In the field of medical billing or healthcare revenue cycle management, denied claims are a constant threat to a healthcare facility’s bottom line. This is a concern that we monitor for our clients at ABCS RCM.
Some healthcare management professionals have estimated that out of the $3 trillion in hospital medical claims that were submitted in 2016, roughly $262 billion worth of claims were denied by insurance providers. The dollar amount of denied claims for smaller practices is likely just as large. However, with careful and an organized follow-up, the majority of these denied claims are recoverable and can be eliminated.
If hospitals and other medical facilities wish to accelerate their cash flow while reducing administrative costs, they need to reduce their amount of denied claims. Successful appeals of denied claims consume time and add an opportunity cost for staff. By having to take the time to rework and resubmit a denied claim, an organization’s billing staff is pulled away from submitting new claims.
The ultimate goal is to figure out what is creating the denied claims in the first place. Facilities, regardless of their size, will never optimize their revenue cycle, unless this problem is solved. Otherwise, they will suffer from this ongoing revenue leakage process.
3 Ways to prevent denied claims (revenue leakage):
 Insurance Coverage & Network Status:
Sometimes denials are generated due to the fact that there may be a problem with a patient’s insurance benefits. Deductibles, secondary v. primary insurance and copayments can all affect the status of a claim. Missing prior authorizations for the medical procedure or if the health professional is out-of-network can also create problems.
In addition, always verify the patient demographics and credentialing status of the healthcare provider. No health professional wants to unexpectedly fall out of network due to an oversight in paperwork. They should monitor their information and status on all of their insurance panels. This includes the Medicaid, Medicare and the CAQH.
 Healthcare Provider’s Insurance Contract:
Many healthcare providers work to minimize denied claims in order to maximize revenue. However, there is another potential source of revenue leakage that can damage a medical provider’s cash flow. Some healthcare professionals, are not aware of the large degree of variance in healthcare practitioners agreed upon reimbursement rates. Location, medical specialty and the volume of claims can impact the reimbursement rate from insurance providers/payers.
Health professionals need to know the specific details of their individual insurance payer’s contract. These contracts often explain the coverage policies surrounding prior authorizations, procedures, referrals, etc. Payer contracts are legal documents and are fully negotiable. Healthcare providers should focus on effectively negotiating their payer contracts in order to maximize net profit. They need to demonstrate the value that their services bring to insurance plan members. For more information on this topic, please refer to the “How Physicians Should Negotiate Payers.”
 Closely Track Accounts Receivable:
A facility’s accounts receivable should be monitored and reviewed every day. The system should have a consistent flow of claims, with blockages and bottlenecks eliminated. Verify that claims have been received and what amounts are on the aging report. When a claim has been in the system for 60 days, a direct phone call to the insurance payer is needed.
This task is done in order to check the status of the claims while also recording the claim number and date of expected payment. The verification process is essential in order to make sure claims are not forgotten and eventually write-off.
If informed that the claim has been paid healthcare providers should record the date of payment, check/transaction number as well as the amount paid. If a check was issued, verify the mailing address and whether it was cashed. Naturally, appeal any claim that was unexpectedly denied.
At ABCS RCM we have found that consistency over time is what will create a level of optimization in a hospital, facility or small practice. Reducing denied claims and optimizing revenue is not a sprint, it is a marathon.
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