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The Remaining 20 (Part 2) - Header

The Remaining 20%: The Critical Role Appeals Play in Profitability (Part 2)

  • Director of Anatomic Pathology Development

This blog post is part two of the series. View Part One. View Part Two.


The first installment of this three part series provides data on denial trends in the pathology, molecular, and the clinical laboratory marketplace. Understanding root causes for specific denials enables us to initiate a strategic, multi-tiered approach to appeals. Measuring outcomes on all attempts to recover revenue, successful or not, is critical in understanding whether our efforts achieved their objectives or require us to modify our actions to improve future outcomes. In Part 2 of this series, we explore what’s driving our successes and how to ensure second and third level appeals are equally as fruitful as the first — if not more so.

Denial rates have increased dramatically over the last five years; as a result, traditional appeal methods have become obsolete, particularly given that many of these processes are manual ones that increase the risk of inadvertent errors or PHI disclosures. XIFIN’s RCM platform supports processes in a fully integrated fashion, which helps the billing department manage of how claims are appealed and automates the process so that once the rules are established, appeals are packaged and sent to the payor with little or no need for human intervention. Using this automated workflow XIFIN performs over 10,000 appeals per month, using over 1,000 diverse types of appeals to over 2,200 payors, which provides us the analytics to design a data driven process to significantly improve appeals success. Because the system is electronically connected directly to many payors, we have excellent visibility into the status and timing of appeals through dashboards. The system has configurable appeals processes, bulk appeals capabilities, and client portal document upload to facilitate the process and generate faster, more predictable appeals results.

The automation provides the ability to proactively address appeals that would rarely be worked, which results in increased revenue that would otherwise likely have been attributed to contractual allowance and would have gone unreimbursed. As important as it is to submit the appeal, measuring the outcome of each appeal is also critical. Every appeal should be trackable and reportable by submission attempts, denial and appeal type, payor plan, and revenue generated at each attempt. Leveraging XIFIN’s vast clinical and financial claims data, we determined collective success rates by Appeal 1, Appeal 2, and Appeal 3 attempts.

The chart above represents cumulative success rates by segment, broken down by appeal attempt. The data demonstrates the importance of a strategic, multi-tiered approach in achieving a higher rate of success (and therefore higher rate of collected revenue).

  • Nearly 60% of molecular appeals received a payment; however, only 23% of the amount received in total was received as a result of the first level appeal. Nearly 34% received payment only upon subsequent (2nd and 3rd level) appeals. For Molecular, 57% of all appeals generate payments. Of that, 42% of appeal success happened on the first appeal, and the rest (58%) didn’t happen until there were subsequent appeals (26% of successes happened on the second appeal, and 32% happened on the third appeal).
  • Nearly 4% of all revenue generated in 2019 by XIFIN’s molecular customers was a direct result of successful appeals.
  • In each segment, with exception of pain and toxicology, more appeals saw success at the second and third attempts, than from first attempts. For pain and toxicology, just under half of successful appeals were achieved in the second and third attempts. Although the rates varied across segments, all segments benefited from executing a second and third level appeal process

Breaking success rates down by the type of denial the appeal addressed shows that some types of appeals fare better on Appeal 1, while others achieve more success on Appeal 2 or 3. Some highlights:

Out of Network Underpayment

Appeals within this category enjoyed the highest success rate overall, with 64% of appeals seeing success.

Medical Necessity

Medical necessity appeals demonstrated the highest rate of first round appeal success, clocking 33% for Appeal 1. Appeals 2 and 3 yielded nearly identical returns, at 12% each. In total, medical necessity appeals also demonstrated the highest appeals success overall, at just under 60% after three rounds of appeals. In-network BCBS plans accounted for 41% of the favorable first round appeals, 64% of second round, and 52% of third round.

Prior Authorizations

Prior authorizations appeals had the lowest rate of success upon first submission (Appeal 1); this segment had highest appeals success in the third go-round; all three rounds together yielded a total appeal success rate of nearly 50%. Commercial payors contributed to 33% of the favorable outcomes in the first level appeal, 35% in the second level, and 30% in the third level, while Blues (in network), accounted for the second highest successes for appeals that were associated with prior authorizations in each tier at 22% for first level appeals, 26% for second level, and 34% in third level.

