It’s difficult to measure the full (and vast) financial impact of denied claims on providers. But, these stats paint a broad picture of how vast and costly denials are in America. And, these stats make a strong case for employing a denials management strategy that helps prevent denials and make working denied claims more efficient.
9% of hospital claims are initially denied. This equates to an average of $4.9 million per health system and a national total of $262 billion.
90% of denied claims are preventable. Advisory Board research shows that nearly all denials are preventable, BUT, only 66% are recoverable. Effort in optimizing the front end — working towards preventing denials — is more efficient in terms of workflow and more fruitful in terms of cash flow.
But if you ignore the back-end, you leave money on the table…
Only 35% of providers appeal denials even through 66% of denied claims are recoverable. Maybe it’s because reworking a denied claim costs ~$118, which is a total of $8.6 billion in administrative costs.
The average denial rate for payers is 5-10%. For Medicare and Medicaid, it’s closer to 10%.
31% of healthcare providers use a manual process for managing denials. In 2016, HIMSS reported that almost one-third of providers hadn’t yet moved to an electronic claims management system. Instead, they used manual processes to work their denied claims. Each claim that is worked manually takes up to 51 additional minutes of administrative time according to the 2016 CAQH Index.
Nearly all of the top drivers of denied claims are easy flags in well-built claims management systems. MGMA’s Health Insurer Report Card lists the following as the top reasons for denials:
• Omitted information
• Duplicate submissions
• Prior adjudication
• No payer coverage
• Late submission
The AMA’s Administrative Burden Index (ABI) calculates that healthcare providers spend up to 14% of their revenue to get paid for services.
Sift Healthcare has data-science driven tools to help providers of all sizes better understand their own denial trends, reduce total denials and accelerate cash flow. Learn more about Sift’s Denials Management.