Getting claims paid is actually the biggest revenue cycle challenge for healthcare providers and denials are a huge hindrance of claims being paid, according to a poll from the Medical Group Management Association (MGMA).
Payers deny reimbursement for a variety of reasons (e.g., eligibility, authorization, diagnosis code issues, CPT code issues, etc.). Some denials are recoverable—through the appeals process—and some are unrecoverable.
Unrecoverable denials or “hard” denials are essentially a waste of time to appeal. For example, if your patient no longer has insurance through the payer you billed, you’re not getting paid from that payer.
But hard denials can be avoided.
With a solid pre-registration process in place before patients check-in for their scheduled service, you can eliminate many front-end denials (which make up 49.7% of denials) and save yourself from other denials headaches along the way. In fact, the Healthcare Financial Management Association (HFMA) advises that at least 24 hours before a patient’s scheduled service, the physician practice should verify patient demographic data; verify their insurance coverage and benefits; and notify the patient of their financial responsibility.
With recoverable or “soft” denials, you can (and probably should) rework them, especially since approximately 66% (about two thirds) of denied claims are recoverable. However, the MGMA estimates only 35–50% of denials are actually ever reworked.
If you’re confident that you can fix the error(s) in the original claim, you can likely have an equal amount of confidence that it’ll be paid by the payer and the claim should be appealed. With payers, it’s more or less formulaic. Demographic info, codes, etc. need to be spot-on or else the claim will be denied, but if you can obtain the money you are owed, you should go after it.
Patient payments, on the other hand, are a whole different can of worms.
Typically, a patient will come in for a specific service, possibly pay a copay and leave. A bill is then mailed to the patient’s address weeks,or even months, after the visit. The patient pays the bill or doesn’t. If it’s paid, great. If it’s not paid, you’ll likely send the overdue balance to collections.
On average, health care providers send 3.3 billing statements before receiving payment, according to the MGMA.
Providers can only expect to collect 50–70% of a balance after a patient visit, according to the Trends in Healthcare Payments Annual Report, 2015. This is due to increasing patient payment responsibilities in recent years with high deductible health plans (HDHP) increasing by 255% since 2006.
To break up the likelihood of payment even more, it’s said that within the first 90 days in accounts receivable, the collectability of accounts is 90%. Once accounts reach 90 days overdue, the chance of collecting drops to 50%. At 180 days, the chance of collecting falls to 20%. Account balances that are over a year old have about a 0% chance of collection.
If a patient’s bill exceeds 5% of their household income, the likelihood you’ll obtain payment drops quickly. From patients with high-deductible plans, providers can expect to collect about $0.18 to $0.34 on the dollar.
And once accounts are sent to collections, it’s tough to know how much you’ll actually see. Depending on the size of your practice and the contract you have with your debt collection agency, you could be working with a contingency-based contract or a fixed fee contract.
Typically large organizations deal with debt on a contingency basis; meaning the collections agency keeps a percentage of money collected. Commissions can range anywhere from 10% to 50% of the recovered amount.
Many sources cite higher commission percentages, so it’s important to check the terms of your contract and possibly find another agency if you are offering over 50% of the commission.
Contingency billing has an advantage, though: your practice only pays on collected debts.
Fixed fee is exactly how it sounds. It’s a fixed fee for a series of letters or calls that the agency will make on your behalf. It is the typical way a small practice can use a collections agency.
With all of that being said, you can still gain payment for the balances outstanding, but you’ll likely never see 100%. You don’t have to give up on payment, truly, unless every patient is OK with either terrible credit or declares bankruptcy. (So you never have to totally forget about payment here!) You just have to know that the longer the balance is in accounts receivable, the less you’ll be paid and the more it’ll become part of this fiscal year's losses.
To prevent accounts receivable from going to collections in the first place, you’d have to collect before or at the time of service using a cost estimation tool. As it happens, 65% of patients are more willing to make a partial payment when given a patient cost estimate at time of service.
In order to collect up front, you’ll need software that can do the heavy lifting in eligibility checks and patient cost estimates. You can do a lot without software to help, but a good software like Rivet can streamline your workflow and increase cash flow.
It’s important to note: Many practices say they’ve attempted cost estimates in the past and patients were apprehensive. We’ve found that though estimates can be nerve wracking at first, patients love when they no longer worry about surprise bills. It is also an opportunity to offer transparency to your patients. You can explain why the cost is the way it is. You can share what you are doing to help them live the healthiest life possible.
Ken Hertz, FACMPE, a principal consultant with MGMA offered this advice: “If you want to collect the money that’s owed to you, you have to be willing to invest some time in making sure staff are trained to help, as a way of showing patients you care about them.”
Rivet offers software solutions for eligibility + estimates, denials and underpayments. To see a demo and talk about your billing pain points, schedule a demo with a Rivet business development representative.
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