How do Denials Impact my Reimbursement?

Denials impact reimbursement by delayed cash flow, increased accounts receivable days and increased cost to rework the claims.  Knowing the volume of denials and the denial reasons is an important step towards improving the denials process.  Understaffed or high turnover in-house billing teams find it challenging to fit denial management work into their regular workflow.  Do you know how many denials your practice is receiving on a weekly or monthly basis? Don’t worry, because many practice don’t know this answer.  Let’s talk about the cost of denials, common denial reason and how to prevent or avoid denials.

The Cost of Denials

The cost of denied claims is usually bigger than you think.  Approximately 50-65% of denied claims are never reworked.  When this happens, practices lose money on claims.  If denials do get worked, it takes additional effort and greater expense to work the claims, handle the appeals, bill the patients, and reimbursement is delayed.   While approximately 60% of denials are recoverable if appealed, it takes extra effort and is time consuming, so often the money is left on the table.  The bottom line — practice profitability is less and often times the true profit is lost in these instances.  To determine how much cash you are losing, look at the volume of clean claims compared to the volume of denied claims.

Common Denial Reasons

Claim denials are one of the main reasons your reimbursement is lower than expected. Of course, ensuring clean claims on the first submission is the key to steady cash flow. Also, having subject matter experts on the billing team to handle the different stages of the denials and appeals process is critical as well.   Some of the most common reasons for denials are:

    • incorrect patient demographics or insurance information
    • wrong or lacking insurance verification data
    • credentialing issues
    • authorization issues
    • coding errors
    • medical necessity or lacking clinical information
    • timely filing

Over 60% of the denials are related to insurance verification or inaccurate patient demographic entry.  Once the most common denial reasons are identified, there is a better understanding of repetitive mistakes occurring in the regular workflow.

Timely Filing Deadlines

  • Keep timely filing and appeals deadline in mind at all times as every insurance company has a different deadline.
  • Clean claims end up in denials due to claims submission delays or documentation backlog. While paying attention to timely filing, it is also important to have accurate data.  The old “garbage in, garbage out” saying…
  • Having a system where denials are assigned to the respective teams or team members is very beneficial for the organization’s efficiency.

Appeals Process

  • Review claims carefully to ensure that information is correctly completed on the claim form.  If any information was inaccurate, be sure to correct and send a corrected claim.
  • If the claim is denied incorrectly or requires additional information, you must prepare an appeal letter to provide further explanation.

Revenue Cycle Reporting

Posting denials into the practice management system and creating revenue cycle reporting for tracking denial reasons will greatly assist in reducing denials.  Trended denials reporting will provide the necessary data to identify root causes of denials and allow the practice to take necessary steps to implement revenue cycle best practices on preventing denials.  Having key performance indicators (KPI’s) and tracking progress towards specific goals with an analytical approach to revenue cycle workflow will positively impact the financial health of the practice.   To read more about reporting and analytics, click this link.

Avoiding Denials

Preventing denials is challenging if you are unfamiliar with the denials percentage or denials reasons.  When practice staff or a billing company reviews clearinghouse rejection reports daily and implements a method to post denials into the practice management system, then it is possible to monitor denial trends.  Claims scrubbing prior to claims submission ensures that clean claims are sent the first time they are filed.  Training staff and implementing accountability tools to monitor success will lead to a reduction in denials.

In a world of declining reimbursements, getting paid the first time a claim goes out the door is optimal.  The potential for increased cash flow can improve the practice’s overall financial health with a focus on clean claims and less denials.  To read more denial management and how we can assist, click this link.

What other information or blog topics would be helpful? Let us know in the comment section below. Subscribe to our blog by using our Contact Us Form or to learn more about revenue cycle management or healthcare consulting topics.

Donna White

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