Denied claims mean denied revenue. With the number of denials steadily increasing, health systems and provider practices must do all they can to protect their revenue streams and capture every dollar they’re owed. This includes addressing the growing impact of denied claims.
The Impact of Denial Rates
Denial rates have been an evolving challenge for several years as payers have implemented increasingly sophisticated technology to flag potential claim issues. At the same time, they have developed more complex submission criteria and more contract variables. The result is an average denial rate that reached approximately 11% of all claims in 2022, up from eight percent in 2021.[1] However, some organizations have reported denial rates of 17% or higher. [2]
The industry’s average denial rate is 5% to 10%. However, to achieve optimal performance, providers should strive for less than 5%.[3]
Constantly changing payer requirements
One of the biggest challenges for providers is simply keeping up with the ongoing payer requirement changes. For example, in a physician survey conducted by the American Medical Association, 62% of respondents said it was difficult to determine when a particular service required prior authorization, and 14% said it was “extremely difficult.”[4]
From March 2020 to March 2022, payers implemented more than 100,000 changes to their requirements for coding and reimbursement.[5] With current staffing shortages, finding the resources necessary to continuously monitor payer changes can be challenging.
Today, 75% of healthcare leaders surveyed said reducing denials was their top priority.[6]
Preventing denials is step one
Of course, the best way to reduce denied claims is to prevent them in the first place. And the best way to do that is by focusing on “clean” claims. Clean claims are those that are complete, accurate, and have all necessary documentation when submitted to the payer’s adjudication system the first time. The industry’s best practice for clean claims rate is 98%.[7]
The following are three steps providers can take to improve clean claims.
- Streamline patient access workflows with automation technology. Patient access workflows are highly manual and time-consuming, such as calling payers or searching their websites for information that is often outdated. Automated technology can reduce these resource-intensive tasks while providing a more accurate and complete picture of a patient’s insurance coverage and eligibility information. This technology can also streamline appropriate documentation processes for prior authorization and medical necessity.
- Take advantage of claims scrubbing software. Claim scrubbing software works by finding and flagging missing and incorrect data before a claim has a chance to reach the payer’s adjudication system. This allows staff to make the appropriate corrections proactively to avoid rejected or denied claims.
- Invest in coder education. It’s no secret that coding can be highly challenging, especially for organizations billing for specialty areas like cardiology and radiology—areas that often include complex claim combinations. Investing in rigorous and ongoing coder education can help reduce errors and improve productivity. Education should consist of regular continuing education courses, as well as nationally recognized certification. Establishing KPIs can also help by incentivizing coders who do quality work, thus elevating the performance of the entire team.
It is vital that coders understand the impact the quality of their work has on the organization’s financial viability.
Streamlining denial management
While most denials are preventable, there will always be those that happen regardless of a provider’s best efforts. Many organizations focus only on the highest value claims due to resource and time constraints. However, smaller values can really add up over the year. A better approach is to identify trends using denial management technology to perform in-depth analytics. This technology provides critical insight into systemic issues and opportunities for improvement. These may include the need for more staff education or the need to renegotiate specific payer contracts.
In addition to analytics technology, providers can significantly streamline denial management by implementing the following capabilities.
- Capture all necessary data from the payer remittance and claim status.
- Qualify denials using payer claim status and reason codes.
- Categorize denials for easier rework.
- Leverage in-depth reporting to better measure and manage denials.
- Perform root cause analysis and use decision support for denial prevention.
- Use workflow tools to drive assignment, follow-up, and resolution.
Providers should aim for a denial resolution rate of 85% within 30 days.[8]
Partnering for success
For many providers, the effort, resources, and technology needed to implement denial prevention and management processes are beyond their capability due to staff shortages or financial constraints. For these providers, partnering with industry experts can bring all the rewards without the heavy lift. HBCS is an excellent choice.
HBCS improves critical financial and operational performance metrics and assists in driving initial denial rates below the industry average. Health systems and physician organizations receive advanced tools to identify, measure, and resolve denied claims. And the HBCS Denial Analytics solution helps drive revenue cycle success with advanced technology and business intelligence.
With a combination of analytics and team expertise, HBCS works as an extension of its clients’ teams to resolve denials promptly and effectively. Once root causes and preventable issues are uncovered, the HBCS team shares the insight with its clients and recommends systemic improvements.
[1] https://www.healthleadersmedia.com/revenue-cycle/cost-denials-saw-67-increase-2022
[4] https://www.ama-assn.org/system/files/prior-authorization-reform-progress-update.pdf
