What is outcomes-based compensation in healthcare? Compensation plans in the healthcare industry have undergone a paradigm shift, with more providers moving away from volume-based to outcome-based compensation for their employees. This is partly attributable to the rising healthcare costs and enhanced patient empowerment, with a growing need for better quality of service delivery (Zigrang, 2022). Volume-based models compensate providers for the quantity of care delivered rather than the impact on the health status of patients (Tai et al, 2014). The vision for outcomes-based compensation in healthcare revolves around incentivizing and rewarding healthcare providers based on the outcomes they achieve in patient care rather than just on the volume of services delivered. This approach aims to improve the overall quality of care, enhance patient outcomes, and reduce healthcare costs. However, existing literature on outcomes-based compensation models shows mixed results in terms of impacts on quality of care and costs, with some reporting significant cost savings and others reporting increased costs of care, as expounded later on in this chapter. In an outcomes-based compensation model in healthcare, providers are encouraged to focus on delivering measurable results and positive patient experiences. This may involve achieving specific health outcomes, such as reducing hospital readmission rates, improving patient satisfaction scores, or effectively managing chronic conditions. By aligning compensation with outcomes, healthcare organizations aim to drive better patient outcomes, ensure patient safety, and enhance healthcare delivery. Healthcare outcomes reflect the quality of care offered by practice and remain stable over time compared to process measures, which keep changing over time. For instance, the target outcomes in a diabetic care clinic include reduced blindness, reduced amputation rates, improved self-management and confidence, and reduced heart attacks.  These target outcomes that matter to patients the most tend to remain stable over time regardless of where you practice. On the other hand, process measures such as fundoscopic examination, blood glucose assessment, foot care, and medication review may vary over time. This forms one of the basis for outcomes-based compensation models (Dunbar-Rees, 2018). The outcomes-based compensation model offers several benefits to different players in the healthcare field. Patients get to enjoy quality care over volume, with the potential to address health inequalities. This is so because the model emphasizes outcomes that matter to patients, which tend to remain constant regardless of the geographical location. For instance, the target outcomes for a diabetic care clinic in Kisumu, Kenya, Africa, would be more or less the same as for a clinic in Atlanta, Georgia, USA. For the providers, outcomes-based compensation helps reduce the wastage of resources and unnecessary interventions by enabling efficient resource allocation. It also reduces fragmentation of care by encouraging collaboration and coordination across clinicians and specialties. The payers benefit through reduced wasted healthcare spend as well as focusing on buying healthcare that is based on outcomes that matter most to their beneficiaries (World Economic Forum, 2023). The outcomes-based model has been implemented across different healthcare facilities worldwide in a bid to improve the quality of care and reduce costs. There are several studies showing the impact of outcomes-based models on the quality of care, resource utilization, and healthcare costs. These studies show varied outcomes, with some reporting positive impacts and others reporting negative impacts or no significant impacts. For instance, the Pioneer Accountable Care Organizations (ACO) implemented by the Center for Medicare and Medicaid Services in the USA as an outcome-based compensation model reported a reduction in healthcare costs by approximately $385M in two years compared to the previous volume-based compensation model, with no difference in quality of care (McCarthy, 2015). The Medicare Shared Savings Program, which was also designed to incentivize cost reduction, reported similar cost savings of $385M dollars over one year of implementation (Eijkenaar & Schut, 2015). However, some studies suggest that outcomes-based models were associated with additional healthcare costs, mainly in the form of bonuses and incentives paid out to healthcare workers. For instance, the Quality and Outcomes Framework (QOF) implemented in the UK as a pay-for-performance program was reported to have spent about US $9 billion on incentive payments over a period of just seven years (Ryan et al, 2016). Outcomes-based compensation models impact on the quality of care delivered to patients, albeit to varying extents from the available literature. In one study, the Quality and Outcomes Framework model operationalized in the UK to incentivize family practitioners for target patient outcomes resulted in an increase in the median practices achieving the target HbA1C levels for diabetic patients from 59% to 66.7% in two years. (Vaghela et al, 2009). However, another study evaluating the impacts of the same Quality and Outcomes Framework in the UK on hypertension reported no significant change in blood pressure monitoring rates and treatment intensity attributable to the program. There was no significant difference in the cumulative incidence of stroke, renal failure, and heart failure as well (Serumaga et al, 2011). With such mixed data on the impacts of pay-for-performance on costs and outcomes, it is evident that this alone