How Much are Denials Really Costing You?

As a medical professional, you’re well acquainted with the constant struggle of submitting clean claims that result in efficient reimbursement. You likely have capable, trained staff assigned to targeting denials – working hard to make sure you don’t let any money owed slip through the cracks. 

That being said, are you aware just how deeply denied claims are affecting your bottom line? The stats on how much money is actually lost on medical claim denials for physician offices might actually alarm you. The Healthcare Financial Management Association (HFMA) reported earlier this year that “out of $3 trillion in total claims submitted by healthcare organizations, $262 billion were denied, translating to nearly $5 million in denials, on average, per provider.” 

graphic showing high expense of denials on denied cliams

Having staff assigned to claim resubmission isn’t as effective as submitting a clean claim on the first attempt. You’re dealing not only with the cost of the denial, but also the cost to pay staff to keep reworking them. How much of your resources are being redirected to recoup money lost? How much are denials really costing you? Read on to learn where you can fill the gaps in your practice’s claims management processes. 

The hidden cost of denials

When it comes to how denials impact your practice, there’s more to consider than dollars and cents. Revenue flow is critical for the overall health of a medical practice, of course, but it’s not as black and white as you may think. Other resources potentially drained by inefficient claims management include staff workflows and overall practice productivity. Many practices assign resubmission of claims to staff with already bloated workloads, which not only increases stress, but also triggers what psychological researchers call “task switching cost.” 

graphic of multitasking brain

Task switching is the new term for multitasking. Studies have shown that human brains are not designed for heavy-duty multitasking, so they switch back and forth between focusing on two separate tasks. Employees confronted with more work than they can reasonably handle often resort to task switching to get everything done, which has been proven an inefficient use of mental energy. This cost also affects your practice’s costs down the road, when you factor in the hourly rate you pay your staff to spend all those extra hours task-switching. You could also be facing a potentially higher employee turnover rate due to administrative burnout. 

The value of effectively scrubbed claims

So what can you do to improve your claims process and avoid a bottleneck of denials? First, take the time to ensure a clean, correct claim is sent on the first pass. The HFMA notes, “For a provider processing 100,000 claims per month, a variance as small as 1 percent in the first pass rate (FPR) can mean an additional 1,000 claims that must be manually reviewed.” As you can see, having an efficient claims management process in place to encourage clean claims submission and quick turnaround time on resubmissions can make a massive impact on your practice, both in terms of productivity and revenue flow. 

graphic showing denied claims errors

Getting prior authorization processes in place

Equally as important as submitting clean claims is ensuring a streamlined, consistent prior authorization (PA) process is in place. Front-office administrators may seem like the best people to task PA to, but in reality, every staff member should have at least some basic understanding of how to verify a patient’s eligibility. This should include how prior authorization is done and what to do if mistakes are made. 

Clinical staff who recognize discrepancies within prior authorization should have administrative staff double-check PRIOR to treatment, in order to avoid providing non-covered services and an unpaid claim. Confirming that a patient has an active insurance policy is only the bare minimum of PA – consider how your staff can take extra steps to confirm deductibles, copays, and service coverages at patient checkpoints.

As an example, one step in an efficient prior authorization process could be collecting patient insurance information before their scheduled appointment. While you’re confirming their details, research their policy to confirm that the policy is active and coverage includes the services ordered. Don’t procrastinate – this is just one of several pieces of information you should already have before the patient arrives at your practice. The last thing you want is a denied claim because the PA wasn’t as thorough as it should have been.

If it turns out a service isn’t covered, or is out of network, be upfront with the patient so he or she knows that all, or a portion, of the balance will be their responsibility to pay. Not only could unexpected expenses cause the patient to lose trust in your practice, you’ll also lose revenue if they jilt the bill. Even worse, you could be facing a poor review if they feel they were blindsided with a bill that they believed their insurance would cover. When it comes to payment responsibility, communication is key. 

medical claim denial reasons

Avoiding common denials

It’s never too late to get a better handle on your claims process. Think of your billing process as a task that needs constant attention and fine-tuning. Most denials are the result of technical errors or simple oversights that could be prevented with a thorough review process. Taking the time, on the front end, to make sure claims are as accurate as possible before going to the payer will save you from the lengthy, tedious appeals process.

Avoiding common claims denials is a great way to reduce your overall denial percentage and help heal your RCM process. Here are some of the most common reasons claims are denied:

  • Claim not filed on time
  • Claim is non-specific 
  • Claim is missing information
  • Claim is a duplicate 
  • Incorrect ICD coding
  • Incorrect or missing patient information
  • Lack of documentation/referral to support the necessity of treatment 

When Denials Happen, and they will. 

Even by following best practices, denials happen. If you receive a denial, you should always submit an appeal. Yes, it takes more time and resources, but if the money is rightfully owed, then you need to pursue reimbursement. Your provider performed a service and reimbursement should always be paid for services rendered. 

Administrative teams should work together to identify the underlying causes of repeated denials and reduce preventable, repeat billing errors. If you’re detecting a trend towards one particular mistake, make it a priority to investigate. It may be advantageous to consult a billing expert. CareCloud offers billing support primarily for enhancing claim submission, including a revenue cycle assessment to review your prior authorization strategies. Having an experienced, dedicated billing partner that can amplify your front office team’s efforts means fewer preventable errors and less revenue-related stress for everyone involved.

Strategizing for success

If you’re unsure about how to tackle your denials, it may be worth watching CareCloud’s on-demand webinar, Dodge Denied Claims. This resource aims to provide practices with a general overview on how to increase confidence surrounding prior authorization. Essential information discussed in this webinar includes best practices for prior authorization, as well as eligibility verification, key performance indicators for measuring success, how to empower your staff to catch and correct denied claims, and much more. 

In summary

Denials are part of practice operations, but they shouldn’t take up so much of your workflow that they distract your team from providing exceptional patient care. A small denial percentage is expected and manageable. As a practice leader, it’s your job to keep claim denial rates from getting out of hand. A lack of prior authorization strategy and frequent appeals can end up being detrimental to your cash flow. Once there’s a bottleneck of denials, it’s hard to right the ship. Start sending clean claims the first time, utilize a billing partner’s resources, if possible, and make sure to analyze your denial rates so you can create a strategy for success. This will help reduce the cost of repeated denials and increase revenue flow for your practice.

Avoid claim denials, increase revenue and empower your staff

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