Technology: Don’t Be Denied

January 1, 2008

Tired of having your claims rejected by payers who seem to be looking for any reason under the sun not to pay you? Try these “claims scrubbing” tools to reduce, and appeal, those denials.

In October 2006, Schneider-Maurer Foot and Ankle Associates, plagued with minimal cash flow and a claims denial rate exceeding 50 percent, put a machine in charge.

The two physicians at the Aspen, Colo.-based practice knew they were effectively leaving their earnings on the table, and they were tired of it. So, they hired Amy Perchick as their new practice administrator. Perchick quickly noticed that “the doctors weren’t keeping up to date, and the business billing manager wasn’t keeping up to date.” Along with letting said billing manager go, Schneider-Maurer researched and purchased a new, well-suited practice management system.

Today, that table is virtually clear of uncollected money. “Our claims denial rate and our cash flow have improved dramatically,” says Perchick. “It’s the first point in five years where we have cash in the bank, and we’re able to offer a retirement benefit to our employees. That all happened within 10 months.”

As much as Perchick would like to take credit for the practice’s financial turnaround, she attributes much of the glory to the practice management system, which has the ability to edit, or “scrub,” claims before they’re ever submitted for payment.

Most medium- and large-sized practices have a practice management system of some sort, to help schedule appointments, analyze patient demographics, bill for services, and otherwise keep a practice buzzing along administratively. However, many small practices consider investing in a practice management system to be a waste of valuable funds.

This stance couldn’t be more wrong. In fact, implementing a practice management system may be the best financial move your practice could make. Small practices in particular have far less latitude when it comes to reductions in revenue due to improper claims processing.

Think about it: Biting into a comparatively small overall budget with a high percentage of denials can cut the bottom line right down to the quick - and very quickly at that. But if you select, implement, and use a practice management system wisely, you’ll find you really can fill your practice piggybank to bursting with every one of those hard-earned pennies.

An electronic solution

For starters, look for a practice management system with a component that lets you not only manage billing but also submit claims electronically. Electronic claims submission alone can make a notable financial difference for your practice, says Pam Waymack, managing director of Phoenix Services Consulting in Evanston, Ill. “If you look at the number of claims you’re sending [by mail], not paying postage is your first savings opportunity,” says Waymack. “Second, every payer I know pushes electronic claims through faster than paper. . . . Instead of waiting 28 days for Medicare to pay, it’s 14 days until the check is in your account. There is a value to that.”

Faster payment on claims, of course, means increased cash flow for your practice. Waymack also touts another benefit to electronic claims submission: fewer errors from payers. “If the payer has to sit there and pound in a thousand claims and put in every CPT code, there are going to be errors. There are going to be transpositions,” warns Waymack. “Those are going to come across as overpayments or underpayments, which as a provider are going to cause me more work.”

Find the right package

That all said, let’s step back a moment. Just because you need a practice management system is no reason to throw your hard-earned dollars willy-nilly at the first system you find. You could end up with a system that doesn’t really help your practice. The result? A complete waste of your money and your time.

The Florida Heart Group learned this lesson the hard way. Certainly, a dynamic practice management system was a must for the practice’s four offices, 19 physician providers, and 60,000 annual office visits. Yet its old system could not identify recurring issues with denials, because the software made it difficult to run reports on a specific denial category.

“We were on a practice management system that really kind of tied our hands as far as being able to run reports that were effective and that would help us with our utilization of the system,” says Joan Bryan, 12-year veteran practice administrator for the Orlando group. “You had to do each and every single claim as an individual report. When you have a practice this large, that is very difficult.”

The practice’s new system is much more versatile, allowing Bryan to produce reports by payer, physician, CPT code or claims category, along with many more options.

Betsy Nicoletti, consultant for Medical Practice Consulting Group in Springfield, Vt., agrees, pointing out the importance of making sure the system you choose has this kind of flexibility so you can analyze trends in claims denials. Why? Because “with denials there are no one-time-only denials,” she says.

Nicoletti’s experience has shown that claims denials are usually indicative of systemic problems in a practice. That is, whatever mistake the staff is making - be it collecting patient or visit data, checking eligibility, or making coding errors - is probably occurring over and over again. Consequently, the bulk of your claims denials will all tend to be for the same reason. Find that reason and you can fix it, thereby avoiding the denial in the future.

Performing this sort of analysis made a big difference for Florida Heart Group, whose denial rates have dropped to about two percent, claims Bryan. In addition, the practice’s turnaround time for claims has fallen from an average of 57 days to only 28 days at present. At least some of that is due to the reports that their new system can run. “That’s a great tool, because if it’s something you know on the front end, you can either change the workflow or educate your staff so that things don’t even get kicked back,” she says. “It’s easy to run the reports and see what user did it and what CPT code it was attached to.”

