Thought Leadership

Denials Management: How Denials Can Shape Your Negotiation

By Revive
posted Feb 15, 2024

This blog is a recap from a session in Revive’s virtual Summit series, where we bring together the best and the brightest managed care executives, legal experts, and renowned thought leaders to discuss the state of our healthcare industry and how we can chart a successful path through its challenges — including chronic payer denials.

In this session, Revive welcomed Jeff Leibach, MBA, Partner of Financial Solutions at Guidehouse, a leading global provider of consulting services to the public sector and commercial markets, with broad capabilities in management, technology, and risk consulting. Jeff co-leads Guidehouse’s Managed Care practice that supports hospitals, physician groups, and payers with strategic challenges related to healthcare finance. With nearly 15 years of experience supporting payers and providers in solving complex strategy and operations problems, his areas of focus include managed care contracting strategy, negotiations, pricing strategy, price transparency and regulatory change, value-based reimbursement, and physician / network alignment.

In this Summit series session, Jeff discusses managed care contract denials, including an exploration of the underlying factors, effective strategies for addressing denials, and the implications associated with these challenges.

The Current State of the National Market

It’s no secret that denials are a growing problem for healthcare providers across the country as avoidable write-offs are approaching at an all-time high and margins are shrinking.

Hospitals are experiencing unprecedented revenue margin decline — and the threats are persisting. Despite the consensus that denials are up, there seems to be little recognition or willingness to connect the dots between these statistics and payors’ record profits.

To make matters worse, contentious negotiations continue amidst increasing expenses for health systems. Providers are being forced to invest in significant resources to chase down denied claims. These resources are paid for the only way health systems get paid: reimbursement for services rendered.

Some of the threats that are persisting for providers include:

  • Inflation and expense growth
  • Staffing shortages
  • Worsening payer mix
  • Mergers/disruptors

Some of the threats that are persisting for payors include:

  • Denials and underpayment issues
  • Downward pressure on Fee-for-Service (FFS) rates
  • Fewer hospital setting services covered
  • Narrow/tiered network strategies

Some of the threats that are persisting for patients and employers include:

  • Benefit plans with high patient Out-of-Pocket (OOP) cost sharing
  • Increasing aging population changing payer mix
  • Denials in the ACA marketplace trending upward among largest payors by enrollment
  • Providers experiencing decreasing revenue per charge, while costs increase due to inflation
  • Providers becoming more assertive

Using Integrated Revenue Cycle & Managed Care Analytics to Inform Negotiation Prep

Key Takeaway #1: The good news is providers can take a more proactive approach in preventing denials and avoidable write-offs.

  • Use relevant external data to place your organization in the market landscape builds context for a payor negotiation.
    • Compare provider rates to market competitor rates
    • Compare current charges to the markets and optimize based on results
    • Understand your revenue portfolio and opportunities for “give and gets”
    • Negotiations are no longer just about rates. Emphasize meaningful operational requests from payors. And don’t be afraid to make operational requests of your own.
  • Leverage internal revenue cycle data, including denials, write-offs, contract language best practices, long-range financial plan, charity care and financial cost data, to highlight issues in the PP relationship.
    • Identify where a provider is not realizing 100% payment by service/code and recoup revenue
    • Understand where there are opportunities to increase or decrease utilization by service, reducing internal costs

Key Takeaway #2: Negotiations are predicated on detailed and reliable data.

In this age, data is everything. Managed care teams need to be able to minimize manual processes and create a standardized approach to denial reporting that allows for easy month-over-month and year-over year trending. From here, you can implement predictive modeling that can help anticipate trends and identify opportunities for improvement.

Ultimately, denials are a litmus test for analyzing a provider’s relationship with payors.

  • Blanket denials create a barrier in the relationship by disrupting the revenue cycle.
  • Data can build a strong negotiation strategy by holding payors accountable.
  • Termination occurs when there is a lack of trust and too many barriers (including denials) to a smooth relationship.

Key Takeaway #3: The days of negotiating based on rates alone are long gone.

Many payors are prioritizing language in contracts that reduces their administrative burden or improves their experience managing the plan. Providers would do well to recognize this trend is likely here to stay, and to begin advocating for equivalent perks within the contract. Of course rates are the ultimate priority, but finding opportunities to alleviate other administrative pain points may help reduce costs and could help improve the payor/provider relationship.

What’s Next for the Healthcare Finance Industry?

The headwinds providers are facing are real, and stiffer than they’ve ever been. Addressing these new challenges requires a clear vision, nimble strategy, organizational alignment and metrics that prove the narrative.  

Looking ahead, what factors should managed care and revenue cycle executives consider for the market future state?

  • How will both clinical and non-clinical staffing cost increases impact revenue cycle teams and contracting?
  • How will the continued increase in access to impactful data, artificial intelligence, and automation affect revenue cycle and the relationships between payers and providers?
  • How can healthcare leaders strategize for the changing payer/provider landscape and optimize their contract negotiation strategy to include revenue cycle?
  • Will government regulation play a larger role in the relationships between payers and providers?
  • What role will employers play in the payer/provider relationship?

Don’t miss the rest of the Summit Series, where we host conversations with the best and the brightest experts in healthcare about the challenges facing healthcare providers — and what to do about it. Register for the next session in our series here. If you’d like to reach out to Guidehouse regarding their expertise on this content, you can contact Jeff directly at jeff.leibach@guidehouse.com.