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An Essay on Rejected Medical Claims and Invoices
By Ross Fidler
Typically, denied and rejected hospital claims quickly surface as a source of multi-millions of dollars in revenue leakage and unnecessary expense.
Struggling Payers
Payers have been struggling for decades with increased hospital costs; and the Affordable Care Act of 2010 [ACA] will only increase the stress. Hospitals now thoroughly inspect claims for errors and have become adept at using their rules to deny and delay claims.
For example, Zimmerman reported the denied percentage of gross charges climbed from 4% in 1990 to 11% in 2001; even more by unaudited 2010. In contrast, providers typically lack the tools to aggressively manage current denied claims and prevent future ones.
Denial Tracking
Without denial tracking, an organization may not recognize the heavy financial impact of denied claims. One report www.HARA.com indicates that bad debt and gross days are declining. However, a majority of medical providers write off denials as contractual allowance, distorting the numbers but not the resulting lower margins and reduced cash. H*Works reports that the typical 350-bed hospital loses between $4 million and $9 million each year in earned revenue from denials and underpayments (assume $103 million annual gross revenue and 40% contractual allowance), thru 2009. Recouping lost revenue from denials and underpayments will, according to H*Works, increase an organization’s operating margin by 2.6% www.advisoryboardcompany.com
Industry Benchmarks
Industry estimates report that at least 50% of denials are recoverable and 90% are preventable with the appropriate workflow processes, management commitment, strong change leadership, and the correct technology. H*Works estimates that for a revenue capture of $3 million from denials and underpayments, the recovery infrastructure costs are only about 3%.
Assessment
With all this in mind, better management of rejections and denials, as well as the information necessary to resolve and prevent them, surfaces as probably the best strategy to improving hospital financials. By streamlining the revenue cycle, managing rejections and denials proves to be less expensive and to provide faster returns than initiating new services.
Conclusion
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Filed under: Events-Planner, Health Insurance, Healthcare Finance | Tagged: Affordable Care Act., Hospital Denial Management, Rejected Medical Claims, Ross Fidler, www.advisoryboardcompany.com, www.HARA.com, www.healthcarefinancials.com | 3 Comments »
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