What is the Average Denial Rate in Your Ophthalmology Practice?

By Michael Carroll on February 22, 2018

According to the American Medical Association (AMA), insurer denial rates are down. The AMA’s most recent National Health Insurer Report Card has billers jumping for joy. Denial rates dropped by 47% in 2013 and are now as low as 1.82%. Compare that to 7.1% in 2010 and 3.48% in 2012. Medicare had the highest denial rate in 2013 at 4.92% and Cigna scored the lowest rate at 0.54%. Low denial rates mean more revenue for medical practices, clinics and hospitals and less administrative time wasted trying to reprocess denied claims.

However, the news is not all positive. Despite overall declining averages, the AMA still estimates that more than $43 billion has been lost since 2010 due to denied claims. Medical Economics reported concern that denials may increase on the next report card due to errors that result from the ICD-10 conversion. “According to an estimate by the Centers for Medicare and Medicaid Services, claim denial rates could skyrocket by 100-200% in the early stages of coding with ICD-10,” reported the publication.

What is the average denial rate in your practice? Is your denial rate in line with national insurer denial rates – progressively dropping? It should be less than 5%. Have you seen an increase in denials since the ICD-10 conversion?

How Much are You Losing?

National averages are nice for benchmarking, but what truly matters is how much cash is not being collected in your practice. Simply put, low denial rates are a definite indicator of an organization’s financial health. Low denial rates equal profitable streams of cash flow.

How can you accurately calculate your denial rate? First, select a time period to analyze. For example, look at the first six months of 2015 and compare that to the first six months of 2016. Total the dollar amount of claims that have been denied by all payers. Next, divide that amount by the total dollar amount of claims submitted during that same time period. For example, if you submitted $100,000 worth of claims to be paid and $10,000 got denied, your denial rate is 10% (10,000/100,000 = .10).

Stop Losing; Perform a Claims Analysis

American Medical News recommends performing a claims denial analysis monthly, or at least quarterly. The more often an analysis is performed, the more quickly negative patterns and recurring errors can be fixed. That not only means an increase in cash flow, but it also decreases administrative costs. The AMA’s report card also found that errors, inefficiencies and waste in the claims process cost physicians $2.36 per average claim – that really adds up over a busy week. Performing a regular claims analysis will minimize that loss.

The key to an effective claims analysis is organization. First, organize denials by payer explanation. Why were the claims denied? These required payer codes allow for quick sorting and organization, especially if you have filed the claim and received the denial electronically.

The next layer of organization is to sort denials based on the action required, or work flows. Was it simply a data issue that can be fixed by the administrative staff and resubmitted? Does the denial require patient action? Will the claim need to be appealed or reconsidered with additional information? Has a pattern of denial developed due to a new rule from the insurer or a new procedure or code used in your office?

Once information is organized, practices are in a position to start the appeal process. Only 35% of practices appeal denied claims. Don’t lose that revenue. Organize denials by appeal deadlines. Have an appeal letter template ready for each common denial code that includes language from the insurer’s documentation. Explore software options that track the appeal and denial process, providing status reports and data useful for denial prevention.

Top Reasons Claims are Denied

Be assertive when setting up your office work flows. Health Care Business & Technology estimates that up to 80% of medical bills contain errors and U.S. doctors leave $125 billion on the table each year due to poor billing practices. Utilize software, processes and procedures that will prevent the most common reasons for denials. Here are the top three reasons most denials occur.

  1. Patient ineligibility occurs for a variety of reasons including simple errors in data entry. The practice may also have old insurance information. Train front desk staff to verify any insurance changes with every patient, regardless of how many times they’ve been in before. If information is missing, set up an alert within the billing system to let staff know they need to gather this data before the patient leaves.
  2. Medical coding errors are on the rise, especially since the launch of ICD-10. ICD-10 requires greater specificity than the earlier system. Claims are often denied because of a code that is not specific or the insurer may deem the service “medically unnecessary” because the wrong code was used.
  3. Insurers change rules, often prompted by changing legislation. The health care environment has developed into a constantly evolving one, requiring physicians and administrators to devote time and money to continuing education and software to stay up-to-date. Falling behind will result in denied claims.

Get the Expertise and Resources You Need

If it sounds like medical billing has become increasingly complicated, it has. Changes in coding, legislation, payer requirements and patient needs have greatly increased the amount of resources an office needs. That’s why 90% of small physician practices that currently handle billing in-house plan to outsource within the next two years. While outsourcing is an initial investment, physician practices of all sizes find the resources and expertise provided by firms that focus only on billing efficiencies far outweigh the cost of the service.

Agnite Health LLC is an ophthalmology billing company with over 25 years of experience in this ever-changing and often complicated process. If your denial rate is over 5% – or, worse yet, if you don’t know what your denial rate is – it may be time to consider outsourcing the process to our team of experts. Contact us today to find out how we can help you increase your revenue stream in the most cost-efficient and streamlined way possible.