Denials are more than just a paperwork nuisance. They’re a financial drain that can cripple a practice if not managed efficiently. For healthcare practices, revenue cycle management is a game of margins. And denied claims are a hole in the bucket. Let’s dive into the real cost of denials beyond the face value of the lost claim.
The Immediate Hit: Lost Revenue
When a claim is denied, the most obvious loss is the amount of the claim itself. Suppose a claim worth $150 for a routine office visit is denied. That’s $150 not coming into your practice until it’s resolved — if it ever gets resolved. And if your practice experiences hundreds of denials monthly, the immediate revenue impact quickly climbs into the tens of thousands.
But this is just the start.
The Rework Time: Labor Costs
Every denied claim demands attention. Medical billers spend an average of 15 minutes to an hour reworking each denial. Multiply that by a few hundred denials, and you have billers spending upward of 50 hours a week just on these tasks. At an average cost of $25 per hour for a skilled biller, your practice is looking at labor costs of $1,250 per week — or more than $60,000 a year — just for the rework.
And that’s if you’re lucky. Some denials require consultation with the medical staff, further complicating and lengthening the process.
The Appeal Process: Additional Resources
Not all denials resolve with a simple resubmission. Many require formal appeals, which are more resource-intensive. Crafting an effective appeal letter — one that addresses payer-specific requirements and codes — demands not only time but a deep understanding of payer policies.
The success rate for appeals varies widely by payer and claim type. But let's say 20% of denials end up in appeals. Given that appeals can require an additional 60-90 minutes of work per claim, your costs swell. Now you're potentially adding another $50,000 annually in labor costs alone if your practice processes 500 denied claims per month.
Permanent Lost Revenue: The Claims That Never Get Paid
Here’s the harsh reality: not every denied claim will get paid, no matter how diligent your team is. Industry averages suggest that 10% of denied claims are abandoned. Whether due to policy reasons, insurmountable documentation challenges, or simply running out of time to appeal, these are dollars permanently lost.
For a practice with $1 million in annual claims, a 10% abandonment rate on denials could mean $10,000 permanently lost each year. And this doesn’t account for the potential patient dissatisfaction and attrition that can occur when denied claims lead to unexpected bills.
Operational Frustrations: Beyond the Numbers
Let’s be blunt: dealing with payer denials is frustrating. Navigating payer portals, enduring long hold times, and deciphering vague denial codes require a level of patience that feels Herculean some days. Payers like to play games with their claim rejections — often cryptic, sometimes unjustifiably stubborn. For example, denial code CO-109 (charges exceed contracted/legislated fee arrangement) might seem straightforward, but resolving it often feels like pulling teeth. And this frustration has a hidden cost: staff burnout.
Burned-out billers are less efficient and more prone to errors, potentially leading to more denials — a vicious cycle if there ever was one.
The Path Forward: Reducing Denial Rates
So, what can be done? First, invest in training. The more your staff knows about payer guidelines and coding, the fewer errors will slip through. Second, employ technology intelligently. Automations can catch common mistakes before they go out the door. But technology alone isn’t a panacea. Vigilant pre-claim reviews by a knowledgeable team are irreplaceable.
Finally, scrutinize denial trends. Are specific payers denying more frequently? Are certain codes consistently problematic? Identifying patterns allows you to proactively address the root causes rather than firefighting individual claims.
A Reality Check
Denials will never be eradicated completely, but their impact can be mitigated. Understand the full cost — from labor to lost revenue — to make informed decisions about resource allocation. Ensure your team is equipped to tackle denials efficiently, and use every tool at your disposal to keep your financial health robust. Because in the end, every dollar counts.
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