may not be sufficient to improve the quality of patient care, and more factors need to be accounted for in order to achieve optimal patient care quality. Another study in rural Kenya evaluated the utility of outcomes-based compensation models in improving the management of suspected malarial fevers. The program rewarded measures of process quality of care, including the proportion of patients correctly given antimalarial drugs based on test results. Incentives were provided to facilities with increased rates of treatment for confirmed malaria cases, as well as those with reduced treatment rates without any confirmatory tests. From the study, the odds of receiving treatment following a negative malaria test in the intervention arm was 0.15 relative to baseline, compared to 0.42 in the comparison facilities that were not enrolled in the program. This translated to a 2.75 times greater reduction of inappropriate prescription of antimalarial drugs in the incentivized groups compared to the comparison groups (Menya et al, 2015). Another instance in which the outcomes-based model has been utilized is through Humana’s

People handle adversity differently; some break down sooner than others. When a team focused on a common goal faces adverse conditions, dissent among some team members precludes them from reaching a shared goal. Under extreme conditions, a mutiny isn’t just mission-critical—it can leave everybody dead. The famous explorer Ernest Shackleton, best remembered for his Antarctic expedition of 1914–1916 in the ship Endurance, managed such risks by assigning the whiny, complaining crew members to sleep in his own tent and share the chores with him. Clustering the “complainers” with him minimized their negative influence on others, and this helped his team survive and accomplish their goals. Medicare Vs. Private Payers It’s essential to acknowledge the contrasting dynamics between Medicare and private payers. Medicare, as a government-backed program, follows distinct regulations and reimbursement structures, while private payers operate in a competitive market with more flexible terms. The negotiation strategies and considerations may differ significantly when dealing with these two payer types. Payment negotiations Actively negotiating with payers is crucial for independent medical practices. However, many providers lack experience or haven’t been successful in past negotiations due to inadequate preparation. To ensure a fruitful negotiation, it’s vital to: Know Your Data: Understand your practice-specific data, including patient volume, charges, reimbursement history, and more. Know the Terms of Each Contract: Familiarize yourself with your current payer-specific contract terms, especially the reimbursement schedule and the claims filing data. (Babcock, 2021) According to a KFF analysis, as seen in the image below, private insurers often pay nearly double the Medicare rates for hospital services. Specifically, for outpatient hospital services, private insurance rates were found to be significantly higher than Medicare rates, averaging 264% of the latter. This difference underscores the varying dynamics and market powers between Medicare and private insurers. Policymakers and analysts continue to debate the necessity of high payments from private payers to compensate for the lower Medicare payments. (How Much More Than Medicare Do Private Insurers Pay? A Review of the Literature | KFF, 2020) Classification of Payment Models Payment models dictate how healthcare providers, including physicians and hospitals, are remunerated for their services. Each model inherently carries incentives and disincentives that can influence the balance between cost reduction and improving care quality. These two objectives often stand at odds. This report delves into the implications of Alternative Payment Models (APMs) in either mitigating or intensifying health disparities. However, before exploring these implications, it’s essential to understand the incentives and disincentives embedded within the prevailing payment models. These incentives play a pivotal role in fostering cost-efficient, high-quality care. The primary distinction among these payment methods lies in the unit of payment. This determines how financial risk is distributed between the payer and the provider. The nature of this risk can significantly influence the behavior of healthcare providers and the overall efficiency and effectiveness of the healthcare system (Quinn, 2015). Factors affecting payment negotiations According to AMA, it’s not just about the rates but also about the terms and conditions that can impact payment. For instance, some contracts might have clauses that allow payers to change rates without notice, or they might have stringent requirements for prior authorizations. Providers should be wary of “most favored nation” clauses, which can restrict them from offering better rates to other payers. It’s also crucial to be aware of the dispute resolution process outlined in the contract, should any disagreements arise. By being well-prepared and understanding the intricacies of payer contracts, providers can position themselves for more favorable negotiations and better financial outcomes. (American Medical Association & American Medical Association, 2022) Payer-provider conflict In the payer-provider conflict, the providers who accept lower reimbursement and who don’t challenge underpayments or delayed payments make it easier for the payers to maintain their market control (oligopsony). Recent research supports this notion, indicating that payers with larger market shares have more negotiating power in