In the healthcare sector, claim denials have become a significant problem for healthcare providers. Benchmark studies show that the financial impact of medical claim denials has increased by 67% in the past year. On average, a health system faces 110,000 denials annually. The claims rejection rate has increased from 8% to nearly 11%, with some areas experiencing rates as high as 17%. Of those denied claims, only 35% of the submissions are fixed and resubmitted.
Patients and providers encounter several reasons for the exponential upsurge in denied medical claims. The Centers for Medicare and Medicaid Services (CMS) have introduced increasingly complex rules, which are not always aligned with payers’ regulations, leading to clashes between the two. Additionally, staffing shortages have left many hospitals and medical practices needing help managing the overwhelming number of denied claims. These staffing issues have resulted in a significant loss of revenue for healthcare organizations, with a 2.5% reduction in gross revenue in August 2022 alone due to the increasing number of denials. Tackling the denials crisis is challenging but surmountable. Providers can proactively manage denials by implementing effective processes, increasing staff training, and leveraging cutting-edge technology.
The Direct Costs of Denials
Healthcare providers often struggle to recover the expenses of their submitted claims, which can lead to significant financial challenges. With claim denials potentially costing up to $31.50-$124.50 per claim, this expense can quickly accumulate to thousands of dollars each month, depending on the number of claims processed. For example, assuming an average of $75 per denied claim and an 11% denial rate out of the national average of 9,200 claims submitted monthly, the average provider could face $75,900 in monthly losses or $910,800 in annual losses.
Healthcare providers lose revenue from denied claims and incur extra administrative costs for correcting and resubmitting them. These costs include staff’s time and effort in identifying and fixing billing inaccuracies and the additional expenses resulting from delayed payments. Deferred reimbursement can further complicate the financial outlook, as a provider’s cash flow may suffer due to claim denials, which can negatively impact their ability to invest in their practice.
The Underestimated Cost of Relationships and Reputation
Aside from the financial strain on healthcare operations, claim denials also critically impact the dynamics of provider-payer and provider-patient relationships. In an inflation environment, where budgets and expectations for fiscal transparency are intensifying, the fallout from denials takes on added weight. Frequent denials can lead to strained relations with payers, who may demand more stringent contract conditions and scrutinize future claims more closely.
At the same time, patient frustration and confusion stemming from denials can significantly tarnish their trust and satisfaction in healthcare providers. This erosion is particularly damaging in today’s digital era, where a provider’s reputation is highly visible and influenced by social media and online reviews. Maintaining the integrity of provider-patient relationships has become crucial in today’s economic climate, where every dollar and every decision counts more than ever.
Reducing Claim Denials through Improved RCM
To reduce claim denials, healthcare providers can enhance revenue cycle management methods and efforts by improving patient data accuracy, verifying insurance coverage, submitting timely claims, and tracking denied claims. This can be done through the following approaches:
Improve Documentation and Coding Accuracy – Train staff about coding standards and documentation to implement double-check systems for error prevention before claim submission.
Prior Authorizations as a Preventative Measure – Integrate a robust prior authorization process into patient intake to identify pre-approved services and save time and resources. This integration also preserves revenue and simplifies billing, especially in today’s financial pressures in healthcare.
Invest in Technology – Streamline the billing process with advanced RCM coding software and automated alerts for denied claims based on historical data.
Regular Audits – Perform periodic audits to understand the common reasons for denials and address systemic issues.
Payer Contract Optimization – Thoroughly review payer contracts to identify terms that can cause denials and negotiate with payers to clarify ambiguous clauses that may lead to disputes.
Patient Education and Engagement – Educate patients on coverage and financial responsibility. Implement transparent billing for trust.
Proactive Denial Management Team – Establish a skilled, dedicated team to address and prevent denials and incentivize them by reducing denial rates.
Outsource Denials Management – Consider outsourcing to a specialized offshore medical billing company with expertise in handling denials to improve efficiency and results.
By implementing these measures, healthcare providers can reduce the incidence of claim denials, improve operational efficiency, safeguard financial health, and maintain strong relationships with payers and patients.
Incorporating a Comprehensive Denials Management Solution
In response to the challenge of claim denials and the ensuing financial strain, offshore medical billing company GeBBS Healthcare Solutions has developed an innovative solution in iAR (iAccounts Receivable), which directly targets the up to 11% profit loss that healthcare organizations face due to incorrect billing and denials management. iAR streamlines collections with automation, providing insights into payer trends and better accounts receivable management.
Its analytics engine identifies rejection patterns for real-time root cause analysis and action, optimizing revenue cycle management. iAR’s unique workflow tool uses automated decision-making algorithms to resolve denials quickly. It integrates advanced reporting and worklists that are driven by denial data. This tool handles denials related to coding errors, payer disputes, provider oversights, and inaccuracies in patient information. With more than 60% insurance collection rates, addressing 100% of denials within a week, and resolving 85%+ of accounts within 90 days of placement, GeBBS’ iAR solutions bring substantial efficiency and financial improvements directly in line with the goals of reducing the costs associated with claim denials and improving revenue cycle management.
In the healthcare industry, claim denials can have significant financial and operational impacts that should not be underestimated. These impacts extend beyond immediate financial losses and can affect provider-payer relationships and patient trust. A strategic and integrated approach is needed to address the direct financial impact and operational and reputational consequences. GeBBS Healthcare Solutions’ iAR Solutions offers a sophisticated tool that helps healthcare providers manage claim denials and improve their revenue cycle management. By utilizing the analytical and automated capabilities of iAR, providers can minimize financial losses and streamline their billing processes.
Visit gebbs.com to learn how to improve denials management, protect financial health, and enhance patient care.