Hospitals are writing off more claim denials than ever before, which poses a major concern within the healthcare industry. By failing to collect payment from patients a significant amount of the time, healthcare providers nationwide are seeing unacceptable losses in their revenue cycles.
According to a recent study performed by Change Healthcare, approximately 9 percent of hospital charges in 2016 were initially claim denials, resulting in a revenue loss of $262 billion from healthcare organizations nationwide.
Overview of Denial Management: How Understanding, Strategizing, and Preventing Denials Can Boost Your RCM
When commercial payers deny medical claims, it takes a bite out of a healthcare organization’s annual revenue. According to Modern Healthcare, this loss, nationwide, totals to an estimated $262 billion. Today, claim denials are a significant contributor to the myriad of financial/net revenue challenges that have impacted US hospitals, healthcare providers, and patients alike.
Two of the most important Key Performance Indicators (KPIs) used in determining the health of your revenue cycle are: Accounts Receivable (A/R) performance and claim denial percentage.
With many healthcare organizations transitioning from a fee-for-service to value-based-care payment model, some recent market trends have spiked the urgency of such facilities to enhance their denial management processes. Struggling to collect outstanding payments and rework denied claims, organizations are facing more challenges than ever as they attempt to ground denial management, decrease overhead, and re-boost their revenue cycles.
In October 2015, healthcare providers transitioned to an advanced version of medical coding, the ICD-10. Replacing the ICD-9, a system developed in the late 1970s for International Classification of Diseases, the ICD-10 reflected a five-fold increase in diagnostic coding capabilities.
In the modern landscape of technologically-supported, value-based healthcare, many providers have reoriented focus on their claims denials management program. The efficiency of those programs, however, can vary significantly across organizations; the effect of denied and delayed rendered claims can be detrimental to the bottom line of healthcare facilities who lack a strategic, holistic approach. An insufficient claims system can cause net revenue losses, increase operating costs, and bog clinicians down with unnecessary administrative tasks.
The medical insurance claims denial process is, by nature, cyclical and complicated. In today’s value-based healthcare environment, management must not only strive to meet the medical needs of patients but also implement guidelines and enhance internal collaboration to prevent denials and maintain revenue.
Can hospitals afford millions of dollars in potential revenue to go unrealized?
Yet, that is the real cost of having inefficient follow-up processes for managing claim denials.
Claim denials are an unfortunate, regular occurrence in the world of healthcare organizations. While there are very few organizations who can claim a denial rate of zero, many providers struggle with maintaining and implementing effective claims denial management processes.