It is estimated that health insurers process more than three billion claims annually. It’s also believed that more than 15% of private insurance claims are denied. And, data from the Centers for Medicare and Medicaid Services (CMS) reported that 17% of in-network claims were denied. In its latest findings, Experian Health’s The State of Claims Survey stated that 30% of respondents say carrier denials are increasing between 10 to 15%. As a result, healthcare providers spend thousands of hours and more than $20 billion annually appealing insurance company denials.
In the first of this two-part article on denial management, we address the financial impact of denials and the need for operational mitigation.
Rejection of a claim is due to incorrect or missing data and occurs before the claim has been fully processed. Denial of a claim is the result of an insurance carrier processing a claim and deeming it ‘unpayable’. There are also two denials that insurers use, Hard Denials are firm refusals to pay, and Soft Denials contest claim data points, but can be revised and resubmitted. The majority of denials are due to ‘manageable’ issues such as coding errors/discrepancies, insufficient documentation, duplicate claims, lack of Pre-Authorization, out-of-network provider, lack of medical necessity, and patient eligibility.
Most denials can be appealed if there are legitimate grounds for doing so. This process involves gathering necessary documentation (medical records, coding rationale, etc.) and submitting a formal appeal to the insurance company within specified timelines.
Healthcare claims denials can have a significant financial impact on healthcare providers. Delayed payment results in lost revenue, decreased cash flow, and increased administrative time associated with resolving denials, as well as a potential impact on patient care.
Dealing with denials can create inefficiencies in billing and revenue cycle management processes, diverting resources from other essential tasks. Some denials may even lead to penalties if not addressed promptly, or if there are compliance issues involved. Cumulatively, frequent or unresolved denials can impact the financial health of healthcare practices and facilities, particularly smaller organizations or those with tighter profit margins, not to mention the effect on the negative experiences patients have during billing disputes that potentially impact patient satisfaction and loyalty.
In the context of the financial impact of claim denials for healthcare providers, operational mitigation refers to strategies and actions taken to minimize the negative effects of denied insurance claims on the organization's finances and operations.
To abate financial impacts, providers often implement strategies such as:
Implementing robust claims management processes ensures claims are accurately coded, documented, and submitted in a timely manner. This includes training staff on coding accuracy and compliance with insurance requirements. These efforts can help reduce the frequency of denials and improve revenue cycle efficiency.
A high denied claims rate hurts a healthcare practice’s financial bottom line because it isn’t getting payment for services rendered. Managing denials to decrease denial rates helps healthcare providers ensure they are billing medical services properly and receiving adequate payment for their services in a timely manner.
Our next article in this two-part series talks about implementing a strategy and leveraging data.
Schedule a complimentary discussion with a member of our Healthcare Consulting Practice to discuss strategies to minimize claims denials, improve cash flow, and enhance overall practice efficiency. Please contact Kimberly Massanova at Kimberly.Massanova@FreedMaxick.com or 716-332-2729 or Ryan Burnside, Ryan.Burnside@FreedMaxick.com or 716-362-6204.