A Trifecta of needs

Practices should also consider looking for a software package that offers all three of the functions below.

  • Claims Auditing - Sometimes called “scrubbing,” but what it basically means is catching mistakes before the claim ever leaves your office. Sometimes mistakes are small ones - a required field left blank, for example. But those little mistakes can add up to big money, says Perchick. Schneider-Maurer’s scrub rate when they first implemented their practice management system was 90 percent. That means nine out of every 10 claims had a mistake of some sort.

Using claims-auditing software, the practice reduced that scrub rate to a little under 25 percent. Still high, perhaps, but it indicates a dramatic improvement in staff performance. Perchick uses the claims-auditing software as an educational tool. “When the staff makes the mistake, whoever makes it fixes it,” explains Perchick. “It’s not just the claims-scrubbing software, it’s the learning process it has when the front-end people actually use it.”

Staff who gain a better understanding of what makes for a successful claim not only enter information faster, they also spend less time correcting errors.

Claims-scrubbing programs can also help with common gaffs, such as transposed insurance ID numbers and misspelled patient names. Even a slight change in patient names (e.g., “Robert Jones” vs. “Robert J. Jones”) can cause the Medicare system to kick back a claim. A good scrubber will check the name or ID number against the patient’s electronic record, flagging potential problems before they wreak havoc.

But wait, there’s more: A significant number of rejected claims are in fact due to miscoding. That’s something a good claims-auditing program also can help you with. “We are a group of podiatrists and . . . podiatry does have its quirks, like every specialty,” says Perchick. “There are specific modifiers and qualifiers that need to be on things for DME [Durable Medical Equipment] and need to be on claims for routine foot care and other specific things.”

Perchick’s group would routinely submit claims without the appropriate modifying codes, which resulted in not only a denial but also a 30-day setback in the collection process.

A claim-scrubbing program can compare the CPT or ICD-9 codes and send up a flare at spots where a modifier may be missing. More robust programs apply complex algorithms that compare the code against a patient’s age, the diagnosis, and other factors to see if it makes sense for the claim.

Florida Heart Group extols the benefits of using a scrubber. “Claims that go out now are probably anywhere from 95 to 98 percent clean,” says Bryan. When claims are denied, it’s usually because the carrier wants more documentation, or some other reason that couldn’t have been anticipated by the practice.

  • Explanation of Benefits Analysis - It’s critical to understand why your claims are denied in the first place. To do that, you need a system that can comb through all of your denied claims and sort them according to physician, diagnosis, billing code, and payer.

With this more in-depth analysis, you might uncover some surprising problems, such as a physician who habitually under-documents or miscodes patient encounters, or an insurance company that processes certain claims incorrectly. “[Analysis] gives you important data for contracting and for working with your proprietor rep,” says Nicoletti. “Sometimes everything you have done is right; it’s just that the payer can’t process it.”

Bryan likes the ability to run reports on individual users. “You can quantify the amount of work that your staff is doing, and you can see where there are differences from appointment scheduling to working claim batches,” she says. Certain software companies even let you compare your staff or practice’s productivity against national averages, so you can see at a glance whether your practice or an individual is doing more or less than expected. “It’s a great thing for employee evaluations,” says Bryan.

  • Payment Comparison - Most modern practice management systems recognize that providers are paid based on contracted fee schedules, and therefore they allow you to load multiple fee schedules for multiple payers. That’s great as far as ensuring that you bill appropriately, but how do you know that what you billed is what you actually got paid?

You can answer this question if you choose a practice management system that can not only analyze your denials from payers but also compare the received amount of a claim against the billed amount. Many practices fail to use this function. They either rely on someone - usually a practice administrator or billing manager - to review receipts manually. Worse, no one reviews received payments at all.

The effect of underpayment is insidiously cumulative. If you billed $80 but received only $75, that might not seem like much of a difference. But how many times have you been underpaid in that way? If it happens often enough, it’s worth your time to go back to the payer and ask them to make good.

You must take time to perform proper due diligence when deciding which practice management system is right for your practice, as not every system will have all three of the above-listed capabilities. Finally, note that some systems charge extra for certain features, such as claims scrubbing. Think carefully about exactly what your practice needs, and take your time to ensure that the system you choose will suit you.

Robert Anthony, a former associate editor for Physicians Practice, has written for the healthcare and practice management industries for six years. His work has appeared in Physicians Practice, edge, Humana’s Your Practice, and Publisher’s Weekly. He is based in Baltimore, Md. He can be reached via

This article originally appeared in the January 2008 issue of Physicians Practice.