contract negotiations (HealthPayer Intelligence). ClinicMind’s network helps providers maintain their payment schedules and motivation by establishing a shared discipline for clients and billers alike in terms of both thought and action. Payers with Larger Market Share and Their Negotiating Power Payers that have a dominant presence in the local market have a distinct advantage when it comes to negotiating lower prices for physician office visits. A study conducted by researchers from Harvard Medical School found that health insurance companies with a market share of 15% or more negotiated visit prices that were 21% lower than those set by payers with a market share of 5% or less. For instance, payers with less than 5% of the market negotiated prices of $88 per office visit. In contrast, those with 5 to 15% of the market share settled for a price of $72, and those with more than 15% of the market share negotiated even lower at $70 per visit. The graph below shows this analysis.   From Policy Changes to Physician Consolidation In 2010, President Barack Obama signed the Affordable Care Act (ACA) into law, a move that expanded Medicare’s reach by adding millions to its coverage. This expansion meant that more physicians had to accept Medicare rates, which have been systematically reduced over time. The ACA not only aimed to extend healthcare access to uninsured Americans but also set in motion a wave of consolidation in healthcare services. As Medicare adjusted its rates, private insurance companies followed suit. While they still paid above Medicare rates, they too began to reduce their payouts. This trend forced physicians to grapple with a challenging reality: working more hours for less pay. The Power of the Network Effect In response to these financial pressures, physicians began to see the value in consolidating their practices. By joining larger organizations, they could harness the network effect, gaining more significant negotiating leverage with insurance companies. This consolidation is not just about survival; it’s about strength in numbers. Large groups, especially those with revenues exceeding $1 million annually, have more room to negotiate than smaller entities. The Rise of Management Service Organizations (MSO) Amidst these challenges,

In the last chapter we talked about hunger and the drive that must exist between all members of a patient community, including the patients themselves, but what about the patient’s need for a mentor? Remember in previous chapters we talked about how Joseph and Bonnie’s dispositions not only affected their ability to treat effectively but also resulted in lost patients? Patients, because they are people, respond and react to the emotions they receive. We don’t always react in the expected way, but that has more to do with the person interpreting than the person reacting. So how do we set ourselves up so that when we aren’t having the best day ever and performing at our peak state, our patients still receive the best care possible? The answer is heroism. And no, I’m not talking about superhero heroism like we see in the movies today. I’m talking about the heroism of someone behaving in a consistent and positive way that inspires others. When people see someone working harder than everyone else (and I don’t mean slightly harder, I mean orders of magnitude harder), they naturally want to help that person. Following success is a tremendous motivator for many because it means that they don’t have to expect 100% effort from themselves to achieve a goal. In other words, the responsibility isn’t 100% on them, and so they feel compelled to work as hard as possible, if not harder. We all know the power of heroes in fiction and how they inspire their comrades and even enemies, in many cases, to follow the path of good and righteousness. Take the most famous superhero of them all. Superman. As we prepare for the dawn of the Superman movies in cinema, these films raise powerful questions about what is meant by a leader. Many would say that Superman is an example of a great hero, but I would disagree. Superman is a great character and, in fiction, does amazing things for many. However, because his power is so great and far removed from our own, we don’t feel like what he does is ever enough (hence people never truly appreciate Superman except when their lives are on the line). As practice owners and clinicians, we’re often seen this way. We hold in our minds and hands, the ability to create massive change in a patient’s life, change that that patient would otherwise be unable to experience. This truly defines us as Superheroes, but it also presents a major problem. It means we are too far removed from our patients resulting in this kind of detached relegation. We feel compelled as patients to receive care and do so reluctantly, hoping we never need to return (think about it, how many patients truly want to be thinking about their illness?). Now take the example of the practice owner and how we react when we feel like superheroes. Sure, at the beginning, it’s an incredible ego booster, it makes us feel like we are kings and invincible. But then what? The feeling goes away, and we’re left with a patient roster that, quite frankly, is embarrassing by superhero standards. Naturally, this gives way to the feeling of inadequacy and negativity we discussed earlier. So what do we need to do? Simple (but not easy), we need to get closer to our patients. In other words, we need to close as much of the rift between a patient and their physician as possible. Since this is a natural phenomenon with man-made side effects, it is especially difficult to