What is the Average Benchmark for Rejected Claims?

By Michael Carroll on June 6, 2018

What is a normal rejection rate for medical practice claims? Simply put, a 5-10% rejection rate is considered average. However, rejection rate is sort of like the first layer of an onion. It needs to be peeled back and evaluated to determine the full effect of rejected claims on your practice. The more aging payments, the less likely you will actually get the money. The longer you wait for payments, the harder it is to manage cash flow and project revenue. According to AACP, “Dedication, education and denial prevention are key to reversing the aging process.” Aging reports reveal much about the management of your revenue cycle. Getting rejected claims under control is critical to shorter aging reports and healthier revenue cycles.

Some rejected claims are inevitable, but a rejection rate that is just a few points too high is indicative of inefficient payment processing. A high rejection rate has a direct impact on your revenue cycle, cash flow and the workload of your staff. How can you determine your rejection rate and how can you improve it?

Calculating A Rejection Rate

How can you figure out your rejection rate? First, select a time period, preferably one quarter. Over those three months, find out the total amount of claims that were rejected and divide it by the total claims submitted. Here’s an example:

Total claims rejected: 100

Total claims submitted: 1,000

100/1,000 = .10 (10% rejection rate)

Now, consider the cost represented by the rejection rate. What happens if those claims are not resubmitted in a timely manner? Your office runs the risk of missing payer deadlines and ultimately getting the claim denied. Let’s say the average claim is valued at $500. Those 100 rejected claims represent $50,000 in revenue. Even if all $50,000 is eventually collected, that is a huge hit on your quarterly cash flow. Managers cannot get accurate aging reports. Revenue projections and office planning are impossible.

The Uncalculated Impact

The impact of a high rejection rate is about more than revenue. According to the AAPC’s Healthcare Business Monthly, managing rejected and denied claims “demands dedicated staff…because they will spend the majority of their time researching, investigating and problem solving.”

Can your office afford to have staff solely dedicated to rejected and denied claim management? Most likely not. That is why many offices depend on an effective billing partner to make claim management fast and easy. “The job requires countless hours on the phone, communicating with insurance representatives, investigating skills for researching denials, and fixing issues before submitting claims,” continued the AAPC. How would your staff feel about investing that much time into working rejected claims? It is likely they will feel overworked, frustrated and eventually disengaged. Disengaged employees cost organizations between $450 and $550 billion annually each year. Conversely, providing employees the tools and partners they need to succeed fosters loyalty.

How to Process Rejected Claims

While the goal is to prevent rejected claims in the first place, once you receive them, they must be processed quickly and efficiently, preferably within 24 hours. Be sure staff understand the difference between denied and rejected claims. This distinction is critical because the process of overturning a rejection is fundamentally different than challenging a denial.

Rejected claims are ones that are missing specific data requirements. They are not considered received by the payer. These claims simply need to be corrected and resubmitted. Conversely, denied claims have been received by the payer and it has been determined that the claim will not be paid. This claim must be appealed with additional documentation. The good news is rejected claims are relatively easy to correct and resubmit; the odds of the rejected claim being paid is much greater than overturning a denied claim. While denied claims are important to track and investigate too, be sure staff realize rejected claims can likely be corrected quickly, making it easy to get them resubmitted within the 24-hour timeframe. Create separate workflows for denied and rejected claims to ensure both are handled in a timely manner.

One key way to keep a handle on rejected claims is to closely monitor your aging reports. Consider organizing your report by insurer. Doing this will help you identify rejection and denial trends. For example, if claims are rejected frequently for the same reason from the same insurer, staff may need to revisit that carrier’s requirements. Organizing reports by insurer will also enable staff to organize job load. They can have all outstanding claims for one payer available at the touch of a button.

Be Proactive

Be proactive, not reactive. The most efficient rejection process is to not get them at all. To achieve this goal, providers, charge entry staff, coders and billers need to work together to identify trends. If a particular modifier is continuously rejected, the provider may need to modify how the procedure or visit is described. Or, the coder may need to re-evaluate the modifiers being used. If patient information is routinely wrong, charge entry staff may need updated training. Diligence is needed every step of the way, from verifying insurance information when the appointment is made through the claims submission.

An efficient “scrubbing” system will catch and prevent many common errors, including incorrect patient, provider and insurance information. How does scrubbing work? Scrubbing refers to an in-depth cleaning of a medical claim before submission. Many practices entrust this process to a clearinghouse or outsourced billing company. The clearinghouse checks the claim and verifies that it is compatible with the specific insurer’s software. It also checks things like whether or not the medical procedure (CPT) and diagnosis code (ICD) match and are valid. Scrubbing reduces the amount of time it takes for claims to be processed because insurance companies receive more claims that are clean the first time. Scrubbing also reduces the amount of staff time spent having to correct all those rejected claims.

By hiring an external billing company to help streamline this process, your practice will be able to:

  • Stay proactive about getting your rejection rates down
  • Identify negative trends and collaborate with all team members involved to resolve them
  • Ensure clean claims are submitted

The professionals at Agnite Health LLC, an affiliate of Advantage Administration, Inc., can help. We have worked with over 350 ophthalmology practices to help improve their medical billing cycle and boost their revenue stream. We help our clients get paid faster by partnering with them to share our process-driven and detailed-oriented services. Contact us today to learn how your practice could benefit from our services.