Three Steps to Fewer Denials

April 1, 2003
Susanna Donato

Take steps to keep denials from taking over your expense budget.


If claims management sometimes feels like a pingpong match, it's no wonder. Payers bounce back an average of 10 percent to 15 percent of all submitted claims as denials, according to Elizabeth Woodcock, FACMPE, director of knowledge management for Physicians Practice. That figure can ricochet to 25 percent or so for certain specialties.

But despite their best efforts, practices are unlikely to eliminate denials altogether. After all, Woodcock says, "float," or interest on funds held, is how insurance companies make money. Add to the mix mobile patients or those who just shirk their obligations, and about 5 percent of claims will likely remain uncollectable.

Clean up claims

To stanch the flow of denials, you must clean up your claims. Begin by understanding how many denials you receive, for what types of services, and from whom. You can develop a simple worksheet to measure denial rates by payer and to track those denials to their source: registration, coding, the billing office, or the payer. 

Woodcock's visits to hundreds of practices across the country show that problems start in registration and coding. The front desk's high turnover and low pay often mean staff there don't understand the billing process. When the process begins with inconsistent patient information, practices wind up submitting claims with outdated insurance data, for ineligible patients, or for services not covered by a specific insurance plan.

"Frankly, there's a disconnect between the positions and functions in the registration area, and the billing office," says Woodcock. "You've got to change that mentality. Everyone is part of the billing process." During the hiring process, make billing part of the job description for reception staff, and pay well enough to get skilled people who can handle the complex registration process. Also, says Woodcock, "Realize you might be squeezing so hard on the front desk by understaffing that you're actually paying twice as much to have more highly paid people fix problems on the back end. You could save money by correctly staffing both places." Woodcock suggests new receptionists spend two weeks in the billing office right off the bat so they understand the process.

Choose your tools

You can tackle denials with high-tech tools or with old-fashioned paper. Your choice will depend on the size and budget of your practice, and on your comfort with technology. A practice that uses paper charts can still use a computerized claims scrubber that checks claims before they're submitted. Practices that have converted to electronic medical records (EMRs) usually can tie in claims management systems to their EMR and transmit claims to payers with a few extra mouse-clicks.

Last fall, Potomac Physician Associates, in Bethesda, Md., a three-office practice with 17 internists and a patient panel of 20,000, brought their claims submission and practice management services in-house. Amanda Tomko, the practice administrator, initially budgeted for seven people to handle billing. After four months of electronic claims submission, just four employees manage the process. Eliminating the need for three staff members, whose salaries average $30,000 to $35,000 per year, saves the practice nearly $100,000 annually.

The cost? Typically, Potomac's electronic claims submission service, Payerpath, charges a set-up fee of $95 per physician, with a $495 minimum per practice. Thereafter, the service costs $49 per doctor per month. Over a year, that totals $11,611 for the entire practice. Clearly, preventing denials offers rich rewards: The cost of billing and staff time adds up to $25 per denied claim, according to Sara Larch, FACMPE, chief operating officer of University Physicians in Baltimore.

For Tomko's practice, the change paid off: It has seen 98 percent clean claims since bringing billing in-house. "We have no idea what our statistics were before, because we didn't track it," Tomko says. "By our receipts, I can tell you that it was probably 50 percent, based on the denials that were coming in."

John Gastright, MD, of West Ashley Family Practice in Charleston, S.C., uses Companion Direct, another online claims processing service. When he began his three-physician practice two years ago, Gastright decided three elements were critical: high-speed Internet connectivity, a modern practice-management system, and an EMR.

"I've watched doctors for 10 years [as a medical director] go crazy trying to [submit claims] manually," he says. "The technology now basically gives practices the same capabilities the payers have, so why not take advantage of it?"

Gastright's office uses Companion Direct to identify problems such as eligibility or mismatched codes before a claim is submitted. The company charges practices a fee of $0.21 per claim submitted. The greatest benefit, Gastright says, is the service's instant adjudication of claims, so the practice doesn't have to wait for the evidence of benefit information to know if a payer will accept a claim.


The service's efficiency, combined with the practice's EMR and paperless operation, allows West Ashley to run with 2.5 FTEs per physician - one FTE fewer than the Medical Group Management Association's average of 3.5 FTEs per physician. Gastright estimates the practice saves 0.5 FTE per physician - a practice total of 1.5 FTEs - by using Companion Direct. If those employees earn $10 an hour, the practice can save $30,000 annually on salaries alone.

"With a payer such as Blue Cross of South Carolina, we have a four-weekday turnaround time on the claim. There's not only instant recognition if a claim is acceptable, but we also are paid promptly," says Gastright. "Consequently, our accounts receivable beyond 120 days is less than 2 percent. We basically turn claims around in 30 days."

Old-fashioned paper still has a role, however. For Tomko, paper claims fill gaps where electronic claims can't be used - for instance, when secondary claims can't be captured electronically.

Practice manager Martin Bodzin filed electronic claims for several years. Now, he has returned to paper claims for the Dayton, Ohio, practice he manages for solo practitioner Rivka Sanders. Bodzin is no Luddite. He designed an EMR that works with an off-the-shelf database he customized. The system lets Sanders do charting and billing simultaneously. Bodzin manages the claims from his position as general manager - and sole employee - of the small practice.

"I don't believe in going to high-tech just for the sake of technology itself," Bodzin says. "When we looked at the costs with time and effort, we found it was cheaper and just as easy to file with paper."

Appeal it or forget it?

Despite improved efforts up-front, you still must decide how you'll handle the inevitable claims that will bounce back. Start by tracking which claims cause problems. Then, set guidelines for what you will appeal. Woodcock notes that if, for instance, you're billing Medicaid for a low-level office visit, for which the agency will reimburse you $23 to $28, you can lose money if you rebill the claim.

"If you know every denial costs $25, don't appeal anything under $10," Woodcock suggests. "Use a cost-benefit analysis to decide: if it's over $10 but under $100, do you make a second [appeal] effort? Maybe not. But if it's a $5,000 claim, you might appeal it till the cows come home."

When you can't get paid for a claim, or when appealing a denial would mean digging your practice into the red, it might be time to write off the claim. Most practices first turn to a secondary payer: the patient.

"I don't really believe in writing things off. We turn the responsibility over to the patient," says Tomko. "If they don't respond within 60 days, it goes to the collection agency. The market is tough; expenses are high. We have to have receipts in the door." Before you turn over all your old A/R balances, check the rules. For instance, Tomko says, in Maryland, only accounts over $20 can be sent to collections.

Bodzin says his practice notifies new patients that they bear ultimate responsibility for paying for their care; then he bills patients if the practice hasn't received payment within 60 days from date of service.

Gastright, too, says his practice has occasional write-offs, most often when patients don't cover their responsibilities. "Occasionally somebody isn't eligible, and we provide service; that's the luck of the draw," he says.

Whatever you do, have some patience. According to Woodcock, it can take six months to see results from cleaning up your claims process, simply because carriers take 60 to 90 days to pay a claim. But the resulting lack of headaches - and the boost to your business accounts - is worth it.   

Susanna Donato can be reached via editor@physicianspractice.com

This article originally appeared in the April 2003 issue of Physicians Practice.