Revenue Cycle Decoded's Question of the Week - How Do You Know If You Have a Denials Problem?Apr 11, 2023
Question of the Week: How Do You Know If Your Medical Practice Has a Denials Problem?
As a practice manager, you may wonder how to tell if your medical practice has a problem with denials. You can turn to key performance indicators and benchmarking to see how your practice measures up against others, and to help you understand how your denial rate, accounts receivable over 90 days, and net collection ratio can tell you how well you are performing on denials indicators. Let's take a look at each of these measurements:
Denial rate greater than 5%.
MGMA recommends a benchmark denial rate between 5-10%, but the best practices have a denial rate less than 5%. It's interesting to note that AllScripts identified an average denial rate of 16% across 5,729 organizations. According to a 2018 survey conducted by the Healthcare Financial Management Association (HFMA), the average denial rate for medical practices in the United States was approximately 10%. Where does your practice fall on this metric?
Insurance A/R over 90 days is greater than 10%.
A/R days over 90 is an indication of delayed payments and can be a sign of a problem, including a possible increase in denials. When claims are rejected or denied, they must be resubmitted or appealed, which can lead to delays in payment and an increase in A/R days over 90. Monitoring your trend in A/R days over 90 will help you to identify patterns in payment delays or denials. Although the benchmark can vary depending on size of the practice, specialty, and payor mix, you should strive to keep your accounts receivable over 90 days as low as possible. Remember that the longer accounts are in A/R, the harder they are to collect.
Net Collection Ratio less than 95%.
This ratio (total collections/net charges)(x100) measures how successful you are at collecting charges that have been billed.
In addition to these KPIs, also look for inappropriate write-offs and for trends in your write-offs for reasons like medical necessity, eligibility, missing authorization, etc. Paying attention to these trends will help you identify areas for proactive denial prevention.
Learn more about managing and preventing denials in my Front End Denials Decoded course.