While it’s easiest to catch coding and billing errors early in the process, employing a clinical claim-editing solution can prove invaluable. The ability to edit an entire claim for clinical accuracy as well as payer-specific requirements right before submission can drastically reduce claim denials. Not all claim scrubbers feature this level of clinical editing, so be sure your software is actually decreasing the number of denied claims as well as identifying reduced payments that can affect your bottom line.
It’s your money. Go after it.
Still not convinced that investing in emerging clinical coding and editing software can save your practice money? Let’s see what relying on traditional denials management methods might really be costing you.
Each rejected, denied or underpaid claim represents earned revenue your practice is missing out on. The average cost to rework a claim has been pegged at more than $25 based on industry reports from MGMA, PNC Financial Services, CMS, The Advisory Board Company and HFMA. Furthermore, appeal costs can skyrocket to over $100. It’s estimated that as many as two-thirds of all denied claims are recoverable. But practices often weigh the reimbursement amount of a claim against the cost to rework or appeal that claim. For smaller claims, many decide it just isn’t worth the effort, which is why getting claims right the first time should be the ultimate goal.
So how much are practices losing by simply correcting and resubmitting denied claims using traditional denial management methods? There are some simple calculations practices can use to determine the financial impact of their denials:
- Determine how many claims are submitted monthly and the average claim amount.
- Estimate the practice’s claim rejection/denial rate (not first pass claims rate). If you’re unsure, the industry average is 15 percent.
- Multiply the number of claims by the average claim amount, then divide by the denial/rejection rate. The resulting figure represents your potential lost revenue.
- Using the industry standard two-thirds denial recovery rate, divide the previous number by 67 percent. This represents your recoverable revenue.
While this scenario shows the amount of recoverable revenue from denied claims, it doesn’t take into account the money spent reworking those claims. Let’s look at an example using figures from an actual mid-sized specialty practice. This practice submits 1,900 claims a month, and the average claim is $150. They have a better-than-average denial/rejection rate of 10 percent. Even with that lowered rate, this practice is losing roughly $28,500 a month to unresolved denied claims.
If two-thirds of those denied claims are recoverable, they stand to recoup $19,095 in reimbursements after the claims are corrected and resubmitted. Factor in the cost associated with reworking denied claims using the industry average of $25 per claim, and this practice is spending $4,750 in administrative charges alone to recover their own revenue.
This brings their actual recovered revenue down to $14,155 per month or almost $170,000 annually. The cost of a comprehensive clinical coding and editing solution is still cheaper than what the practice spends per month when reworking denied claims.
Smarter technology, better financial results
Is there an easier way to actually retain hard-earned revenue? Yes. Clinical coding and editing software solutions have evolved well beyond simple front-end edits. Practices that use this technology can significantly reduce their claim denial rates by ensuring the most accurate claim is filed the first time around.
As you review your revenue cycle workflow, consider options that edit clinical data earlier in the workflow to ensure a smoother claim submission process for all staff involved. Remember, when it comes to claims, prevention always outweighs denials.
Timothy Mills is chief growth officer at Alpha II, LLC, where he provides solutions for coding, compliance, claims editing and revenue analysis for healthcare professionals, clearinghouses and government entities. Tim has extensive experience in clinical, financial and administrative outsourced technology services as well as turn-key solutions for the provider, hospital, health system and health insurance marketplaces. Tim has been a healthcare and IT executive for more than 30 years.