Home  |   Subscribe  |   Resources  |   Reprints  |   Writers' Guidelines

Summer 2023

Denials With a Capital D
By Jonathan Wiik
For The Record
Vol. 35 No. 3 P. 22

How to Break the Inefficient Cycle of Revenue Management

The state of revenue cycle management (RCM) prior to COVID-19 was running the same as it has for the past few years—marginal improvements here and there, while at the same time, large inefficiencies in place. Hospitals and health systems were having one of the best quarters in years in March 2020. As the pandemic entered the United States and made landfall on homes, hospitals, and organizations across the country, revenue cycle managers struggled to staff their teams and capture revenue at the pace they once did. Elective procedures were placed on hold, preventative care appointments slashed, and emergency departments saw patients pay three to six times more than they would at urgent care.1 Labor shortages amplified as well as supply costs, resulting in more than half of US hospitals experiencing negative margins in 2022.2 And all the while, the cost of health care premiums for family coverage is up to $22.5 thousand annually,3 which is $14.5 thousand higher compared with 20 years ago.

The frustration doesn’t stop there. Not only are hospitals operating at a deficit due to the aforementioned reasons but patients are also struggling to justify the cost of health care when and where they need it. Medical bills continue to be the number one cause of bankruptcy, followed by unaffordable mortgages or foreclosures, spending or living above one’s means, student loans, and divorce/separation.4 The reality? Many patients prolong care to the last minute, and when they do finally seek care, they find whatever facility is open. Patients have a tremendous difficulty navigating health care and it’s not getting any easier.

Labor’s Effect on Revenue Management
A 2018 to 2022 year-to-date US Bureau of Labor Statistics Job Openings and Labor Turnover Survey5 found that there are more than two million jobs available for health care professionals in the market, which is two times the rate of jobs available since COVID-19. The stark difference is that many leaders at hospitals and health systems, revenue management teams especially, are struggling to attract new employees given the national competition created by a now mostly “work from anywhere” remote workforce.

In an industry that’s lost anywhere from 20% to 30% of its workforce over the past two years,6 57% of health systems and hospitals reported having more than 100 open positions to fill across their operations.7 These numbers beg the question of where people will safely receive care and also shine a light on the disparities across the industry when it comes to effective revenue management.

We Can Change the Broken Cycle
The good news is that there is a way forward. Hospitals and health systems, strapped as they are, have a huge opportunity to break the cycle of inefficient revenue management. This level of change requires digging deep into the common pain points within organizations to determine root causes. This can vary across the board, but some of the challenges providers face in our line of work include the following:

• fixed resources;
• mixed claims inventory;
• wasteful claim touches;
• lack of analytics and insight;
• lack of consistent workflow; and
• data in disparate systems.

Once providers can assess some of these problems head on, it becomes vitally important to collaborate with other entities. Payers, despite their bad rap, do have modernized and automated ways of solving issues, which can and should be a great model for providers to follow. Democratizing data assets and aligning care goals on the continuum (vs the encounter) will lead to fewer administrative burdens on both sides. However, like providers, payers have their own challenges, including the following:

• unclean claims, changing coverage and demographics, and rising costs, to name a few;
• lack of urgency to pay claims; and
• lots of tools but no clinical “story.”

When payers and providers join forces, there’s an opportunity to tackle these common challenges head on. These tried-and-true solutions do work, but success will require a high level of commitment from all internal stakeholders. The following are recommended strategies to get your organization’s revenue management back on the right track.

Strategy 1: Get a Grip on Denials
One of the biggest inefficiencies seen in most systems across the country is a steady rate of denials. The American Hospital Association reports8 that 58% of commercial claims are denied initially, which leads to a host of problems, including the following:

• declining reimbursement—$257 billion reductions in federal payments estimated between 2010 and 2029;

• rising bad debt—$42.7 billion in uncompensated care provided annually; and

• the impact of COVID-19—$54 to $94 billion losses to hospitals and health systems.

The first step to mitigating these statistics is to understand the root cause of your system’s denials. According to Clarivate Healthcare Business Insights 2023,9 the top five reasons for denials are the following:

• not medically necessary (25%);
• duplicate claim (18%);
• more information needed (15%);
• no authorization/precertification (10%); and
• patient not eligible/enrolled (8%).

