In the landscape of healthcare, medical billing plays a crucial role. One of the important components of medical billing is denial prevention and effective denial management strategies that maximize revenue for the healthcare services you provide to your patients. Understanding the root causes of denials can increase cash flow, reduce accounts receivable days, and enhance the overall financial health of your practice.
Reducing claim denials is a pivotal responsibility of your revenue cycle team which also requires the participation of multiple stakeholders from physicians to administrators across your practice. Without an effective denial management strategy, your practice can face financial instability and excessive overhead costs, which might be steeper than you would think.
Claim Denial Effects in Healthcare
As per the US healthcare industry report, providers spent nearly $20 billion in 2022 towards delays and denials across all types of payers. But it does not stop here. A primary survey of 516 acute care hospitals in the USA revealed that nearly 15% of all claims submitted to private payers for reimbursements were denied in 2022.
See below for more staggering statistics concerning claim denials:
- Medicaid claims received an initial denial of 16.7% whereas the denial rate for Medicare claims was comparatively lower which is 8.4% as reported.
- Most of the denied claims are overturned but it takes multiple rounds of appeals which are extremely time-consuming.
- Healthcare institutions spend an average of $44 per claim.
The impact of denied claims decreases the practice’s cash flow and increases administrative costs due to the requirement of rework and resubmission of claims. The in-house staff spends more resources on identifying and rectifying the claims, which can be spent on delivering valuable patient care.
Claims denials prolong the time in getting payments for the services rendered. This increases the average number of days in accounts receivable and more headaches to manage while appealing claims to insurance companies. The resources spent on appealing denials further strain the revenue cycle management of your practice.
Top Reasons for Claim Denials
Despite numerous efforts by the healthcare industry to simplify the claims process, the number of refused claims is rising. Claims can be denied due to multiple reasons and addressing them promptly is essential for financial success. Here’s a list of a few reasons why claims are denied;
- Incorrect and incomplete information such as patient’s demographic details, diagnostic codes, dates of service, etc.
- Missing or incorrect utilization of codes and modifiers.
- Failure to get prior authorization for the services rendered to the patients which cost around $80,000 in lost revenue for physicians.
- Physician or facility credentialing errors.
- Submitting the same claims multiple times for the same service or procedure.
- Claim submission for non-covered services.
- Missing claim submission deadlines given by the payers.
- Lack of evidence supporting the medical necessity of the services rendered.
You Need Effective Denials Management Strategies
As per some reports, 65% of claim denials are never worked upon, which results in an estimated 3% net revenue loss. However, healthcare providers can eliminate the financial risks of denied claims by creating an effective denial management strategy. This strategy emphasizes accuracy in front-end processes, medical necessity, and payer contract variations.
- Meticulous documentation of patient information, diagnoses, treatments, and procedures before claim submission.
- Manage denials proactively by understanding billing and coding guidelines, accurate code selection, and documentation.
- Conducting regular audits and quality checks to eliminate inaccuracy.
- Gather necessary approvals before the claim is submitted.
- Stay updated with the latest guidelines for medical billing.
- Cultivate a collaborative environment among payers, providers, and patients.
Implementing an effective denial management strategy can help reduce claims and help revive the financial health of the providers.
Why Your In-house Team Might Need Outside Help
Excessive claim denials can put financial pressure on your practice’s bottom line so relying solely on your internal team to implement and manage denials may not be an optimal option. Here are some of the reasons why:
- Your internal team is probably already overburdened; insufficient resources and time restrictions may prevent a thorough claim review and follow-up which may trigger denials.
- The sheer volume of coding and billing changes happening each year is overwhelming. Failure to stay updated in these spheres can lead to errors and oversight.
- Most internal teams lack the depth and scope of RCM expertise necessary to identify all the factors contributing to claim denials.
- Many in-house staff lack the necessary infrastructure and assistance to create customized workflows that prevent denials.
RCM Partners, like RCM Workshop, has teamed up with experts who always stay up to date with changing regulations and payer policies, ensuring accurate billing and faster reimbursements. We possess resources sufficient to handle claims and minimize errors.
Our best practices involve categorizing denials, contacting payers and patients for additional information, submitting corrected claims, following up on denied claims, etc. ensure a significant decrease in denials. This results in improved cash flow decreased administrative costs, and enhanced financial performance. Therefore, corresponding with a dedicated RCM partner like us with deep industry knowledge is optimal for achieving substantial financial progress and reducing denied claims.
Final Thoughts…
Effective denial management is a multifaceted approach that involves a combination of proactive measures, staff education, continuous improvement, etc. By identifying the root causes of denials and implementing robust strategies to address them, the healthcare industry can reduce claim denials, reduce overhead expenses, and enhance financial stability. It can also allow providers to deliver timely and appropriate care without worrying about unnecessary financial burdens.