The denial rate represents the percentage of claims denied by payers during a given period and quantifies the effectiveness of your revenue cycle management process. A low denial rate indicates a healthy cash flow.
A 5% to 10% denial rate is the industry average; keeping the denial rate below 5% is more desirable.
Calculating Denial Rate
To calculate your practice’s denial rate, add the total dollar amount of claims denied by payers within a given period and divide by the total dollar amount of claims submitted within the given period.
A denied claim is a completely different issue. Denied claims are defined as claims that were received and processed by the payer and a negative determination was made. A denied claim cannot simply be resubmitted. It must be determined why the claim was denied. Having that information available allows an appropriate appeal to be written or a reconsideration requested.
Why Are Claims Being Denied?
There are five major reasons for denied medical claims:
- Missing information- examples include even one field left blank, missing modifiers, wrong plan codes, incorrect or missing social security numbers.
- Many times, a duplicate bill is the result of human error.
- Service is already adjudicated – (unbundling) services. Benefits for service are included within another service or procedure.
- Services not covered by the payer. Before providing services, call the payer to check details of eligibility and determine coverage requirements
- The limit for filing has expired. There are a set number of days following service for the claim to be reported to the payer. If outside of that time period, the claim will be denied.
Few more unavoidable reasons which deny Medical bill claims:
- Worthless Services: If the healthcare provider ordered a service that had no medical value, this can be an egregious billing.
- Inadequate Services: This can happen when a healthcare provider denies tests or services or submitting a claim for a procedure without completing one of the necessary components.
- Diminished Standard of Care: If the provider does not meet the specific standard of care, including independent healthcare providers, nursing homes, hospitals, and other medical facilities, it can be excluded from the program and be subject to monetary damages.
- Unnecessary Services: A healthcare provider may order unnecessary tests or order unnecessary medical services in an attempt to increase its profit margin if it is reimbursed for each unnecessary test or service.
- Misrepresentation of Credentials: The False Claims Act can also recognize liability when the healthcare provider who provides medical services misrepresents his or her credentials.
- Improper Coding: Medical coding errors can cause considerable damage to both patients and providers in the form of inaccurate medical bills and lost revenue for the medical office.