Many of these top claim denials can be alleviated through investments in technology in patient access and midcycle. Many of the process changes on the front end can be verified and automated, reducing work for revenue integrity and patient financial services teams later on. This approach also ensures that budget responsibilities are at the department level, which allows for coverage and charges to be corrected efficiently, with greater opportunity to prebill while reducing audit and compliance risks.

Some examples of patient access teams helping on the front end of the cycle include system checks for the following:

• eligibility and benefits verification;

• patient financial clearance—benefits, network, authorization, medical necessity, level of care, and funding mechanism;

• patient identity and address verification;

• previsit insurance discovery;

• patient portal/mobile app synchronization; and

• pricing transparency (shoppable services + machine readable files).

At the midcycle, there are various ways to approach the problem. One option, and a best practice, is to start by distributing results to clinical departments. This can ensure any root causes are identified on the front end and corrected going forward, keeping your revenue integrity team out of the fray. Educating the clinical areas on their role in payment helps align better outcomes and also helps reduce the bill hold period significantly. Meanwhile, revenue integrity team members can focus their efforts on charge description master maintenance and other billing requirements to ensure charge compliance. Revenue integrity auditors should be trained to review complex results if problem causes are unclear, as well as address department questions and provide education.

An alternative is to bypass the clinical department and go to the revenue integrity auditors right away. This requires dedicated staff to review revenue capture issues daily, remove bills from hold, and educate departments regarding errors along the way. The caveat here is that it will increase the risk of longer bill hold periods with results spread across fewer people. It’s worth noting that in both cases, bills are held and HIM is included in a review process.

Regardless of which way your organization chooses to go, it’s important to nail down your prebill workflow to avoid lost revenue due to denials. The reality is that many denials are entirely avoidable, with proper planning and strategy on the front end.

Strategy 2: Say Yes to Automation
Despite years of tenure in the industry, many health care professionals remain unclear about the true meaning of automation and how it can help improve revenue management. There’s concern that automation will uproot teams and take the “engagement” out of patient engagement, which leads to hesitancy and inaccuracies that aren’t justified.

Simply put, artificial intelligence (AI) algorithms can review, interpret, and even suggest solutions to complex medical problems. They afford providers the ability to improve and accelerate billing processes through analytics and automation. Subsets include the following:

• robotic process automation;
• predictive analytics;
• machine learning;
• natural language processing; and
• optical character recognition.

A growing number of hospitals10 are seeing major savings as a result of automation in numerous parts of the revenue management cycle, such as the following:

• eligibility and benefits verification;
• patient payment estimation;
• patient access;
• patient satisfaction/engagement;
• prior authorization;
• payment amount and time estimation;
• denials prevention and management;
• charge capture;
• coding; and
• claims lifecycle.

Instead of saying no to automation, consider a commitment to several specific areas from the list outlined previously when seeking ways to increase your revenue. Join the other 98% of health care organizations that either have or are planning an AI strategy at their hospitals.11 Even if you can only realistically automate one or two areas, those areas could result in significant reduction in accounts receivable days, automated patient refunds, and numerous records touched/hours saved. Setting an action plan that involves all key stakeholders on the front end, much like the strategy for eliminating denials, is key to success.

The following are some tried and true ways to get started:

• Define what automation entails for your organization. Where are you looking to make improvements? Is there a particular area of the revenue cycle that is more challenging for your organization?

• Know before you go. Similar to “shop before you buy,” it’s important to know what is and is not a worthwhile approach to automation. Establish your end goal and determine your strategy from there.

• Partner up. The most important step to automation is finding a knowledgeable and trustworthy partner. Do your homework, ask smart questions, and pull the trigger. A partner can take your automation strategy from good to great.

• Read the fine print. Cut through the jargon and get to the functional content. Whether you’re looking at consumer-directed AI, clinical AI, or administrative AI, be sure to read all onboarding materials to fully grasp what you’re about to undertake. Once again, ask questions.

• Learn. Learn from your mistakes and adjust. Fail fast. You can’t run until you walk, and you can’t walk until you crawl. The process is worth the reward.

