Doctors submit patient claims to insurance payers so that they can receive reimbursement. In order to collect revenue and increase their bottom line, these claims need to get accepted.
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Seems easy enough: submit the claim, collect the money. Unfortunately, it’s not that simple. Submitting claims doesn’t guarantee that a doctor will get paid by the insurance company. Many of these end up denied. This is a major roadblock for healthcare organizations, even if they submit appeal letters.
It’s important to realize that there’s already a cost associated with submitting a claim before it’s even rejected. This average cost to file an initial claim is $6.50. But when these get denied, the cost to rework them is far more expensive. The average to resubmit just one of these is $25, and that price is rising annually. But we can’t forget about that initial cost to submit. So really, the amount that a provider spends to process just one rejection is $31.50.
To understand the significant impact that this has on providers, we need to consider how often these denials occur. $31.50 wouldn’t be too bad if it happened every once in a while. But it isn’t as infrequent as one would hope. One in seven of all claims gets denied, resulting in 200 million rejections each day. I’ll break this down on a smaller scale so we can understand it for a single provider.
Let’s say that a practice has 100 denials each month. If the office reworked all of them at $25 per claim, you’re spending an extra $30,000 per year. That’s a lot of money to be spending just to get the money that you’re already owed. And it doesn’t even include the $6.50 that I talked about earlier to submit each claim in the first place. This also doesn’t consider the financial impact of reduced cash flow since it’s taking so long to collect your revenue.
It’s important to note that 65% of claims don’t even get fixed and resubmitted. Maybe your initial thought is, “That’s financially reasonable because I don’t want to spend $30,000 each year on resubmissions.” But unless all of those claims were for less than $25 each, which is very unlikely, then providers lose out on a lot of money by not collecting on them.
For the industry as a whole, $262 billion in claims get denied. This is equivalent to around $5 million per provider. As of 2017, healthcare organizations were writing off 90% more rejections compared to in 2011. For hospitals with an average of 350 beds, this increase in uncollectable denials translates to a $3.5 million loss over the course of four years.
With how much revenue and profit a healthcare provider can lose from claim denials, it’s so important that they streamline their submission process. Thankfully, there are some ways to keep the costs from getting too high. For instance, claim scrubbing prior to submission helps limit the frequency of rejections. And writing effective appeal letters can get you the money you’re owed even after you receive a denial. By implementing some simple yet effective processes, your office can limit the number of rejections so that you collect revenue in a timely manner.
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