Experimental / Investigational

This segment had the second highest success rate for first round appeals, at 32%. Second round appeals yielded just under 10%, and third round appeals showed further diminished returns at just under 7%. Medicare overturned 56% of experimental/investigational denials in the first round of appeals. Keeping similar momentum into the second level, 44% of Medicare investigational appeals were successful, with only 8% of appeals successful in round three.

The Big Elephant in the Room: Prior Authorizations

Prior authorizations can be tedious to acquire in the laboratory industry, given our dependence on referring physician offices and hospitals to acquire that information on our behalf. To complicate matters, we continue to see payor adoption of prior authorization requirements increasing in an attempt to better manage the course of healthcare and treatment for their subscribers. Authorization requirements are quickly becoming a new normal.

The American Medical Association performed a survey in 2018 focused on prior authorizations. The results of the survey showed that:

  • Medical practices complete about 31 prior authorization request per week, per physician.
  • One in four physicians waits 3-5 days for the decision.
  • 92% of respondents unsurprisingly stated this caused a delay in patient access to care.
  • In the last five years, more than 51% of respondents have experienced a significant burden to their practice as a result of prior authorizations.

Part of the challenge is that 82% of authorizations are still not being done through fully electronic means, which means providers resort to faxes and phone calls. Provider offices are spending 20 hours per week of staff time per physician completing prior authorization requests. Upon submission, they may way wait from five days up to two months before obtaining a decision. The constant back and forth with insurers can prolong the prior authorization timeline, with the patient waiting for treatment the entire time. 

As a result of these complexities, it is estimated that nearly 40% of all prior authorizations are abandoned due to complex approval policies. It’s important to understand the burden that is placed on ordering providers to properly complete this requirement in order to give us a better appreciation for how difficult and costly it is for them to manage with any level of consistency.

XIFIN’s analysis indicates a 300% increase in prior authorization denials during the last several years. 

Proprietary labs had a 92% increase in prior authorizations and molecular labs had a 52% increase, respectively, while anatomic pathology experienced a 65.4% increase. 

Given how difficult it can be to acquire a prior authorization (by either laboratory efforts or those of the physician office), the demand on billing teams is becoming more challenging. There is a substantial risk of reduced productivity and increased cost to collect. While we here at XIFIN have experienced a slight stabilization in the growth of prior authorization denials, it’s not without a tremendous amount of effort being put into acquiring this information more proactively, appealing those that do deny, and fighting for coverage changes to payor policies. Any level of reduction, or stabilization, can be attributed to a number of influences within our control. The integration of prior authorization solutions into our billing platform has had a measurable impact in resolving prior auth denials that were previously never paid. Innovative solutions help us continue to actively decrease fatal denials and reduce loss of revenue.

XIFIN has partnered with Glidian and Infinx to offer prior authorization solutions that work directly with XIFIN RPM. Using online portals rather than phone calls or faxes, clients reduced the time spent per prior authorization case by 87%.

As labs submit their prior authorization requests, solution providers like Glidian and Infinx begin to recognize insurance-specific criteria, similar to what we see with appeals. This supports the tailoring of prior authorization submissions to match payors’ varying definitions as to what’s considered a complete set of clinical criteria. Submitting requests for prior authorizations as a canned approach only increases the likelihood of denial or a payor request to submit additional documentation (often issued with an unrealistic 24 to 48 hour window to do so).  Robust prior auth software and services are designed to address methods, processes, and formats each payor prefers. All these considerations expedite time to decision, reduce cost to acquire, and improve collections.

Stay tuned for Part 3 where we will discuss the various payor edits and policies that drive denials and how the payor’s process for each level of appeal review influences the way we draft reconsideration letters. Real-world scenarios will be discussed and used to show the important roles report documentation and verbiage play in overturning a denial.


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Published by XIFIN
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