Strategy 3: Find the Single Source of Truth
Health care’s approach to revenue management has struggled due to the existence of so many data silos. To truly effect change, one has to work from a single source of truth. So, can you accurately answer the question of where your data are coming from? Many hospitals cannot. The average hospital has relationships with 1,300 different vendors.12 And approximately 69% of health care finance leaders reported that their organizations use two or more vendors to handle parts of the automation process in the revenue cycle.13

An autonomous revenue cycle is not just a potential workaround to remedy the deep cracks in the foundation that have plagued the health care ecosystem for years. It’s the way to displace best-of-breed solutions and take back the thousands of dollars in lost time and vendor contracts that are killing your bottom line. So how do you get there?

You first need to lay out your requirements for each phase. In our experience, most CFOs rank the following as must-haves for an autonomous solution:

• deep integration with EHR;
• ability to create custom dashboards and reports;
• prebuilt analytics dashboards and reports;
• deep integration across individual products within the RCM platform; and
• deep integration with patient portal/website.

Do you notice a common word here? Integration. Over and over again, we see RCM teams raising their hands to make sure the technology all works together—it goes back to the single source of truth. Terms like interoperability are more than buzzwords. The clinicians and HIM teams want seamless flows of information, just as patients do. When data lives in one place, all three areas of revenue management can be improved to make the lives of the payers, providers, and patients much easier.

Once you have nailed down your priorities, create a checklist. Following are some starters to consider:

• Front End: On the front end, it’s important to take a step back and consider a patient walking into your system for the first time. How are they greeted? How are they welcomed in a way that alleviates any nerves and mitigates upfront errors? How are they financially cleared? While these thoughts might appear to take away from what your revenue cycle team is focused on, it’s actually critical when you consider that 86% to 90% of denials are preventable,14 and many go back to registration and eligibility. Other areas to focus on include patient engagement (patient portals, patient scheduling tools), eligibility (patient identity verification, previsit insurance discovery), authorizations (eligibility and benefits verification, medical necessity, referral management), and patient financial engagement (pricing transparency and point of service payment capture).

• Midcycle: This is where the revenue integrity auditors and team members need to be involved. Again, make sure all of the prebill workflows follow government regulations and are thoroughly vetted by the clinical teams when possible. This step is critical to autonomous revenue management. Coding errors can cost you and your patients significantly, leading to higher rates of denials. Common examples15 include the following:

- Unbundling codes—Stop using multiple CPT codes for the individual parts of a procedure. This is often a result of misunderstanding or an effort to increase payment.

- Upcoding—This is often seen with physicians in a specialty group, such as oncology, with highly complex patients. The highest-level evaluation and management (E/M) service should be coded regardless of the patient’s presenting condition. You must report the level of the E/M code based on your individual patient’s condition, not based solely on your specialty.

- Failure to comply with National Correct Coding Initiative (NCCI) edits—When reporting multiple codes, it’s important to follow CMS policy to ensure adherence to correct coding methods, which helps to avoid inappropriate payments for Medicare Part B claims. This is essentially an automated way of checking every pair of codes billed for the same patient on the same service date by the same provider to see if an edit exists in NCCI. If an edit does exist, one of the codes is denied. In some cases, but not all, NCCI edits provide a list of CPT modifiers that can be used to override a denial.

• Back End: The back end is where claims processing and payment, insurance collections, patient payment, and billing occur. In a perfect world, if you follow best practices on the front end and midcycle, your back-end billing work should be more streamlined. Remember that everything your team does on the front end affects what happens on the back end, for better or worse. Registration accuracy, point of service collections, and self-pay all take place upfront and have a trickledown effect. Use of analytics is a critical part of the back end because it gives follow-up teams a complete record from which to work on collections. Ask any CFO or vice president of revenue cycle what they are looking for in terms of collections and it will likely include some variation of working the right accounts at the right time with the right people. Denials, accounts receivable, claims, collections, and contract analytics are all indicators of who is likely to pay and when. This allows specialists to start with the high-dollar, more likely to pay accounts first and work their way down the list.

Health care is long overdue for disruption, and everyone involved is feeling the heat, especially patients and providers. Work to improve workflows and processes within your organization so that denials, underpayments, and other revenue leakage are minimized. Set up a strategy to start automating specific areas that can increase revenue and decrease internal workloads. Finally, work toward a management style that is autonomous and enables your organization to establish a complete data blueprint that sets everyone up for success. Stay the course—employee satisfaction and better patient financial and clinical outcomes are closer than you think.

