At the Margins

Want to reduce inpatient denials? Target these 3 service lines.

by Rachel Matthews

A successful denials strategy centers on denials mitigation, not management. Reworking claims during appeals is both timely and costly. As one organization recently told us, "As soon as you're appealing the denial, you've already lost."

To help you tailor your inpatient prevention strategy to where it matters most, Advisory Board partnered with Optum360. Our analysis reviewed 837/835 electronic remittance files from over 108,000 inpatient encounters. All payers are included in the dataset, and the respondent cohort is nationally representative. We anticipate that these insights will help hospital finance leaders evaluate strategies to reduce denials across service lines. (Editor's note: Advisory Board is a subsidiary of Optum. All Advisory Board research, expert perspectives, and recommendations remain independent.)

Read the report: Recent inpatient denials by service line

Our findings

General medicine and cardiac services emerged as the two most prominent opportunities for improvement. Both service lines report a disproportionally high volume of high-dollar denials and thus require the most attention.

Beyond these two service lines, general surgery and neonatology ranked in only one of the two criteria (denied charge value and denial volume, respectively). While the most efficient denials mitigation strategy will first tackle the high-volume, high-dollar denials in general medicine and cardiac services, general surgery and neonatology warrant second-tier priority.

Three key insights

When targeting these service lines, revenue cycle leaders should organize denials mitigation efforts around three key insights:

  1. In general medicine, the most troublesome MS-DRGs are sepsis-related (MS-DRG 870-872). These claims are most commonly denied for lack of medical necessity, likely due to inconsistent payer care criteria.
  2. Major denial pain points across cardiac services and general surgery stem from extracorporeal membrane oxygenation (ECMO) services, likely due to recent coding updates. Although CMS announced a reversal of these changes in 2020 IPPS Final Rule, these services will be under technical denial risk as providers learn to revert back to the previous coding method.
  3. Neonatology reports unique representation of eligibility denials. While all other service lines report equal representation of denial types, 52% of the service line's denials are eligibility-related, likely due to complexity in newborn coverage.

Our methodology

Our analysis examined service line denials by two criteria: denial volume and denied charge value. We excluded non-MS-DRG claims and assigned service lines and sub-service lines according to CMS' official MS-DRG grouper versions v. 30-37, available for download here. Denial categories were assigned based on the corresponding denial codes.

Important data disclaimer: The dataset may underrepresent medical necessity denials. Many payers notify the provider of impending medical necessity denials via phone, meaning medical necessity denials are less likely to be captured in the 835 remittance files.

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Download the research note to learn more about our research methodology and findings.

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