resolve. It means that we, as practice owners, have to first overcome our confidence needs to see ourselves as our patients see each other, powerful and capable. Above is a diagram that describes what I’m talking about. Nature develops these build-in separations as we grow in expertise and capability, but it also creates a lack of empathy and connection with our patients. The real question is, who is responsible for bridging this gap? Heroism lies in effective communication with patients and addressing their concerns holistically. As a practitioner, you should be able to listen to, understand, and share in people’s feelings, beliefs and experiences in order to take care of their real needs and offer individualized care rather than just focusing on the science of the illness. This is part of the spectrum of empathetic communication (Moudatsou et al, 2020). Several strategies can be used to effectively communicate with patients. These include active listening, using plain language while avoiding technical jargon, using relatable examples and illustrations, using appropriate language, keeping the interaction confidential and letting patients explain concepts in their own words to demonstrate understanding. (Tulane University School of Public Health and Tropical Medicine. Strategies for Effective Communication in Health Care. Sept 2021; Float Care 2023 ) Here’s a great personal example. In graduate school, I was a teacher’s assistant (professor lackeys or TAs as we were widely known) teaching the recitation for a course on statistics for Psychology undergraduate majors. These were first-year students who, for the most part, had no idea what they were doing, but also knew exactly what they were doing. As with most young people, there was a split, and although they needed guidance, they weren’t ready to admit it yet. This was clear in the first month as I clearly entered the room as an authority figure. I was confident in my knowledge of the material and ability to convey it in a manner that would instruct students (sounds engaging, doesn’t it?). Obviously, you can imagine what happened next: I inspired exactly zero students to actually be interested in the material and as a result, many did not pass the first exam. There was an uproar from the professor and from the students, apparently thinking that the recitations were the source of the problem. The professor sat me down for an hour over coffee and tea (I was the difficult one who didn’t and still doesn’t drink coffee), explaining the difference between

Great, now Reuven wants to know if I’m hungry. Don’t worry, we’re not talking about hunger pains or anything like that. I’m talking about drive, the hunger to stop at nothing to succeed. But I’m also not talking about it in the most general sense. In other words, we’re not talking about all those Youtube videos dealing with motivation, drive, and hunger. I’m talking about the hunger unique to healthcare that is required to create a thriving practice. I’m talking about community hunger. When you want to put together a thriving patient community, regardless of specialty, of course, it’s critical that both you, your staff, and your patients feel a certain hunger. Gone are the days of thriving practices where patients simply receive care. Today, a thriving practice depends on the teamwork built between a patient and the staff in the office. However, anytime you have a team, you need teamwork based on a voracious hunger. A driving force that unites the team and propels them forward. Clearing objectives, roles, and expectations; providing training and support; promoting diversity and representation; providing incentives and feedback; and securing institutional support and sponsorship are all examples of effective patient engagement tactics, according to a systematic review on the topic published in Bombard et al. (2018). One of the biggest misconceptions about hunger and drive is that you must be an extrovert or high-energy person to derive strength from hunger truly. In fact, I’ve quite often experienced the opposite. In Joseph and Bonnie’s case, these two had opposing personalities, but Bonnie, who was more of an introvert than Joseph’s incredible extroversion, was clearly overcome by a stronger hunger. She was more consistent in her behavior and suffered from less burnout than Joseph. She was also more adaptable. She was able to empathize with both high-energy patients and low-energy ones. Experience really is the best teacher, and more often, it’s easier to understand high-energy people from a low-energy perspective than to understand low-energy people from a high-energy perspective. According to research, personality factors have been linked to job satisfaction and burnout among healthcare professionals. For instance, higher neuroticism levels have been associated with lower job satisfaction, increased emotional exhaustion, and depersonalization. Contrarily, agreeability and scrupulosity are positively connected with job satisfaction and adversely associated with depersonalization (Kang & Malvaso, 2023). These findings imply that managing burnout and enhancing worker well-being in healthcare settings can be facilitated by understanding various personality types. I’ll give you a personal example. I am a high-energy person who loves to be loud, talk fast, and get from A to B with as little in between as possible. I was always the quintessential type A personality who never enjoyed the journey because he was too caught up in achieving the destination. In school, that can often do well for you, as I always achieved top scores on exams and papers. However, my personal relationships