Claim denials are the worst. Not only does remedying them require additional time and resources, but they also delay cash flow—a situation that can be difficult for practices to navigate. While you may be tempted to overlook one or two denials, these pesky problems add up quickly—and even a couple can point to a much larger issue. And that issue that could cost your clinic a lot of money. Here’s what you need to know about the true cost of a denied claim—including some denied health insurance claims statistics:
The average cost to rework a denied claim is about $25.
According to this infographic, the average cost to file an initial claim is $6.50. And a few years ago, the Medical Group Management Association (MGMA) estimated that the average cost to rework a denied or rejected claim was about $25—a number that is rising annually according to Lori Zindi, the author of this RCM blog. So when a claim is denied, the total cost of processing that claim jumps to about $31.50. And that’s just the beginning of the story. To see the big-picture impact of that cost, consider this: if you have 100 claims denied per month—and you rework all of them—you’re spending about $30,000 extra a year just to get the money you’re already owed (100 claims per month x 12 months x $25 to rework a denied claim). That’s on top of the $6.50 per claim you’re already spending for initial submission. And those numbers don’t even account for the financial downside of reduced cash flow. After all, you can’t use money you don’t have—not even to passively accrue interest.
Only 35% of all denied claims are ever reworked.
According to the above-cited infographic, 3.8% of all claims are returned to providers with denials. And only 35% of those denied claims are ever fixed and resubmitted. Unless all of those claims are for less than $25 each—which, even with the current trend of declining reimbursements in healthcare, would be hard to believe—providers are leaving a whole lot of money on the table. Josh Vierling—the author of this blog post—said it best: “One thing is clear: the current system benefits [p]ayers much more than it does [p]roviders.”
That should be incentive enough to prevent denials in the first place.
According to Zindi, the healthcare industry has had a “a longstanding practice” of “appealing and fixing denials” as part of routine business practices. However, that doesn’t have to continue—and it shouldn’t, because according to Zindi, 90% of denials are preventable. In other words, you could be collecting on 90% of all claims upon the first pass. That’s better for your business operations—and your bottom line. And it’s not that difficult to accomplish—if you optimize your revenue cycle management (RCM) process, that is. And you can do that with an in-house team and the right billing software—or with .
Start by optimizing your billing processes.
- Incorrect data (e.g., data-entry errors)
- Incorrect or missing insurance information
- Missing claim details (e.g., codes and modifiers)
- Missing or invalid referral or authorization information
- Incorrect or missing provider credentials
- Late submissions (outside of the payer’s timely filing window)
- Incorrect beneficiary information
- Failure to submit payer-requested information
Then, track denial codes.
The best way to prevent denials on the whole is to truly understand why you’re receiving them in the first place. So, as WebPT’s Charlotte Bohnett suggests in the above-cited blog post, for every denied claim, you should:
- Identify the denial error code—and note it in a denial management log.
- Reach out to the payer to understand the reason for the denial.
- Correct and rebill the claim in accordance with the payer’s instructions (i.e., don’t leave money on the table).
- Document all details of the process—including all interactions you have with the payer.
- If you resubmit the claim and still receive a denial, appeal within seven days of the payer’s final determination. (According to McCutcheon, claims submitted within seven days have a 67% chance of being paid; claims submitted outside of that window have only a 40% chance.)
- Regularly review your denial management log to identify trends and remedy the root of the problem.
For more great strategies to prevent denied claims—including creating policies and procedures and training your staff—check out this blog post in full. In the meantime, just remember that claim denials don’t have to be a fact of life for anyone running a healthcare business. There are plenty of things you can do now to make them a thing of the past.