How Claim Rejections are affecting your Bottom-line & How to prevent it?

Have you ever realized what the actual cost of claim rejections is? When analyzing a new client’s revenue cycle management processes, this is one of the first questions I ask. It still amazes me how often the answer to that question is “No”. This one bit of knowledge can guide me in the right direction when it comes to identifying a practice’s revenue cycle issues. 

Days in AR, cumulative collections, and First Pass Resolution Rate are among the major key performance indicators to improve clean claims rate, resulting in improvements to the practice’s bottom line. 

Medical billing experts are well aware of the constant efforts to submit accurate claims resulting in speedy payments. You likely have trained employees to pursuing rejections, and they have taken the necessary steps to ensure that rejected claims do not fall through the cracks. Claim rejections are harming your bottom line significantly. The statistics on how much money physician offices spend due to medical claims rejections may startle you.

According to the healthcare financial management Association (HFMA), “$262 billion claims were denied out of $3 trillion total claims submitted by healthcare providers, $262 billion were rejected equating to at almost 9% of rejection rate. The effort of recovering almost 60% of these rejected claims costs healthcare providers almost $118 per claim. Submitting a clean claim on the first attempt is much more effective than having staff for claim resubmission. The cost includes dealing with the denial and paying employees to constantly redoing them.

Read on the article to learn how much are denials costing you? Read on to find out how you can fill the gaps in your practice’s claims management processes.

The Invisible Cost of Claim Denials:

The highest cost of poor clean claims rates occurs when a biller cannot keep up with claim rejection and denial management and does not work on them.

Staff workflows and overall practice productivity are two resources that depends on efficient claim processing. Assigning the resubmission of claims to employees who already have heavy workloads increases stress and “task switching cost”.

Multitasking Erodes Productivity:

Multitasking is also known as task switching. Human brains find difficulty in heavy-duty multitasking. When they focus on two different things, this significantly influences the Practice’s Net Collections Rate. As the Accounts Receivables look clean and the Days in AR are within industry guidelines, the cost of writing off claims is frequently overlooked.

Employees frequently switch tasks to get everything done, which has been shown to be a wasteful use of mental resources. When you consider the hourly rate you pay your personnel to spend all those extra hours task-switching, this expense impacts your practice’s costs down the road. You may also face a greater personnel turnover rate as a result of administrative burnout.

Significance of Eligibility Verification:

Having a streamlined, consistent eligibility verification process is just as crucial as filing clean claims. Clinical professionals should have administrative staff double-check the eligibility to avoid providing non-covered services and an unpaid claim. Determine how your staff can confirm deductibles, copays, and service coverage at patient checkpoints.

Collecting patient insurance information before their scheduled appointment could be one stage in an efficient pre-authorization procedure. While verifying information, look into the insurance policy to ensure it is active and covers the services you’ve requested. If it shows that the insurance does not cover a service or is out of network, inform the patient right away to understand that they will be responsible for the payment.

Charge Reconciliation and Verification:

The billing process requires constant monitoring to avoid technical errors. Investing the time to ensure claims accuracy before sending to the payer will save you time and money in the long run.  Make sure you send an accurate claim on the first attempt. If a large practice is processing 100,000 claims per year with a discrepancy of 9% in the First Pass rate can mean 9,000 claims need a manual review.

It is clear from these stats that having an efficient claims management process to promote clean claims submission. And quick turnaround on resubmissions may greatly influence your practice’s productivity and cash flow.

Having an efficient claim scrubbing system in place can maximize the chances of getting the claims accepted in the first attempt. Here are some of the key issues you can figure out with the claim scrubbing process in place.

  • Claim filing was not on time
  • Claim is ambiguous
  • Some information is missing
  • Claim is a duplicate
  • ICD coding is incorrect
  • Patient information is missing or incorrect
  • Lack of documentation

So how can you make sure your clean claims rates as high are as they should be? Ensuring the higher First Pass Acceptance Rate (FPAR) and the number of claims the payer accepts on the first submission is a great starting point. This is not the same as your First Pass Resolution Rate, the number of claims paid on the first attempt. The truth is that putting in the effort to ensure that your FPAR is as high as achievable will always result in fewer denials and a higher FPRR.

Computing your First Pass Acceptance Rate:

Divide the number of claims accepted by the payer by the total number of claims filed in a batch. Or over a particular time to get your First Pass Acceptance Rate. When you are first starting to evaluate where you stand. Track this every week when you are first starting to evaluate. Where you stand v/s when you actually started to monitor this KPI. You may be able to switch to monthly monitoring once you’ve noticed any progress.

Following are a few key steps that will assist you in identifying problems and starting to implement solutions:

  • Whenever you send claims, use practice management software to evaluate claim validation reports and clearinghouse reports.
  • Working rejections daily or as often as you send claims is a good idea.
  • Look for repeated rejections, such as missing NPI numbers, subscriber information that is missing or invalid, and CPT codes, ICD codes, or modifiers that are missing or invalid. List your top rejections by volume and price amount, and then address the root of the problem.

Much emphasis is put to claims denial management to limit the number of rejections and increase overall clean claims rate. Focusing on developing denial management best practices to limit the number of potentially avoidable rejections can help you increase your overall clean claims rate. This can help your practice’s bottom line by cutting expenditures and also increasing Net Collections.

Denials are part of practice operations, but they shouldn’t distract you from providing exceptional patient care. Therefore, you can hire a medical billing company to improve your practice cash flow.

Contact us today if you are looking for strategies to eliminate claim rejections as well as the cost associated with it. And improve your overall revenue cycle management process. We’ll discuss how to find practical solutions for achieving a clean claims rate even beyond industry averages. And our EHR software to help you meet your business goals.



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