suffered greatly. For example, I could never maintain quality friendships (although I had many friends), and forget about romantic relationships where you truly need to be present to be successful. Imagine being so caught up in the result of effort and bringing that to a romantic situation. Strong leadership is crucial in community-based healthcare practices. Effective community involvement projects have been shown to involve communities in planning, designing, implementing, and evaluating primary health care services. Community leaders are essential in promoting teamwork and driving the group toward shared objectives (Erku et al., 2023). Ultimately, I had to recognize the drawbacks of my personality and the opportunities that presented. In other words, what were the challenges I had to overcome, and how would those help me to become a better and more contributing individual? At the same time, I struggled because some of my friends had great connections, and I often felt that they were lazy because they spoke slower, didn’t engage at a super high level of energy, and often stayed home instead of constantly going out. It’s important to consider the varied personality types’ needs for recharge time (Grailey et al., 2023). Now we understand the difference in recharge time required for different personality types. For example, if you are more introverted, you can definitely be the life of the party, but afterward, you’ll need some time to recharge the batteries. There’s nothing wrong with this; in retrospect, I think this is more beneficial than constantly being out. The literature also emphasizes the importance of reflection and self-awareness in identifying one’s fundamental limitations and comprehending the advantages associated with various personality characteristics. Extroverts may thrive in social situations and get their energy from continual engagement, but introverts have a special ability to use deep thought and reflection to advance both personally and professionally. This implies that accepting and comprehending one’s innate characteristics might result in personal growth and achievement in a variety of areas of life (Grailey et al., 2023). It challenges us to search for that hunger within instead of constantly being hungry for what’s outside of us. In my personal struggle to expand beyond my core limitations, I recognized the incredible power of introverted people and how I could leverage that to grow personally and professionally. However, one of the biggest mistakes people make is thinking they can grow this way independently. In other words, they think there is a way for them to simply absorb this information without help. Nothing could be further from the truth. Studies have underlined the value of mentoring for improving patient outcomes, career growth, and skills in healthcare settings (Nandwani, 2023). The analogy of hunger shows how, similar to the body’s requirement for nutrition from outside sources, people may need coaching to comprehend and successfully realize their inner desires. Without the right direction, they could make detrimental decisions repeatedly, just like when they consume “junk” without understanding their genuine needs. Mentorship serves as a compass, assisting people in discovering their true desires and fostering both personal and professional development. Think about your body, your purest form of

AI has revolutionized many different industries, and healthcare is no exception. In recent years, medical billing has benefited greatly from using Artificial Intelligence.   Where are the major pain points in healthcare today? 1-Patients:  A major challenge today is long wait times. In 2022, the average wait time for a physician appointment in the 15 largest U.S. metro markets is 26 days [1]. The longer someone has to wait, the higher the risk of complications or possibly more serious health issues arising.   Some possible solutions to address this problem include  use of telemedicine involves providing medical consultations and services remotely using technology such as video conferencing.   increasing the number of healthcare professionals in practice,  streamlining administrative processes and  improving patient communication and education to help prevent avoidable illnesses and hospital visits.   2-Physicians:  Physician burnout is affecting a high percentage of physicians. 62.8% of physicians experienced at least one symptom of burnout in 2021 [2]. Reasons for burnout include outdated technology and inefficient workflows, which contribute to increased work stress and frustration even for skilled and experienced professionals. Additionally, a shortage of skilled workers puts extra pressure on those in the workforce, leading to burnout and poor job satisfaction. One potential way to address these challenges is to invest in updating technology and improving workflows, which can streamline processes and reduce workload. Additionally, increasing access to training and education for both current and future workers could help alleviate the skill shortage issue. It’s essential to take proactive steps to address these issues to ensure that our healthcare workforce can continue to provide top-quality care to patients without experiencing burnout.   3-Payers:  Payers recognize the importance of delivering better experiences to their customers. To meet these expectations, payers are focusing on several critical areas:  A-Improving ease of use  Improving ease of use can be achieved through various initiatives, such as clear communication to help customers understand their network, status updates on claims, and easy-to-use portals and tools.   