Healthcare providers seeing more diagnosis-related group downgrades and ghost denials

Each year, tens of millions of medical claims will be denied by healthcare payers – a significant percentage of all submitted claims.^[1] Such claims denials can be quite costly to healthcare providers, resulting in consequential revenue leakage. And the number of claim denials is only rising. Alisha Mays, JD, managing attorney and executive director, client success, at Aspirion, said the company has seen a 15% to 20% average increase in clinical denials, including authorization, medical necessity, inpatient to outpatient downgrades, and emergency department acuity level downgrades.^[2] Yet, she maintained, today’s providers are struggling with another type of claims denial: the diagnosis-related group (DRG) downgrade.

“DRG downgrades are increasingly becoming a hot topic in the industry,” said Mays. “Providers are definitely seeing more of them – and it’s something that people are asking about how to better manage and what tips and tricks they can use to handle these complex claim denials that they are now, unfortunately, getting hit with more and more often.”

To discuss this growing issue, Mays led an HFMA Revenue Cycle Executive Council Meeting session on March 8, 2023, in Phoenix, Arizona, entitled DRG Downgrades and Ghost Denials (Ghost Denials are any denials that are not well-defined by the payer or are unable to be accurately and quickly identified by the provider without in-depth analysis). She and more than a dozen attendees, from provider organizations of a variety of sizes, spent time highlighting their experiences with DRG downgrades, as well as lessons learned to help other organizations better measure, manage and successfully appeal these complex denials.

“Historically, many providers may have just accepted and allowed these kinds of denials – because they were rare and quite complicated,” she said. “But with the increase in numbers, healthcare organizations are realizing that they need to take a stand, educate themselves on best practices and find ways to protect themselves against
DRG downgrades.”

Denials team structure and processes

Having the right denials team in place can increase your chances of successfully appealing a DRG downgrade denial. When Mays asked the audience about the makeup of their denials team, there was a mix of responses – but many highlighted the importance of having a physician advisor on the team. Mays concurred this is a best practice that more provider organizations are adopting.

“From our perspective, having a clinician on the team is very important – whether it is a nurse or a physician,” she said. “When they work together with coders and other team members, they can dig into the actual nuts and bolts of the claim and understand what’s happening with that account. Different organizations also organize their teams in different ways – certain payers or denial types – and some have a single team that works all types of denials.”

Attendees also discussed how far they will take a denial. While the majority of the group stated they go as far as they can with internal appeals, there were differing opinions on whether external appeals are worth the time and effort required.

“Many organizations will do these types of external appeals because it’s a process they can go through, but they often don’t find much success in them,” said Mays. “There was also a lot of hesitancy about taking things further to arbitration and litigation because of the amount of time and resources necessary to do it. It was clear, as we continued to talk about these different appeals, that it’s only worth taking things beyond the safety of the internal process if you are doing so with really strong accounts. It’s also worthwhile when your peers are seeing a lot of the same type of denials. Sometimes it takes multiple provider organizations escalating their own small group of strong accounts to make an impact.”

Tracking and measuring complex denials

It’s often said that you cannot manage what you cannot measure – and the adage more than holds true for complex claims denials. Mays said that providers rely on a variety of methods to track claim denials – and the council attendees demonstrated that to be fact.

“Many providers rely heavily on their electronic health record (EHR) if it has good reporting capabilities,” Mays said. Some of the attendees indicated that they also have some sort of bolt-on information technology (IT) system to keep track of denials. Even so, there are still some providers who track claims very manually – as in using a spreadsheet. There’s no shame in that if that’s the only available option, but it’s obviously not a best practice, especially when you are talking about some of these more complex denials.”

The council attendees also discussed how they determine which denials to pursue, including their triage approaches and internal thresholds for denial amounts. Once again, there was a fair amount of variety in responses. Mays said this is not a surprise.

“Each organization has to assess how much time and effort is worth putting in for these denials – and whether that effort will return enough on their denial amounts,” she said. “Much of that will depend on the size of your organization, but it’s clear that it’s so important to take the time to do that kind of evaluation. You need to think about the strength of each case and the likelihood of getting some return. That’s where the tracking and measuring, even down to the single account level, becomes really important.”

Managed care, contracting and compliance

The key to managing DRG downgrades and other complex denials, Mays contended, is making sure you put in a two-way feedback loop between the front end and back end of the claims process. When healthcare organizations have transparency into their claim denials and the metrics in place to evaluate which complex denials should be pursued, they can feed that information back to medical billing and coding to reduce the overall number of denials.

“The providers that are most successful are taking a hard look at the heavily scrutinized diagnosis codes and even tagging accounts for review before billing with those codes,” Mays said. “When you can track things at that level and put another set of eyes on the claim before submission, you are more likely to avoid a denial. This isn’t all about back-end fixes. You want to also fix the front end to limit the number of denials you see.”

Another important strategy to consider is renegotiating contracts with payers to ensure beneficial language is present to better protect provider organizations from increased DRG downgrades and ghost denials.

“That same data you give to your coders, you can give to your compliance and contract teams,” she said. “Payer contracts are cyclical. If you are gearing up for a contract renewal, you can work to put language in it to protect yourself from these types of denials. Too often, people on the contracting side are not aware of aggregated trends or what kind of denials are occurring and why. Make sure you have a feedback loop there, too – and use that information you’ve collected to see about getting better protections.”

Mays said she hopes that council attendees take away the importance of sharing their best practices with other provider organizations. Not only can they learn about better ways to address and manage complex claims denials, but they can work together to better hold payers accountable.

“If you think you’re the only provider or health system having a particular issue with these kinds of denials, I guarantee you that you’re not alone,” she said. “When you can work together to stand up for yourselves, that is how change will be effectuated. At the end of the day, any balances that remain unresolved hurt the provider. We want to make sure every patient care dollar that is appropriate is passed on to our providers.” 

About Aspirion

Aspirion helps hospitals and health systems maximize revenue recovery by focusing on their most challenging reimbursements. Aspirion achieved the top 2022 Best in KLAS for Revenue Integrity/Underpayments ranking which is reflective of its unparalleled technological innovation and team of 100-plus attorneys, 30-plus clinicians, and seasoned claims processors. From Motor Vehicle Accident, Workers’ Compensation, and Veterans Affairs/TRICARE to Denials and Aging AR, Aspirion’s 1000-plus healthcare clients across 45 states count on Aspirion for superior revenue recovery performance.

_{This published piece is provided solely for informational purposes. HFMA does not endorse the published material or warrant or guarantee its accuracy. The statements and opinions by participants are those of the participants and not those of HFMA. References to commercial manufacturers, vendors, products, or services that may appear do not constitute endorsements by HFMA.}

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^[1]. Pollitz, K., Lo, J., Wallace, R., and Mengistu, S., Claims denials and appeals in ACA Marketplace Plans in 2021, Kaiser Family Foundation, Feb. 9, 2023.

^[2]. Aspirion research presented at HFMA Revenue Cycle Executive Council, Phoenix.