A Medicare claim denied is a lost opportunity for income. When private insurers reject claims, you may be put in the untenable position of collecting funds directly from patients, particularly alienating them, or writing off the lost funds. The average medical practice has a profit margin of about 13%. Eat into this too much through denials, and you may suddenly find your practice losing money.
Even when denials constitute a small portion of your total claims, they eat into your profits in ways that may initially be invisible, but which can become extremely damaging. Here’s what you need to know.

What Happens When You Write Off a Denied Claim?

Most medical practices write off their denied claims. They might file a half-hearted appeal, but that’s rarely enough. When that appeal is denied, they might attempt to collect the funds from a patient. It’s unlikely the patient will ever pay. So rejected claims become lost revenue. Most practices dismiss this as a cost of doing business. Denied claims, however, add up quickly.
One recent analysis found that as many as 9% of hospital claims are initially denied. The figure is even higher for private practices, which rarely have the claims management resources of hospitals. Denied claims end up costing $262 billion annually.
If that money were funneled back into the healthcare system, it could revolutionize medicine by funding new technologies, allowing for larger salaries, and ensuring better patient care. The total cost of uncompensated care for the uninsured is less than $90 billion, which means that the money lost on claims denials could be used to provide care for patients in need. We’re talking about massive sums here. We’re talking about denials for services you provided, services for which you deserve to be compensated.

A Few Dollars Add Up: Here’s What You’re Missing With Denied Claims

So what is your practice losing when its claims are denied? That money adds up over time. The money you lose on denied claims is money that could be funneled into:

• Better employee benefits. Consider options such as higher salaries or more paid time off. This could mean happier, healthier employees.
• More employees. This could mean a better-run practice, shorter wait times, or more time off for you.
• More equipment for your office. Whether it’s a new medical technology, better billing software, or an office television to entertain waiting patients, better equipment means a better patient experience.
• A chance to give back to your community. Would you rather lose money in insurance denials, or use that money to help patients in need? If you can bring in a little more money, then you can offer free or discounted care to patients in need, participate in free clinics, or even set up a charitable organization.

The Perils of Becoming a Debt Collector

Many practices, upon realizing how damaging claims denials are, decide to become debt collectors. Rather than fighting with insurers, they attempt to collect the money directly from consumers. This is a losing proposition because:

• It’s unlikely that patients will be able to pay, particularly if the sum is large.
• Attempting to collect money from patients can alienate them. You may lose them as patients, and lose potential patients whom they tell about your collection practices.
• Debt collection can be a fulltime job. Moreover, it presents numerous legal issues. If you outsource debt collecting, the collector must follow the strict requirements of the Fair Debt Collection Practice Act. If you perform collections in-house, then you may have to hire, train, and supervise a new employee, and ensure they collect the debt in a way that positively represents your practice.
• Collecting medical debts can call into question your billing practices, or even subject you to oversight from medical boards. Consumers may look for billing errors and double-billing. In some cases, they may be so angered by debt collection practices that they report you to a medical board. Consider how the patient who was unhappy with their care might react if they get a large bill.

Debt collection is not a workable solution for most practices, and it rarely brings in much money.

The Components of Effective Denial Management

Effective denial management begins well before the denial. Preventing denials is key here, and requires diligent attention to your billing practices.
The most common reasons claims are denied include:

• The claim is missing information. This can happen even if a single field is left blank.
• The claim is a duplicate.
• The claim has already been paid, or an item included on the claim has already been paid.
• The claim is not covered by the insurer. In some cases, the problem here is the way the claim has been coded. Medical coding errors account for about 80% of claims denials for non-covered services.
• The filing limit has expired.

Understanding why your claims are rejected is critical to fighting these denials. That’s a time-consuming undertaking that often requires significant research and extensive communication with the payer. It’s a worthwhile undertaking that can bring in money. But time is money, too. The time you lose fighting denied claims is time you could spend on claims that are more likely to be paid. That’s why outsourcing denial management may be all that’s standing between you and a highly profitable practice.

Is it Time to Outsource Your Denial Management?

Operating a medical practice brings a lot of surprises. When you were in medical school, you probably didn’t give much thought to your own business acumen, or consider whether you needed to brush up on management skills. Running a practice means spending a lot of time on pursuits that have little to do with patient care. You don’t need to add denial management to the list.
Good denial management puts more money in your pocket. It means less time spent on frustrating tasks that do nothing to help your patients. So if you’re struggling with denial management, consider Precision Medical Billing. We help you understand why your claims are being denied, then tackle each issue for you. Your patients deserve all of your time. And you deserve to be fairly compensated for that time. With PMB, both are possible. Contact us today!