Despite rumblings about the decline of the number of small physician practices in the United States, they still comprise a substantial portion of the healthcare industry. In fact, the most recent Physician Practice Benchmark Survey from the American Medical Association (AMA) noted
that in practices with fewer than five doctors, about half were wholly owned by physicians. The largest percentage of U.S. medical practices includes practices with two to five physicians, and approximately 56.5% of doctors work in practices with under ten physicians.
If you’re under the impression that smaller practices don’t provide as high of a quality of care as larger ones, you might want to rethink that idea. According to the Annals of Family Medicine, evidence suggests that small, physician-owned practices not only offer a greater level of personalization and responsiveness to patient needs, they also have lower average cost per patient, fewer preventable hospital admissions, and lower readmission rates than larger, independent- and hospital-owned practices.
Denial Management - A Problematic Process
One area in which small practices face challenges, however, is healthcare claims denial management. The goal of this process is to investigate every unpaid claim, uncover a trend by one or several insurance carriers, and appeal the rejection appropriately as per the appeals process in the provider contract. Unlike claim rejection, in which a claim is submitted to a payer with incorrect or missing data or coding, claim denial occurs when a claim is processed and then repudiated by a payer.
Unfortunately, denied claims cannot be resubmitted; they must be corrected based on the reason(s) declined. Then, an appeal or reconsideration of the claim has to be proffered by the provider. Basically, the denial management process seeks the root cause for the denial as well as the coded cause.
Denials of claims result from a variety of causes, including missing or incorrect data, duplicate or late submissions, improper or outdated CPT or ICD-10 codes, lack of prior authorization, and out-of-network care. Probably the number one source for denied claims is patient eligibility, meaning the service submitted for payment isn’t included in the insurance plan under which it’s being billed.
Cost of Denied Claims
The AMA reports that 1.38-5.07% of claims are denied by payers on the first submission. Some other statistics that highlight the cost and fallout from denied healthcare claims include:
- The average claim denial rate across the healthcare industry is between 5-10%.
- Commercial and public payers deny about one in every 10 submitted claims.
- Gross charges denied by payers have increased to 15-20% of the nominal value of all claims submitted.
- An estimated 90% of denials are preventable.
- Up to 65% of denied claims are never resubmitted.
- An estimated two-thirds of all denied claims are recoverable.
Physician practices, especially those with only a few doctors, might not realize the revenue they’re forgoing by not paying enough attention to the denial management process. In addition to not recouping all the revenue they’re owed or receiving it days or months later than possible, these practices increase their risk of non-compliance with assorted regulations, decrease patient satisfaction, and waste time and resources that can be utilized elsewhere in the practice.
Sizeable Challenges Faced by Small Practices
As we discussed earlier in this blog, although smaller physician practices are typically able to provide a more personalized level of service than their larger counterparts, they face a number of barriers to a successful denial and appeal management. Without addressing these issues, they jeopardize the financial sustainability of their practice and the level of care they’re able to provide their patients. Although there are more, we’re examining five substantial denial management challenges faced by small physician practices.
1. Lack of staff appropriately trained in denial management.
Did you know that approximately 42% of claim denial write-offs are due to missing data? Or, that 30-40% result from registration and pre-service-related challenges?
Staff members in a small practice often are encumbered by a multitude of administrative tasks and required to fill many different roles. They also must deal with oft-changing industry and regulatory trends and regulations. Medical errors are a leading cause of death in the U.S., even if they’re not committed on purpose. If someone in a practice isn’t correctly trained in the complexities of claims management, its revenue flow can seriously be affected. Even if technology is in place to streamline a denial management process, it’s not worth much if the team member(s) using it aren’t trained appropriately.
2. Lack of automation.
A survey from the Healthcare Information and Management Systems Society (HIMSS) found that about one-third of providers continue to manually perform their denial management process. Such manual processes leave a lot of room for human error, offer less transparency, and are usually extremely time-consuming and increase the turnaround for claims. Plus, even small physician practices often must deal with multiple payers. Those that lack automation in their denial management process miss out on the capability for advanced claims reporting and customized decision support.
3. Lack of financial resources
Although they might not have the high operational costs of their large practice equivalents, small physician practices are similarly dealing with increasing expenditures. Some don’t realize that claims denials cost healthcare organizations approximately 5% of their net revenue stream, and reworking them increases administrative costs by almost $9 billion annually. These costs don’t include the $25 average for managing a denial.
By not investing in a denial management solution that enables them to promote correctly submitted claims in the first place, a practice might not be able to recoup enough revenue to ensure they’re able to address correcting and appealing denied claims. Also, if such a practice doesn’t employ a staff member well-trained in the denial management process, there’s a higher probability claims that weren’t approved are never reworked.
4. Lack of applicable technology
Some healthcare claims are denied because insurance coverage isn’t verified before an appointment. This is especially the case when fewer staff members are available to perform recommended administrative tasks or don’t have technology accessible to automate these processes. Rural healthcare facilities face this problem, too – they have the lowest rate of possession of certified health IT.
Without technology to effectively prioritize, manage, and channel claims, physician practices are unlikely to be able to streamline their denial management and obtain revenue they’re owed by patients and payers. Even if a practice’s staff members are knowledgeable about the process, not having the applicable technology to administer claims makes it difficult to manage them efficiently.
5. Transition to value-based care
The move from fee-for-service to value-based care has been challenging for many physician practices, not only smaller ones. Patient payment responsibility is increasing, payers are integrating more complex requirements into their provider contracts, and quality measures reporting adds another layer to their reimbursement process. Because of these changes within the healthcare industry, countless small physician practices have to figure out more complexities in the denial management process while still offering quality care to their patients.
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