Ask any medical biller or practice owner what the nemesis of their practice is, and they will name rejected claims. The healthcare revenue cycle is full of issues that can impact financial performance, with rejected claims being at the top of the list.
Practices aim for a success rate of more than 95% — they want to ensure that no more than five percent of their claims aren’t reimbursed. However, in reality, many practices achieve a 75-85% success rate. This means that denied claims can account for a quarter of an organization’s revenue. Rejected claims have significant implications for practices that may run deep.
This article explores some of the hidden impacts of rejected claims on practices.
What is the Probability that The Payer may Reject Your Claim?
Medical billing is a complex process where the smallest mistake can cause challenges. Dependence on the patient, the procedure, and the insurer makes claims processing a delicate process.
The number of claims rejected by payers is higher than you’d expect. Still, you are not alone in dealing with unpaid claims. Rejected claims are common even in practices with the most diligent billing departments; they represent an average annual loss of $5 million for healthcare organizations. This amounts to approximately 5% of the net patient revenue.
Unfortunately, medical claims denial has spiked by 20% over the past five years. A closer look at the industry shows that approximately 20% of all claims filed are rejected. Around 60% of these claims are never resubmitted. This is partly due to the cost of reworking the claims, which averages $25 per claim. Whatever the case, this is a huge loss in healthcare that many practices often fail to address.
Around two-thirds of rejected claims are recoverable. Yet, the time involved takes a toll on an organization’s performance.
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Unforeseen Impacts of Rejected Claims on Your Practice
Rejected claims impact healthcare organizations in several ways. Some of the effects of denied claims are predictable and easy to recognize. For example, if your practice consistently has claims denied, it’s likely that you:
- Suffer insufficient revenue
- A lower cash flow for day-to-day operations
- A lower level of patient satisfaction
- Increased workload for your billing team
However, your practice may experience other hidden consequences that can exacerbate poor performance. Some of the unforeseen impacts may include:
Becoming a Target for Audits
If your business struggles with medical billing errors lost revenue is not the only demotivating problem. Rather, you also become a target of billing audits. The Centers for Medicare and Medicaid and private insurance companies single out practices with a history of billing errors. Fraud prevention and audit programs are used to scrutinize practices whose claims are often denied.
The audits need compliance and put practices at risk of rejection by other payers. Additionally, frequent audits are time-consuming and can affect an organization’s morale.
Increased Employee Burnout
You know the staffing shortage in the healthcare industry. Burnout rates and other frustrations are forcing medical professionals to change careers. Unfortunately, this is also impacting the number of students choosing medical careers.
Of course, increased workloads and staffing shortages are major causes of burnout in healthcare. If you’re already suffering from a staffing shortage, denied claims can exacerbate the issue. With frequent rejected claims, your already overworked employees have even more responsibilities. Reworking on rejected claims intensifies frustrations, leading to more burnout.
Neglecting other Important Duties
Your team may have to review possible errors within a rejected claim. Taking time away from other, more strategic initiatives. Postponing your marketing initiatives or delaying one patient’s feedback, for example, may have an insignificant impact at first. Still, constantly postponing tasks to address rejected claims may have adverse effects.
Regardless of whether you postpone or neglect a task to follow up on the denied claim, the time and cost can have a long-term impact on your business. For example, the cost of settling a single claim is about $6.50, while reworking a claim can cost $25. These costs are manageable if you deal with one or two claims needing follow-up. But, if your company experiences a dozen denied claims, the costs can skyrocket and impact the entire practice.
Increased Organizational Conflicts
You may associate one or two rejected claims with billing errors. Still, frequent rejected claims can create organizational conflicts. When rejected claims start affecting departmental performance, finger-pointing between departments is inevitable. Other departments begin to doubt the competence of your billing team, leading to conflict.
Such conflicts affect employee performance. It’s also important to note that in addition to employee mistakes, having an outdated billing system can also lead to claim errors. If such problems are not diagnosed, they can increase conflict and turnover.
How Do You Reduce Claim Rejections and Denials?
Documentation, coding, and billing policies vary on payers, procedures, and patients. Yet, most of the claims rejected are preventable. You can address these issues by analyzing the common causes of rejection and streamlining your billing process.
Effective measures to prevent rejected claims include:
- Effective verification of insurance and eligibility. Ineligibility causes 24% of all rejected claims. Hence, confirm patients’ coverage and benefits.
- Verify referrals, authorizations, and other necessities. Pre-certification and authorization account for many claim rejections. Nonetheless, obtaining prior authorization doesn’t guarantee payment. Perform a medical procedure only when necessary.
- Ensure you have a competent coding team. Assigning your receptionists’ billing roles can be cost-effective. Still, it may lead to many coding errors.
- Collect all necessary patient information before filing claims
Avoid Rejected Claims with Apex EDI
Rejected claims can take a toll on your practice’s revenue cycle. Delayed employee payments, limited resources, and patient frustrations can pile up. Other hidden impacts like neglected duties and employee burnout can also hurt your practice.
An internal coding and billing team can be cost-effective for a small practice. Still, frequent rejected claims can be costly in the long run. The good news is that a medical clearinghouse can save your practice from rejected claims.
Apex EDI has been processing insurance claims for more than 20 years. We help doctors focus on providing care to patients while we take care of your billing burdens. Our software is flexible and easy to integrate with most EHRs, allowing for one-touch claim processing, real-time information eligibility, and claims process reporting. Schedule a demo to see how Apex EDI can help you optimize your billing.