Recent reports state that many hospitals in the United States are nearing the denials danger zone. What is this, and why is it important? Claim denial is a very common term that medical billing and coding companies are not very happy to hear.

Claims are denied when the payer refuses to reimburse for the services rendered by the healthcare provider. Since most Americans have health insurance, insurance companies become the major payers. Such insurance providers deny claims for various reasons like ineligibility, missing or wrong information submitted by the healthcare provider, non-coverage of service, or authorization problems.

Hospitals enter the denials danger zone when they experience consistent denial rates that are more than the industry average. When a large portion of the bills submitted is denied by the payer, the healthcare provider’s revenue is directly hit.

Now, there is no way that medical billing and coding companies can promise a zero claims denial rate for their clients. That does not happen practically. However, depending on how effective the billing and coding team is, you will be able to maintain a lower-than-industry average denial rate and improve the reimbursement rate.

According to the Change Healthcare Denials Index, the claims denial rates have increased by about 23% since 2016. This index further goes on to state that almost 86% of these denials are avoidable.

So what could have avoided them? – Competent RCM processes that are designed and handled by expert medical billing and coding companies.

Another survey conducted by a private healthcare organization for the year 2021 talked to over 130 experts from RCM and billing and coding companies. This survey shows the following results.

• Average denial rates:

The average denial rates in healthcare organizations range between 6% and 13%. Anything over 10% is not optimal at all and could mean that the organization’s RCM processes need to be tweaked.

• Nearing high denial rates:

About 16% of these organizations are nearing the danger zone and have denial rates averaging from 8% to 10%. Such healthcare providers can tweak their existing RCM process or rope in one of the top-performing medical billing and coding companies to reduce the levels.

• High denial rates:

Out of all the organizations surveyed, 33% of them had a denial rate of more than 10%. This means that about 1/3rd of all the healthcare providers in the United States fall under the danger zone category. One out of every three claims that they submit ends up being denied. Just imagine what this is doing to their revenues!

These executives were further asked what they thought was their top concern causing high denials. About 32% of them felt it was a lack of coding expertise. One of the top priorities of medical billing and coding companies should be to strengthen their coding team. Coding is definitely one of the more challenging parts of the RCM process, and preventable errors in the codes may lead to claim denials.

We have always believed that it takes two sets of expertise to get the codes right. That is why Quintessence’s coding tool – Codessence, is built with Machine Learning skills and exemplary human prowess. The tool keeps learning with every code run and helps our coders add the right modifiers and use the perfect codes every time.

Apart from a lack of coding expertise, here are other reasons that lead to denials.

• Lack of prior authorization
• Eligibility issues
• Not checking for an out-of-network provider
• Medical necessity acute IP
• Missing or Invalid Claim Data

Handling high denials

Whatever your current denials rate is, it is absolutely possible to bring down the value by focusing on changing certain aspects of your current RCM process.

Start by analyzing your denial rates. Find out the year’s average and keep that as a base to work with. Finding out the core issue is important too. Remember that medical billing and coding companies may have more than one reason that could lead to their claims being denied.

Some of the common problems to tackle could be:

1. Handling lack of resources – You cannot expect a small team of coders to create thousands of codes a day without exhaustion eating them up. Make sure you have the right manpower to handle the workload. That would help improve denial rates by itself.
2. Not being aware of the latest compliance changes – Now, you could have an amazing team to handle your backend billing and coding. However, if they don’t keep updating themselves with changes in compliances, then their skills could get redundant. Medical billing and coding companies will have to invest in periodical training sessions to keep their staff updated.
3. Lack of automation – Now, this is a problem that smaller RCM companies and internal billing and coding teams may face. Automation brings about efficiency in the RCM process and when your team is manually trying to handle every step, the chances of preventable human errors are high.
4. Delays in filing – This could be a very simple reason why your claims get denied. If there is a submission backlog and your team sends out claims post deadlines, even the valid ones may be denied. So this is something medical billing and coding companies should definitely keep track of.

Continuous improvement is the key here. It is important to check the denial rates once in a while to ensure your team is working on bringing the levels down. Quintessence’s Receivables Management segment works extensively in bringing down denial rates, handling AR follow-ups, analyzing low-pay areas, and taking up appeals at the right time. As a result, the number of claims that get denied reduces quickly and profitably for you.

Here are reasons why Quintessence could be your perfect RCM partner.

Conclusion 

A healthcare provider could do everything possible to retain old clients, get new ones, expand the business, and offer the best treatment. However, if the billing and coding do not happen right, then a major chunk of the claims would end up getting denied, and the practice wouldn’t be making the expected money.

Medical billing and coding companies play a major role in taking over the RCM processes for hospitals and practices and help these organizations focus on treating people and not having to worry about the backend complexities.

If you think your current denial rate is higher than the industry average, give us a call to find out how Quintessence can help.