Claim denials continue to be one of the main issues impacting the income and productivity of physicians. Each denied claim means delays, extra work, and loss of income. While every healthcare organization tries to file their claims correctly, few keep track of important KPIs indicating areas of inefficiency in the revenue cycle.
Denial management isn’t just about appealing to a denial claim but rather about discovering any trends, analyzing the underlying causes, taking necessary measures and keeping track of your performance. Physicians looking at denial management metrics on a regular basis (once a month) will be able to better understand the current state of affairs and solve any potential problems.
Keeping tabs on the right denial metrics helps medical organizations to manage cash flow, decrease administrative burdens, raise collection amounts and build good relations with insurance companies. The use of core KPIs will help you make better decisions for running your business successfully.
The following six denial management metrics need to be analyzed once a month.
Denial Rate
One of the most critical statistics in denial management is the denial rate. It measures the proportion of rejected claims by insurance companies after their submission.
It can be computed using the formula: Number of Denied Claims/Number of Submitted Claims *100. An increasing trend in the denial rate is an indication of issues in the billing, coding, documentation, eligibility, and authorization functions.
Tracking the denial rate on a monthly basis helps the physicians to know whether their claims quality is improving or declining. A relatively slight increase in the denial rate may lead to huge losses in practice revenues. For instance, when practices submit tens of thousands of claims each month, then a few percentage point increase in the denial rate may mean losses worth millions of dollars for the practice.
A low denial rate usually indicates a well-functioning front-end and back-end of the revenue cycle process. When there is an increase in the denial rate, then it should be analyzed urgently and actioned upon accordingly.
First-Pass Resolution Rate
The first-pass resolution rate shows what percentage of claims is paid after their initial submission without further resubmissions, corrections, or appeals.
This indicator gives information about how effectively the billing procedures of the practice work. High first-pass resolution rates mean that the claims are submitted properly and contain all the required documentation, coding, and other payer specific elements.
When looking at this indicator every month, doctors will know if the process of billing works well or not. Low rates of first-pass resolution may indicate problems like incorrect coding, lack of documentation, patient eligibility, and other issues.
First-pass resolution rates provide several benefits for the practice. The process becomes less costly, faster, more efficient in terms of the workload, and less time-consuming. All resubmitted claims are corrected manually, which takes extra effort from the staff members.
Successful medical practices set up certain performance benchmarks and track the trends to keep the rates high.
Denial Categories and Root Cause Analysis
Not only is it important to understand how many claims are denied, but it’s even more critical to understand the reason behind it. Monthly denial category analysis enables physicians to uncover patterns that are causing the delay in the payment process. By analyzing the reasons behind denials and their frequency, medical practices can determine the weak points in their revenue cycle process. For instance, an increase in denials related to authorizations indicates a need for training and/or changing workflows. Recurring denials due to coding issues could be reduced through coding audits.
The root cause analysis allows denial management to move from being a reactive activity to becoming a proactive one. Not only can they fix the mistakes made, but also prevent them from happening again.
The monthly denial category report offers a clear plan of action.
Denial Recovery Rate
Denial recovery performance rate indicates the efficiency with which the practice is able to reverse denials and recover money.
All denials are not always lost forever. Some of them can be reversed if the right documentation, coding clarification, or other information is submitted. But practices, which do not measure denial recovery rate, can lose revenue, which can be handled by healthcare denials management services
It is calculated by dividing the number of claims which have been successfully recovered by the total number of denied claims processed within a certain period of time.
A high denial recovery rate means an efficient reversal process and good follow up. A low recovery rate may show that there are weaknesses in the denial process flow, staff education, documentation, appeals submission process, etc.
It is useful for physicians to check denial recovery rates on a monthly basis to be sure that the team is working efficiently on recovering denied claims. Knowledge about the most successful denial types can be helpful in focusing staff effort on these types to receive the maximum benefit.
The better the denial recovery performance rate is, the better the collections are.
Average Days to Denial Resolution
Average Number of Days to Resolve Denied Claims is an important metric impacting cash flow directly.
Each day that a denied claim remains unresolved equates to a delay in reimbursement. Longer resolution times could impact the organization’s cash flow, raise account receivable levels, and waste valuable manpower resources.
This metric looks at how long, on average, it takes to resolve a claim after receiving the denial, either by getting paid, getting adjusted, or closing out the claim.
In assessing this metric on a monthly basis, physicians will want to identify any trends reflecting inefficiency in denial processing. These delays could be due to understaffing, lack of proper communication with the payer, lack of proper documentation, or poor follow-up practices.
Improving the average time for resolving denials results in many positive outcomes. Not only does this help in cash flow, but it will also reduce administrative costs and avoid missing any deadlines for appeals.
Denial resolution is something that could be easily improved if the practice creates a denial processing work queue and follows it up regularly.
ConclusionÂ
Successful denial management is not just about fixing the claims that have been rejected but involves constant monitoring, analyzing and improvement of the processes involved. The doctors who regularly analyze the denial management metrics on a monthly basis understand their revenue cycle process better and prevent possible issues from becoming major sources of financial loss.
There are six metrics which are critical to track. They are the denial rate, first pass resolution rate, denial types and root causes, denial recovery rate, average days to denial resolution and net collection rate. These metrics offer a complete picture of how well the practice handles its claims and avoids losses.
Regular review of these metrics will allow physicians to reduce denials, speed up reimbursements, enhance cash flow and ensure overall financial stability of the practice.
