How Healthcare Providers Can Reduce Insurance Claim Denials

From the perspective of an individual, having an insurance provider deny a claim after receiving an expensive treatment can be downright shocking.  One can’t help but wonder, “How can my insurance provider refuse to cover a service the doctor said I need?”

From the perspective of a hospital or practice, insurance claim denials are frustrating because they require more work from administrative staff and reduce overall operational efficiency. They also have the potential to adversely affect patients’ opinions about the organization.

Here's more on how healthcare providers can reduce insurance claim denials and why it’s so beneficial for everyone involved to do so.

 

How Much Do Insurance Claim Denials Cost?

As Modern Healthcare cites, hospitals across the U.S. lose about $262 billion cumulatively each year due to denied claims from insurers. This shakes out to about $5 million in payments per hospital, due to the fact insurers tend to deny about nine percent of hospital claims initially.

Of course, after the initial denial, hospitals and healthcare providers can appeal claims— meaning they’ll be able to recoup some of those initial losses, but not all of them. And, it’s important to account for the time and effort spent by administrative staff handling these denied claims.

Another eye-opening statistic is the fact that providers spend approximately $118 per claim on appeals, according to Becker’s Hospital Review CFO Report. This amounts to as much as $8.6 billion on administrative costs across the country each year.

So, we’ve established the degree to which insurance claim denial is an ongoing problem in the U.S. system — especially considering the already tight margins healthcare organizations are operating on. To lose out on more than 3 percent of patient revenue due to denied claims is simply too much.

And, of course, if healthcare providers are unable to eventually secure the funding for a denied claim, either the provider or the patient is responsible for covering the full cost of services. This is the worst-case scenario for both parties, as it has the potential to seriously affect satisfaction rates and financial health.

 

Reducing Costly Insurance Claim Denials

The next question to ask: Why are healthcare providers seeing such high claim denial rates? Recognizing the underlying causes can help providers work to mitigate them and improve their acceptance rates the first time around.

According to Physicians Practice, here are some of the most common reasons for denials:

-                     Patient is ineligible for care under the terms of their insurance plan

-                     An omission, like the patient’s date of birth, has occurred

-                     Clerical error leads to duplicate billing

-                     Current Procedural Terminology (CPT) or ICD-10 codes are incorrect or outdated

-                     The claim was filed after the eligible period in which to do so

-                     The provider is out of network for the patient’s current plan

-                     Prior authorization was required but not obtained before services

As you can imagine, providers must take a multi-faceted approach to increasing the percentage of claims approved by insurers. Employee training is perhaps the most important piece of the puzzle.

Intermountain Healthcare is one not-for-profit system currently using medical data analytics from ThoughtSpot to identify gaps in physician training when it comes to submitting these claims. This demonstrates how digging into the data surrounding denied claims can help providers pinpoint where they’re falling short and missing out on revenue opportunities.

One small Massachusetts-based practice decided to update their Revenue Cycle Management (RCM) software after discovering its staff was failing to find out about denied claims until after the 90-day deadline — an error costing the practice thousands of dollars. The new RCM tech helped the practice “reduce denials before they occurred by pre-determining eligibility and practicing time-of-service collections.”

As you can see, training and technology are key in reducing the occurrence of expensive — and avoidable — insurance claim denials for providers.

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