump two years prior. Simply put, this is an alarming trend and viable threat to medical practice revenue if not performed properly and not monitored. The good news is there are usually only two independent variables causing these denials which are (1) practice personnel’s knowledge, ability, willingness, diligence, and business savvy and (2) coding and documentation provided by clinical staff supporting the planned service procedure.


A prior authorization/pre-certification denial can be categorized into four categories: (i) Invalid Authorization, (ii) Authorization Denied, (iii) Services Exceed Authorization and (iv) No authorization. Here are some examples or explanation for each subcategory that we commonly witness:


Invalid Authorization – According to the 2022 Index, 3 out of 5 prior authorization/pre-certification denials are deemed to be invalid. In a nutshell these are clerical errors with missing or incomplete information provided by the office to the insurance company. Pre-authorizations must have accurate and complete information related to the patient, facility, provider, procedure code, units, NPI, and requestor for the prior authorization.


Authorization Denied – This occurs when the (i) the service is a non-covered benefit or (ii) services are not deemed medically necessary, or (iii) the information provided to the health plan lacks sufficient information to approve coverage for the services. According to the Index, 30% of prior authorization/pre-certifications are denied by the payers.


When the service is a non-covered benefit there’s no chance of reimbursement. What’s difficult for medical practices to anticipate is that each plan is different for each employer plan design that’s on file with Department of Labor. For example, if a Blue Cross PPO approved a pre-certification for one patient this doesn’t always translate that all Blue Cross PPO’s will cover the benefit. Employer plans are governed by the Employment Retirement Income Security Act (“ERISA”) which is at the Federal level. ERISA health & welfare plans always preempt State law so some benefits required by the State may not be covered by ERISA employer sponsored plans.

Health plans are required to explain the exact reason for medically unnecessary denials providing the physician to discuss the denial with the reviewer. Medicare has defined medically necessary services or supplies as those that are proper and needed for the patient’s diagnosis or treatment of the patient’s medical condition and meet the standards of good medical practice.

With proper and accurate coding upfront can also decrease denial rates. You can also search the Medicare Coverage Database to verify whether Medicare will cover a specific service. Since the URL changes frequently, you can also do a web search for “Medicare National Coverage Determinations Coding Policy Manual and Change Report.” The manual will tell which ICD-10-CM codes support CPT® codes for reimbursement which should let your staff verify whether the procedure will be reimbursable. Commercial payers provider manuals available online are also a great resource to learn about the prior authorization/pre-certification requirements.


Services Exceed Authorization – Out of all the prior authorizations and pre-certifications, this denial only occurs 7% of the time according to the Index. Services not documented and provided to the insurance company when obtaining a prior authorization or pre-certification will not be payable to the medical practice. We commonly see this denial when a practice is allowed a certain number of visits in a set timeframe or when a surgical group doesn’t list all the procedures that is actually performed.


No Authorization – While this only occurred 4% according to the Index, an example of this denial is when a practice staff member who’s responsible for getting the prior authorization/pre-certification fails to contact the insurance company to obtain prior approval. Insurance companies call representatives contribute to this denial by falsely advising medical practice’s personnel the procedure does not require pre-certification. While the carrier’s call representatives are there to help, many of them don’t have the full and complete knowledge documented within provider manuals for every procedure. To avoid this type of denial, a practice administrator should check the schedule to verify patient eligibility and whether an authorization code was obtained before the patient is treated. If an authorization code was not obtained and documented, have the appropriate personnel contact the insurance company immediately and double-check the carrier’s provider manuals to ensure the practice is eligible for payment. Also, please keep in mind that a patient can change their coverage from the time you obtain the pre-certification to the time the procedure is performed. Having a pre-certification approval with the previous insurance company won’t work with the new insurance company.


In Conclusion

The 2022 Index cites the following three factors contributing to increasing denials: (i) staffing issues and inadequate training, (ii) growing denials backlog and (iii) legacy technology.

I fully agree with the Index’s first factor for staffing issues and inadequate training as many small practices don’t create a culture of staff training and professional development. But instead of the last two I believe the Index should have emphasized more on oversight and continuous improvement. When a practice owner or practice administrator invests time and attention with their front-line work force by designing a process and squarely placing accountability, the results will invariably improve. Management involves 4 key aspects to running a business which include planning, organizational management, leading and controlling activities. When leading and controlling business activities, practice managers and owners must set priorities as well as expectations. Lastly, monitoring results will allow them to discover unknown process weaknesses, payer nuances which will lead to future opportunities to achieve reimbursement.


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