OS inc. President, Lori Zindl, presented Changing the Conversation on Denials at the 2023 AAHAM Annual National Institute in Los Angeles. For those that couldn’t attend, we’ve taken some key points from that presentation and put them in this article. We hope you find value that can be utilized in your organization’s revenue cycle.
In the complex realm of healthcare revenue cycle management, one term often stands out: the clean claim rate. It's a metric widely tracked and celebrated, representing the percentage of claims submitted without errors or issues. However, as healthcare organizations delve deeper into the intricacies of revenue cycle denials, a stark realization emerges—the clean claim rate can be misleading. In this blog, we'll explore the fallacy of the clean claim rate, dissect denial types that impact claims getting paid on first submission, and examine the profound impact of denials on the revenue cycle.
The Clean Claim Rate Fallacy
At first glance, achieving a high clean claim rate appears to be a considerable accomplishment for healthcare providers. It signifies that claims are ready for prompt processing, with no glaring errors or issues. However, the fallacy lies in the fact that a high clean claim rate doesn't necessarily translate into a high percentage of claims being paid on the first submission (First Pass Yield). In reality, it’s the latter metric that holds more weight in assessing the efficiency of your revenue cycle. If a clean claim denies, that creates a cost and a burden to your accounts receivable.
Denial Types That Impact First Submission
When looking to improve your First Pass Yield, it’s important to understand and identify where to look for the types of denials that most commonly affect claim denials. These include:
- 277 Rejections: These are notifications that inform providers whether a claim has been accepted or rejected by the payer. Common reasons for 277 rejections include missing or incorrect patient information, procedure codes, or insurance details.
- Medicare Return To Provider (RTP): Medicare RTP occurs when a claim is sent back to the provider due to errors or missing information. Addressing why these claims are denying is crucial to avoid delays in reimbursement.
- 835 Denials: An 835 is an electronic remittance advice (ERA) that provides information about claim payments and denials. Analyzing 835 data can help identify denial reasons and where you can take corrective action.
- Correspondence and Paper Denials: These denials often involve complex issues that necessitate additional documentation or communication with the payer. Managing correspondence and paper denials effectively is vital for dispute resolution and claim payment. These claims are especially important to review if you are not getting at least 90% of your remits electronically.
The Impact of Denials
The impact of denials on an organization's revenue cycle is profound, affecting both financial stability and operational efficiency. Astonishingly, roughly 90% of denials are preventable, with the following breakdown: 61% due to demographic and technical errors, 16% due to eligibility issues, and 12% due to medical necessity. The cumulative effect of these denials can result in a significant financial loss for healthcare providers.
The cost of a single denial has been estimated to range from $25 to $118. This cost includes the administrative overhead of handling denials, resubmitting claims, and the delay in revenue collection. Even if you apply the low end of this range and considering the sheer volume of denials, it becomes evident that addressing this issue is essential.
Strategies to Improve Your First Pass Yield Rate1. Enhance Authorization Rate: Implement robust pre-authorization processes to ensure that all necessary approvals are in place before delivering services. This step minimizes the risk of denials based on lack of authorization. Design and implement edits to look for payers/services that require authorization. Stop those claims before they get billed.
2. Techniques to Manage Medical Necessity: Thoroughly document the medical necessity for services, providing comprehensive and well-structured justifications for procedures. Educate clinical staff on proper documentation to support medical necessity claims. Incorporate physician education regarding documentation issues.
3. Improve Eligibility Techniques: Invest in real-time eligibility verification tools that can identify coverage and benefit details before services are rendered. Require ID fields in registration to match your payer requirements.
4. Avoid Untimely Claims: Implement stringent timelines for claim submission, ensuring that claims are filed promptly after services are provided. Timely filing is crucial in preventing denials due to late submissions. Make sure your billing system has timely filing edits implemented.
5. Manage MUE Frequency: Leverage your billing system to edit charges against Medicare’s practitioner and facility MUE table. If possible, do the same for other payers.
6. Add Edits to EMR and Clearinghouse: Integrate claim edits into your Electronic Medical Record (EMR) system and clearinghouse. These edits can catch errors and discrepancies before claims are even submitted. This may impact your clean claim rate but will ultimately improve your First Pass Yield rate.
In conclusion, while the clean claim rate is a commonly tracked metric, its significance is not as important as the First Pass Yield rate. Denials, especially those that are preventable, can have a real impact on healthcare providers' financial health. By understanding denial types, estimating the cost of denials, and implementing strategic scenarios and tools, healthcare organizations can significantly enhance their revenue cycle, leading to more claims being paid on first submission and a healthier bottom line.
If you’d like more information, or if you’d like to speak with one of our experts, you can get in touch with our experts today, call 800-799-7469 or contact us here.
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