With ever-mounting financial pressures, healthcare leaders are examining their systems’ performance to identify ways to increase profitability. While many hospitals consider denials management a necessary evil, new data has revealed just how damaging denials can be to the bottom line. Data also shows that managing claims denials after they happen isn’t enough anymore – prevention is now key.

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Why should you prioritize denials prevention in 2018?

1. Lower Margins are a New Reality

Data from Moody’s Investors Service shows that hospitals’ median operating margin decreased in 2016 from 3.4 % to 2.7% as a result of growing expenses and lower reimbursement outpacing revenue growth. Among the factors contributing to the trend are pharmaceutical costs, labor costs, and uncertainty around health insurance exchanges. Health systems must be more proactive than ever when it comes to protecting revenue and preventing unnecessary expenses.

2. Denial Rework and Write-Offs Are Costing You Money

Many healthcare organizations just deal with denials after they come in rather than taking a proactive approach to prevent them from happening in the first place. This approach isn’t cheap. Change Healthcare found that reworking a claim can cost providers $118 per claim, which adds up fast. And when you can’t overturn the denial, write-offs cost even more. According to Beckers Hospital Review, denial write-offs are costing healthcare organizations 1-5% of net patient revenue. For an average 300-bed organization, 1% can equate to $2-3 annually– and that’s the low end of potential impact. Overall, hospitals across the country lose approximately $262 billion per year on denied claims from insurers.

3. Denials impact patient experience, which affects reimbursement

In this new world of patient consumerism, hospitals have to consider how denials impact patient experience. Everyone knows patient experience impacts the bottom line, both through revenue and reimbursement and studies show that billing influences a patient’s perception of your facility. According to Transunion, 70% of patient respondents who gave the highest ratings to their quality of care also gave high ratings to their billing and payment experiences. Data aside, a patient receiving an unexpected bill isn’t going to be your biggest advocate.

4. Denials prevention is a top priority for your peers in both small and large systems.

Your peers are have identified denials as a top priority across systems. According to Porter Research, 81% of hospital executives have made denials and underpayments a top priority and 61% consider it to be in the top five. Don’t let your competition leave you behind.

5. Denials don’t have to be a given

If 90% of denials are preventable, why do so many healthcare organizations consider them to be just a cost of doing  business? Part of the issue is that leaders haven’t dedicated sufficient focus to on the right end of denials management. Many of the root causes of denials stem from front-office functions, such as scheduling and registration, and from the limits of manual approaches to claims processing. With 31% of organizations still managing denials manually, it’s no wonder denials seem difficult to control. With better staff training and supporting technology, you can prevent denials up-front.

Want More Information?

We’d love to work with you on your denials management process. Contact us to set up a customized assessment. To download the full infographic, click here.