The real cost of claim rejections

The real cost of claim rejections

What impact do claims rejections have on your bottom line? 

Claim rejections are one of the biggest threats to cash flow & overall practice revenue. As we will see later in this article, claim rejections often come down to human error & can happen to even the most experienced & well-trained individuals.  

So, no matter how much you try to avoid it, small billing mistakes can creep in – especially when you’ve got a waiting room full of patients in a hurry to be seen. While it’s easy to make small mistakes, those mistakes can add up to big money. The good news is that it’s not as difficult as you think to avoid them. 

This article explores the real financial impact of claim rejection on your practice, the top reasons that claims were rejected in 2019 & five ways to prevent some of the most common — & costly — billing mistakes. 

 

What is the money cost?

Do you know how much money your practice is losing because of rejected claims? Most practices are surprised by the actual Rand value. If you don’t know what yours is, here’s a simple calculation to help you know how much money you’re losing:

  1. Step 1: Determine how many claims are submitted monthly & the average claim amount.
  2. Step 2: Estimate your claim rejection rate. If you’re unsure, the industry average is 15%.
  3. Step 3: Multiply the number of claims by the average claim amount, then divide by the rejection rate. The result is the Rand amount of lost revenue.
  4. Step 4: Using the industry average of two-thirds claims rejection recovery rate, divide the previous number by 67 percent. This represents your recoverable revenue.

While this scenario shows the amount of recoverable revenue from rejected claims, it doesn’t take into account the money spent reworking those claims which we’ll pick up on later. 

Example

Let’s look at an example using figures from a mid-sized medical practice

Claims rejection example

Step 1:

This practice submits 1 500 claims a month with an average claim of R400.

Step 2:

They have a better-than-average rejection rate of 10%.

Step 3:

Determine total rand value of all claims:
1 500 x R400 = R600 000

Determine total rand value of all claims: R600 000 x 10%

Revenue at risk per month = R60 000

Even with the lower rate, this practice is at risk of losing roughly R60 000 a month to rejected claims

Step 4:

Determine recoverable Rand value: R60 000 x 67%

Determine Rand value per month = R40 200

 Total lost revenue per month: R19 800

If two-thirds of those rejected claims are recoverable, this practice will stand to lose R19 800 per month or almost R237 600 annually. This is considerable income for any private practice. 

So now that we have an idea of the actual cost of rejected claims to your business, let’s look at the most prevalent reasons why claims were rejected in 2019. 

Top reasons SA doctors’ claims were rejected in 2019*

Top reasons SA doctors’ claims were rejected in 2019

What we can see from this list is that rejected claims are avoidable if you are able to simply check & validate patient details before submitting claims. Particularly, if you are using a reputable medical billing software system to submit claims. 

Bearing in mind that getting claims right the first time is cheaper than reworking them, here are some ways you can actively minimise rejected claims:  

  1. Verify patient (& patient dependent) information by performing a benefit check before their scheduled appointment. By simply performing this check ahead of the patient’s visit, you will know if the patient’s medical aid details that you have on file correspond with the information held by the medical aid. If over 50% of rejected claims are related to inaccurate information, it’s worth having an automated patient benefit check for all patients as standard practice. 
  2. Submit claims in real-time. The near-instant response time from medical aids means you can submit claims while the patient is still at the practice. If a claim is rejected for any reason, you will know instantly & can therefore fix & resubmit before the claim gets stale. An additional benefit to practicing real-time claims sending is the positive effect it has to reduce your bad debt risk.  We’ve covered previously the reasons why prompt billing encourages prompt payment.
  3. Use pre-populated templates. Incorrect or missing diagnosis codes account for more than 10% of rejected claims. That’s why it makes sense to use pre-populated templates when submitting claims. Medical billing software that allows you to customise templates to your speciality &/or most used codes means you’re more likely to submit the correct ICD-10 codes & the required lines, minimising the instances of rejected claims. 

 

What else should I be doing to help my practice minimise claim rejections?

Track & analyse trends in claim rejections. By reviewing your data periodically & categorising rejections can reveal patterns in errors. Once identified, these patterns can then be addressed & corrected as quickly as possible to reduce costly mistakes & ensure a healthy cash flow. 

Make sure your staff gets the training & support they need to be able to spot & handle rejections quickly & efficiently. 

Lastly, you can see from the above that the right medical billing software is invaluable when it comes to reducing claim rejections. But is there a way to further streamline your RCM process? Yes. Clinical software has evolved & when integrated with medical billing software, it can ensure that the most accurate billing instructions are filed the first time around thereby significantly reducing your claim rejection rates.

When next you’re reviewing RCM processes, consider software that incorporates clinical data earlier in the workflow to ensure a smoother claim submission process for all staff involved. Because when it comes to claims, prevention always outweighs rejection.

For more about how to reduce rejected claims & increase revenue at your practice, click here

 

*Data based on a sample of over 250 000 medical aid claims.
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