B-Ensuring the availability of services on-demand.  Having around-the-clock access to support and information is essential to ensuring customers can get the help they need when they need it.  To support these initiatives, payers need to leverage data-driven insights to create value for their customers. This can be achieved through technologies such as artificial intelligence and machine learning, which can help to identify trends and patterns in customer behavior and preferences, enabling payers to provide targeted and personalized support proactively.  Overall, payers must continue to innovate and adapt to meet the evolving needs and expectations of their customers, and taking a data-driven approach to improve ease of use and availability on demand could be a critical step forward. C-Reducing hospital readmission rates   Payers are leveraging machine learning to gain actionable insights from healthcare data sets. By analyzing claims data, payers can identify trends in patient outcomes and determine the most effective treatments for specific patient populations. They can also predict which patients are at a higher risk of complications or readmissions, e.g., inflammation and blood clotting occurs most following surgery, and provide this information to providers to help them take preventative measures. This kind of data-driven approach is valuable because it enables healthcare providers to deliver more personalized care to patients, leading to improved patient outcomes and reduced costs. By sharing these insights, payers can demonstrate the value of their contributions to patient care while simultaneously empowering providers to make better decisions and improve healthcare delivery.   Improved Medical Coding Accuracy One way AI has been used in medical billing is through automated billing and coding. The technology can analyze electronic health records and notes made by healthcare providers and use that information to generate codes that accurately bill for specific services. This reduces the risk of errors, which can result in denied claims and lost revenue.   Improved Insurance Cash Flow Prediction and Denial Management  AI is also used for claims prediction. By analyzing past claims data, AI identifies patterns and predicts which claims will likely be denied. This allows billing teams to proactively address issues and avoid denials, which saves time and money.   Also, when denials are increasing due to a lack of medical necessity, lacking documentation, or coding mistakes, AI can analyze the denials to find the cause and then create tasks within the EHR to correct the likely causes for denials.   Improved Medical Billing Workflow To automate the claims follow-up process, AI analyzes claims data and identifies the claims that are most likely to require follow-up.  AI automatically generates follow-up tasks for billing teams. This reduces the administrative burden on billing teams and ensures that claims are followed up on in a timely manner. The deep learning of users’ interaction with EHR and billing software allows the learning of users’ habits, needs anticipation, and the display of the right data at the right time. Automatically retrieving and displaying all of the required data and just at the right time drastically reduces the amount of labor spent on manual billing tasks and allows staff to make better decisions about the next steps for denial resolution.   Improved and Expedited Pre-Authorizations The current pre-authorization process can be a real headache for patients and healthcare providers. A streamlined, automated system that can quickly analyze a patient’s health data and determine the medical necessity of a procedure would be a game changer. Imagine how much time, stress, and resources could be saved if medical billers no longer had to worry about pre-authorization denials or chasing down authorization numbers. It’s exciting to think about how technology can continue to improve and simplify healthcare processes like this.   Improved patient customer service With the rise of technology, we’re seeing a lot of improvements in healthcare that can benefit patients and providers alike. Using bots for patient interactions like appointment scheduling and payment collection is one way to streamline processes and reduce frustration for patients and billing staff. By standardizing these tasks, there’s less room for error and confusion, leading to smoother, more efficient

Partial denials cause the average medical practice to lose as much as 11% of its revenue (Capko, 2009).  Payers are known for denying claim payments for legitimate reasons (provider-generated errors) and arbitrary reasons, motivated by the inherent benefits of controlling the float for the maximal time (Stahl). Systematic denial management must address both kinds of errors.  Denial management is difficult because of the (intentional) complexity of denial causes, payer variety, and claim volume.  Systematic denial management requires measurement, early claim validation, comprehensive monitoring, and customized tracking of the appeals process. According to a survey by the Medical Group Management Association (MGMA), 69% of organizations reported a significant increase in denials, averaging 17%, in 2021 alone. These findings are further supported by additional alarming statistics  (Zipple, 2023):   In 2021, claim denials surpassed 48 million (Kaiser 2023). On average, nearly 20% of all claims are denied, and shockingly, up to 60% of these denied claims are never resubmitted (Poland and Harihara, 2022) Certain payers exhibit denial rates as high as 80% (Revenue Cycle Intelligence, 2022)   However, there is some hope as, on average, approximately 40% of denials can be overturned through appropriate appeals processes (Kaiser 2023). According to a HIMSS Analytics study, here are some key findings on how hospital executives manage claim denials:  44% of hospital executives rely on vendor solutions to manage denials. 