Are Denied Claims Costing Your Practice Money?

Are you losing thousands of dollars each month? Practice owners review many valuable metrics that help monitor the practice’s finances. Some industry experts say the key metric is the clean claims ratio and insist it is essential for real success.

What is a clean claim?

A clean claim is one that was paid by the carrier the first time the claim was submitted. This means that the claim

  • Had no errors.
  • Was never rejected; and
  • Was not filed more than once.

Some software solutions have various ways this can be measured and some billing companies under-state the denial rate because they reset the claim submission date. Although this produces a favorable metric it is not accurate. Measuring this number in the strictest sense requires evaluating every denial to determine whether it was preventable.

If your billing service is measuring this ratio accurately, they can then suggest ways to improve and eliminate the denials that are preventable. This is extremely important for the financial wellness of your practice because clean claims increase revenue by ensuring that you are not providing free care and ensure a timely and steady stream of revenue for your practice.

Every rejection or denial introduces the risk of not getting paid. Assuming the denials are worked it still delays you getting your money in a timely fashion. According to the Medical Group Management Association (MGMA) 50% to 65% of denials are never worked. These are the hard dollars to collect and require time, tenacity, and knowledge. Studies show the average cost to rework a claim is $25 and in many cases is far too much to expect of in-house billers and billing services may not deem it to be cost effective.

Are you losing thousands of dollars per month?

If the average cost to rework a claim is $25 and you have 100 denials per month then it costs an average of $2,500 a month to work denied claims. This is one reason that some billing companies charge less but return denied claims to the practice. This means someone must enter the rejection or denial, call the payer for details, research whether the carrier is, in fact, correct, correct the mistake, and refile the claim. Many payers only allow you to research three denied claims per phone call and they don’t always tell you if there were multiple reasons that claim was denied.

When assessing practice management systems and billing services, ensure that you are getting accurate clean claim ratios. This is not the same as first-pass ratios. First-pass ratios typically refer to the ratio of claims that make it through clearinghouse edits and are passed on to payers. It does not guarantee the claim will be paid.

The key to reducing denied claims

Make sure you are getting a report/input from your billing service that identifies denials.

Are you getting denials for non-covered services? If so, is there another clinically accurate code that can be billed or are you providing services for which you cannot be paid. Are the denials related to information the front desk is not capturing correctly? Using automation to its fullest extent can also help to monitor pre-authorization compliance. Bundled services will also be denied and you will get paid only on the lesser of the two charges.

These are all opportunities for improvement. Educating the entire practice to the cost of unclean claims and giving everyone feedback about what they can do to improve can go a long way to decreasing denials and maximizing your reimbursements and cash flow. If you aren’t getting this information from your billing service talk with them about obtaining such information monthly. It truly is a team effort to decrease denials. Ultimately, this reduces cost and increases revenue, which are keys to survival in today’s changing healthcare landscape.

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