How do You Measure Revenue Cycle Management Success?

Debunking the Clean Claim Rate Fallacy

Benchmarking the effectiveness of a clearinghouse can be done in many ways and most clearinghouses use clean claim rate, as the success criterion making them the best choice for your revenue cycle.

Here are a few quotes pulled from various websites and case studies:

“...and the healthcare organization now has a 92% primary clean claims rate.”
“…(our) clients, however, enjoy an average of 98% clean claims rate.”
“… (our solution) provides a 99.25% clean claim rate (one of the highest in the industry) via smart technology offered through its clearinghouse system.”

These percentages sound really, good. But what do they really mean?

The term clean claim rate indicates a level of success at getting claims processed but for the sake of having a marketable rate over 90%, it seems each clearinghouse defines the metric a little differently and it has little bearing on collection success.

Unfortunately, this is the fallacy of using clean claim rate as a reliable revenue cycle management benchmark and why putting too much stock into a metric with little impact on cash flow can lead to trouble.

In most cases, the clean claim rate is being calculated one of two different ways:

1. The percentage of claims passing front line edits allowing the claim to pass electronically into the payer system. Every clearinghouse should have high clean claim rates on this metric as it is basic claim validation, so not much to brag about. It’s the 835 remittance denials that matter more to cash flow than the upfront 277 denials.
2. The more dangerous situation is if the advertised clean claim rate is calculated on the percentage of claims passing clearinghouse edits and going directly to the payer. If the claim scrubber is running only basic payer validation to get a high clean claim rate, it probably means the clearinghouse is pushing through more claims without proper editing; which will result in more denials and put more revenue at risk.

The clean claim rate metric originated at a time of less complex payer rules and when revenue cycle tools were designed to manage rather than prevent denials.

The process looked a little like this:

• The clearinghouse performs a series of minimum necessary checks on the claim to ensure compliance.
• The claim is submitted to the insurance company.
• The payer either accepts or denies and tells you what’s wrong.
• You make the correction and re-bill. 

This basic approach worked just fine for years but as reimbursement rates decrease and payers implement increasingly complex rules, the ability to collect on the first submission has never been more valuable.

Change the Paradigm - An Ounce of Prevention

Instead of focusing on submitting a high volume of "clean" claims and having staff rework the denials encountered as a result of this outdated approach, a Revenue Cycle Matters best practice is to focus on first pass yield.

First pass yield is simply the percentage of claims getting paid on first submission. This is truly the only metric that matters when it comes to benchmarking the success of a clearinghouse.

Do you know what percent of your claims get paid on first submission?

Think about what focusing on first pass yield instead of clean claims rate would mean to your cash flow, A/R and noncollectable write-offs, if 95% of your claims got paid on first submission.  

Focusing on first pass yield requires a commitment by both you and your revenue cycle team (staff and business partners) to continuous improvement. It puts the emphasis on denial prevention – by allocating more time to pre-submission claim review and creating better, custom edits. Which in turn, limits the number of incorrect claims reaching the payer, thereby, increasing cash flow and reducing time spent working denials.

Although this creates a little more work up front, it will ultimately make your revenue cycle much more efficient.

Revenue Cycle Matters Tip: Working smart in the revenue cycle means - understanding the “why” behind denials and working with business partners to continuously analyze denial data and create better edits. Your time spent working smart earlier in your claim's journey to payment will quickly be recouped by less time spent working denials.

Many older clearinghouses have not had success integrating denial analytics back into the claim scrubber and are somewhat limited in their ability to help predict why payers are delaying payment on claims. Which could be why they choose to promote their clean claim rate versus the more meaningful metrics like first pass yield.

When evaluating a revenue cycle tool for your organization look for one that takes a denial prevention approach.

Here are a few features to look for:

• Intuitive and flexible to increase staff productivity
• Provide clear and informative warnings explaining suggested next steps before submission can occur.

No Limits on Edits

• Edits are an expectation in modern healthcare billing – no additional fees for a claim scrubber to do its job.
• Integration between denials and edits – ease of adding edits to prevent future denials.

Electronic Attachments & Appeals

• Some payers require attachments with claims, if you can attach and submit required documentation automatically you increase compliance, save staff time and eliminate on print/mail expenses.
• Same goes for appeals!

Analytics & Business Intelligence Tools

• Reporting that puts your claims and remittance data to use in visual graphs and meaningful charts without taking all day to create.
• Key drivers in identifying opportunities for upstream revenue cycle training, where to work edits and denial prioritization.

Check out our last post, Should You Expect More from Your Clearinghouse to learn about other expectations you should set for your revenue cycle partners.

Keep in mind, a strategy focused on denial prevention doesn't mean you stop working denials. Denial management is still a critical piece of the collections puzzle! When a claim does pass your edits and you receive a denial, make sure you work that denial and understand why it happened and whether or not you can implement a new edit to address similar claim issues going forward. Over time, you will see your first pass yield improve and your overall denial rate decrease.

Choose Denial Prevention

At efficientC, we take a denial prevention approach to claims management. Our clearinghouse software and our client experience team are both hardwired to stop likely rejections from reaching payers before they can become a denial.

As a leader in the denial prevention movement, we love sharing our story. efficientC was born from a need for a better way to manage claims. Built by revenue cycle experts for revenue cycle specialists like yourself, we created a revenue cycle management tool to make your transition from a strategy of denial management to denial prevention seamless.

We would love to show you how efficientC is different. If you’d like to see or hear more, contact us here or send an email to efficientC@os-healthcare.com.  

In our next discussion of Revenue Cycle Matters, we will take a deeper dive into the value of electronic remittances, denial analytics, and business partner customer service in your RCM strategy.