How Much Are Claim Denials Costing Your Medical Practice?

September 9, 2021 by Antonio Arias, MBA, CHBME

Topics: Practice Management, Medical Billing Company

Claim rejections are incredibly costly - and anything lower than a 95% clean claims ratio means your medical practice is losing revenue and furthering your expenses by having to rework those rejected claims. In reality, most practices have a rate that varies between 75% and 85%, which means that somewhere around 15-25% of claims submitted each month have to be worked on twice (at minimum). It’s like taking four steps forward and always having to take one step backward right after.

How can you best eliminate your risk of denied claims so you can avoid the high cost of these rejections? We’ve got tips and best practices for you to streamline your medical billing practices and get paid the first time.

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What are Claim Denials?

Claim denials, the opposite of “clean” claims that get accepted the first time around, happen when the insurance company - or whatever receiving party – catches errors or misinformation in the claim. 

Submitting “clean” claims is an essential component of a financially successful medical practice. A basic clean claim definition is claims, forms, or fields that are filled out clearly and accurately for processing. Clean claims not only have no incomplete or inaccurate documentation that delays timely payments but also for legal reasons.

If your medical practice has a 95% “clean claims” rate, then that means that all but 5% of claims get to payers with no mistakes upon the first submission. This ensures a quick and efficient reimbursement process so no time is wasted on delayed payments and denied claims. 

calculate claim denials

How Common Are Medical Claim Denials?

Medical practices should strive for a 95% clean claims rate. However, few medical practices reach that optimal goal. Most practices receive reimbursements for the first time a claim is submitted for somewhere between 75% and 85% of claims they bill. This means that about 25% of claims are denied or delayed due to errors or incomplete documentation.

Some studies have found that medical practices have a clean claims ratio of even 65% – resulting in 35% of bills needing to be redone. This translates to upwards of $20 billion per year in either delayed or permanently lost reimbursement in the United States alone. 

You shouldn’t be satisfied with a clean claims rate under 95% for your medical practice, and especially anything under 90%. Although errors are bound to happen, anything above a 5% claims rate is costing your medical practice money and time. By keeping your clean claims standard high, you can increase your clean claims ratio and overall profitability! 

How Much Are Medical Claim Denials Costing You?

One study found that denials represent 90% of missed revenue opportunities. Out of all the claims submitted, 3.8% of those claims are denied on the first submission. The average cost to file an initial claim is $6.50. Should your claim be rejected, you will spend another $25 to resubmit those rejected claims. 

$25 may not seem like a lot for one claim, however, multiply that by 100 claims in one month that you have to shell out additional money to appeal for a total cost of $2,500 per month. Now, think about it from an annual standpoint – if you multiply that monthly expense by 12, it would cost you a whopping $30,000 each year.

Common Medical Billing Errors

Inaccurate information on medical billing claims is a huge part of the reason your medical practice’s claims might get denied; keep your team apprised for these common medical billing errors to reduce the chances of denial:

Not Collecting Updated Patient Information

From contact information to insurance carriers and more, there’s a lot of patient information that can change – and quickly. With inaccurate patient data being a lead cause of denied claims, it’s crucial to have patients confirm or update their current information before receiving services. To help verify patient information in advance, use precise documentation to avoid delays and be sure to have patients update their forms at every visit (or even sooner with automated reminders).

Not Providing Detailed Documentation of Medical Information

Another way to help boost your clean claims rate is to ensure you have the most detailed medical information possible. This includes proper documentation of procedures, case history, medication history, and other similar information. These documents can be used as supplemental records to process claims if needed.

Missing Insurance Claim Filing Timelines

Filing claims usually requires submitting within a tight window. And any time a claim is submitted outside of that window means an increase in denied claims.

If your goal is to have a near-perfect clean claim ratio for your practice, one of the best ways to do that is to pay attention to claim deadlines, and if there are any issues associated with patient coverage prior to their date of service, resolve them so the claim is not submitted late. One best practice is to aim for authorization between three and five days prior to service.

medical claim denials

Best Practices For Reducing Claim Denials

Double-Check Modifiers

When it comes to your modifier usage, it’s important to verify that you’ve applied them correctly and to the right procedure. One way to help ensure this is done efficiently is to create a guideline of customized National Correct Coding Initiative (NCCI) edits for reference.

Verify Eligibility Prior to the Date of Service

Established patients are those who regularly visit your practice. They are also the patients who your staff may assume have had no recent changes to their insurance. However, outdated established patient insurance information is often the source of most denied claims. One step toward a 95% clean claims rate is to collect and confirm every patient’s primary, secondary, and even tertiary insurance at least five days before their scheduled service.

Simultaneously, it’s important to confirm any in- or out-of-network benefits, copays, or deductibles as well.

Outsource Your Medical Billing Altogether

While the goal of a 100% clean claims rate is just not practical for medical practices, a 95% clean claims ratio can be achievable with the right insurance billing practices in place. By optimizing your billing processes with these clean claims rate tips, you can maximize clean claims and minimize delays and denials – enhancing your revenue cycle management and profitability in an already challenging healthcare landscape. 

One of the best ways to help achieve an increased clean claims rate is through outsourcing your billing with an expert medical billing company. Trusting a third-party medical billing service not only ensures compliance but allows professionals to bill your claims – catching any errors before they’re submitted and ensuring all billing is completed accurately. This prevents delays and denials so your medical practice can receive payments for your services on time. 

To learn more about how outsourcing your insurance billing with a medical billing company, such as NCG Medical, can empower your healthcare practice, contact us today. Our insurance billing experts can work with you to build a customized solution that meets your specific billing needs  - so you can achieve the clean claims rate your practice deserves.

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