— Jonathan Wiik has more than 25 years of health care experience in acute care, health IT, and insurance settings. In his current role as vice president of health insights at FinThrive, he is responsible for leading health care data insights and research. Wiik works closely with the market and hospitals on industry best practices for revenue management. He’s considered an expert in the industry for health care finance, legislation, revenue management, and strategic transformation. He’s an active advocate of legislative changes that evolve the health care industry and the author of Healthcare Revolution: The Patient Is the New Payer and Revenue Evolution: Helping Providers Get Paid in an Era of Uncertainty, which was released in early 2020. He frequently speaks as a thought leader at state and national events.


1. Fay B. Emergency rooms vs. urgent care centers. Debt.org website. https://www.debt.org/medical/emergency-room-urgent-care-costs/

2. Condon A. Half of hospitals ended 2022 with negative margins: 4 takeaways. Becker’s Hospital Review review. https://www.beckershospitalreview.com/finance/half-of-hospitals-ended-2022-with-negative-margins-4-takeaways.html#:~:text=Half%20of%20hospitals%20ended
. Published January 30, 2023.

3. 2022 employer health benefits survey. Kaiser Family Foundation website. https://www.kff.org/health-costs/report/2022-employer-health-benefits-survey/. Published October 27, 2022.

4. Health care costs number one cause of bankruptcy for American families. American Bankruptcy Institute website. https://www.abi.org/feed-item/health-care-costs-number-one-cause-of-bankruptcy-for-american-families. Published January 20, 2017.

5. 2.1 million job openings in health care and social assistance in September 2022. US Bureau of Labor Statistics website. https://www.bls.gov/opub/ted/2022/2-1-million-job-openings-in-health-care-and-social-assistance-in-september-2022.htm. Published November 4, 2022.

6. Weldon D. The staffing crisis will dominate 2022 finance trends. Here's what to do about it. HealthLeaders website. https://www.healthleadersmedia.com/finance/staffing-crisis-will-dominate-2022-finance-trends-heres-what-do-about-it. Published December 15, 2021.

7. AKASA. Filling the gaps: survey finds nearly 60% of hospitals and health systems have more than 100 job vacancies. PRNewswire website. https://www.prnewswire.com/news-releases/filling-the-gaps-survey-finds-nearly-60-of-hospitals-and-health-systems-have-more-than-100-job-vacancies-301549656.html. Published May 18, 2022.

8. American Hospital Association. Hospitals and health systems continue to face unprecedented financial challenges due to COVID-19. https://www.aha.org/system/files/media/file/2020/06/aha-covid19-financial-impact-report.pdf. Published June 2020.

9. Clarivate Healthcare Business Insights. https://clarivate.com/products/healthcare-business-insights/. Clarivate website. Published 2023.

10. American College of Healthcare Executives. Poised to transform: AI in the revenue cycle. https://www.ache.org/-/media/ache/about-ache/corporate-partners/change-healthcare-ai-rcm-research-study-ebook.pdf. Published 2020.

11. Torrence R. Healthcare execs trust AI to automate administrative processes, advance health equity: Optum. Fierce Healthcare website. https://www.fiercehealthcare.com/tech/healthcare-execs-trust-ai-to-automate-administrative-processes-advance-health-equity-optum. Published December 20, 2021.

12. Harris B. Hospitals are paying for not vetting their vendors. Healthcare IT News website. https://www.healthcareitnews.com/news/hospitals-are-paying-not-vetting-their-vendors#
. Published July 11, 2019.

13. Dimensional Insight and HIMSS Analytics survey shows healthcare organizations with multiple revenue cycle management systems have higher rate of denials. Cision website. https://www.prweb.com/releases/2018/05/prweb15478385.htm. Published May 10, 2018.

14. Pollitz K, Lo J, Wallace R, Mengistu S. Claims denials and appeals in ACA marketplace plans in 2021. Kaiser Family Foundation website. https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans/. Published February 9, 2023.

15. O’Reilly KB. 8 medical coding mistakes that could cost you. American Medical Association website. https://www.ama-assn.org/practice-management/cpt/8-medical-coding-mistakes-could-cost-you. Published July 14, 2021.