Getting paid for clinical services should be a straightforward process. You capture the patient’s insurance, verify eligibility and obtain the needed pre-cert or prior authorization. Then you see the patient, document the visit, code the service, send the claim and get paid. This should be all.
But if that were the case, you would not need a billing department. But with 90% of the denials being preventable, you can have a very lean team by proactively avoiding denials.
Ignoring the causes of your denials and simply appealing your claims can have significant financial impact on your organization. According to Allscripts® Practice Performance Database, the average denial rate across 5729 organizations is 16%. If you can successfully overturn 70% of these denials, assuming the following figures, you would incur a negative monthly financial impact of $51,017, or $612,207 a year.
- Total claims per month: 6,000
- Denied claims at 16% denial rate: 960
- Estimated denied revenue: $90,057.60
- Recovered revenue at 70% overturn rate: $63,040.32
- Estimated cost of appeals: $24,000
- Total monthly impact: $51,017.28
Your average denial rate could vary based on your location, so you can adjust your strategy accordingly.
To proactively avoid denials so your practice can decrease costs and increase revenue, follow this five-step framework:
- Identifying — Use your practice management and/or your denial management tool to analyze all your denials. Determine why your claims are being denied. Is it affecting a specific provider, location, type of service or insurance? Trend these denials and identify common patterns. This step is crucial to supporting an efficient appeal process, a process improvement initiative and future contract negotiations.
- Appealing — Group all denials by insurance and denial reason. Ideally this process is automated and not manual. Assign denials to the appropriate resources and work those with shorter appeal timeframes first. Consider implementing robotic process automation (RPA) to have the system address common denials that require the same actions repeatedly (e.g., denials requesting medical records).
- Improving — Having determined why your claims are being denied, group your denials by responsible party and identify all possible causes for the denials. Do you need to provide better tools to complete a task? Do your resources need additional training? Are you staffed appropriately? According to Allscripts® Practice Performance Database, almost 50% of all denials stem from front office challenges. This is likely one of the areas where you will spend most of your efforts.
Prioritize process improvement initiatives by determining which can be addressed quickly and easily and those which will give you more bang for your buck. Do not try to solve all problems at once. Quick wins will motive your staff and encourage their participation and buy-in. They will be a great source of information to develop your solutions.
- Monitoring — Frequently reviewing all your key performance indicators (KPIs) will help you identify progress and/or if there are other areas to optimize. Keep in mind that though the average denial rate is 16%, and the best practices are below 5%. Foster a culture of becoming great denial avoiders instead of successful appeal submitters. Encourage your now-motivated staff to look for new opportunities and develop corrective actions and prevention plans. Know that for every 10 denials your practice prevents each month, you are saving $3,000 a year in appeal costs.
- Celebrating — Once you have done a terrific job preventing denials, take the time to acknowledge and reward your employees. In today’s complex environment, many practices are barely successful at this. They are so busy managing day-to-day revenue cycle challenges that they do not have time to review their current processes. Affirming your staff and their efforts will increase their enthusiasm in the future, meaning you will continue discovering more and more opportunities to save, improve and succeed.