31% of executives still handle denials manually, without any specific tool or software. 18% of hospitals have developed their own in-house tools for denial management. 7% of executives are unsure about the method they use for denial management. Among respondents without a vendor-provided solution, 60% plan to purchase one within the next 7-12 months. (Regulsky, 2023)   Denial Risk Classification The denial risk is not uniform across all claims. Certain classes of claims run significantly higher denial risks, depending on six factors: Claim complexity  Modifiers, e.g., incorrect modifier used  Multiple line items Temporary constraints Claim not filed on time   Patient constraints, e.g., claim submission during global periods (see below) Payer constraint (e.g., claim submission timing proximity to the start of the fiscal year) Procedure constraint (e.g., experimental services) Payer idiosyncrasies Bundled services, e.g., services incorrectly bundled or Unbundling and upcoding  Disputed medical necessity, e.g., Not a medical necessity   Non-covered services   Other Patient data Patient deductible   Plan benefits exhausted   Provider data, e.g., Out-of-network (OON) provider   Process Compliance Incorrect insurance ID number   Duplicate claim submitted   Prior authorization not attached   Typo errors in patient information   Note that for complex claims, most payers pay the full amount for one line item but then pay only a percentage of the remaining items. This payment approach creates two opportunities for underpayment: The order of paid items The payment percentage of the remaining items   Next, temporary constraints often cause payment errors because of the misapplication of constraints. For instance, claims submitted during the global period for services unrelated to the global period are often denied. A global period is a period of time before and after a surgical procedure during which related services are bundled into the initial procedure’s payment. It helps streamline billing by including pre-operative visits, post-operative follow-up care, and related services within a single payment (Master, 2020). Similar mistakes may occur at the start of the fiscal year due to misapplying rules for deductibles or outdated fee schedules. Additionally, payers often vary in their interpretations of Correct Coding Initiative (CCI) bundling rules or coverage of certain services. Developing sensitivity to such idiosyncrasies is a key to full and timely payments. CMS contractors conduct medical reviews on certain claims and prior authorizations to ensure that Medicare payments are made only for services that comply with all Medicare regulations. Suppose a review leads to a denial or non-affirmation decision. In that case, the contractor responsible for the review provides the provider or supplier with a comprehensive explanation detailing the reasons for the denial or non-affirmation.  For example, the code AM300 is used when the provided documentation lacks evidence to substantiate the provision of Basic Life Support services during an emergency response. Please refer to 42 CFR § 410.40 (c), 42 CFR § 414.605, Internet Only Manual (IOM), Publication 100-02, Medicare Benefit Policy Manual, Chapter 10, Section 20, and Section 30.1.1 for further clarification and guidelines on this matter. (Reason Statements and Document (EMDR) Codes | CMS). Payers can also separate the Claim Processing and Denial Management departments to add complexity and improve the likelihood of underpayments and delays. In this scenario, the provider may be forced into a deadlock by having to deal with two separate departments for the same claim, where each of the two departments “waits” for the decision of the other.   Denial Risk Management Stages In a high-volume clinic, the only practical way to manage denials is to use computer technology and follow a four-step procedure:   1. Prevent mistakes during claim submission    This can be accomplished with a built-in claim validation procedure that includes payer-specific tests and EHR integration. Such tests (“pre-submission scrubbing”) compare every claim with Correct Coding Initiative (CCI) regulations, diligently review modifiers used to differentiate between procedures on the same claim, and compare the charged amount with the allowed amount, according to previous experience or the previous contract, to avoid undercharging.   Integrating EHR and claims management systems allows for the seamless transfer of patient data and encounter information from the EHR to the claims system. This eliminates the need for manual data entry or transcription, reducing the chances of errors or omissions that may occur during the claims submission process.  EHR systems often include built-in templates and structured documentation features that guide providers to capture complete and accurate information. These templates help ensure that all necessary information for claims submission, such as procedure details, diagnoses, and supporting documentation, is appropriately recorded.   2. Identify underpayments   Identifying underpayments in the claims process is crucial for healthcare organizations to ensure accurate reimbursement and maximize revenue. This involves comparing the payment with the allowed amount, identifying zero-paid items, and evaluating payment timeliness. The