Why Denied Claims Hurt Your Bottom Line & How a Medical Billing Company Fixes It

In the healthcare industry, claims denials are a significant obstacle to maintaining a healthy revenue cycle. Denied claims not only delay the flow of cash but also incur additional administrative costs and efforts that can drain resources from a practice. Healthcare providers rely heavily on timely reimbursements to cover operational costs, and when claims are denied, it disrupts their financial stability. This article will explore the negative impact of denied claims on healthcare practices and how partnering with a medical billing company like Thrive Medical Billing can help reduce denials and improve cash flow.

1. Understanding Denied Claims

Denied claims are requests for payment from insurance companies that are rejected for various reasons. The denial can happen for a variety of factors, including incorrect coding, missing documentation, or errors in the information submitted. Regardless of the reason, a denied claim means that the healthcare provider does not receive the payment they expected for the services rendered, and this can significantly hurt the financial well-being of the practice.

Denial rates are on the rise, with many healthcare providers reporting significant losses due to claim rejections. Some studies suggest that approximately 9-10% of all medical claims are denied, which can result in substantial revenue losses if not handled correctly. Additionally, the cost of reworking a denied claim is high, making it crucial for practices to address claim denials promptly and efficiently.

2. Why Denied Claims Hurt Your Bottom Line

Denied claims can have a far-reaching impact on a healthcare practice’s bottom line. Below are several reasons why they can be so damaging:

a. Revenue Delays

When an insurance claim is denied, the healthcare provider loses valuable time in securing the payment for their services. These delays can negatively affect cash flow and create a financial strain on the practice. Without timely reimbursements, a healthcare provider may struggle to meet operational costs such as staff salaries, rent, and medical equipment expenses.

b. Increased Administrative Costs

Managing denied claims takes up a significant amount of time and resources. Staff members must spend time reviewing and correcting the claim, appealing the denial, and resubmitting the claim. This process can be labor-intensive and often leads to inefficiencies in the practice. The administrative costs associated with denied claims can quickly add up, further eroding the practice's profits.

c. Disruption in Cash Flow

Cash flow is the lifeblood of any business, and for healthcare providers, consistent and timely payments from insurance companies are essential for smooth operations. When claims are denied, providers experience interruptions in their cash flow, which can cause a backlog of unpaid bills and outstanding balances. This disruption can result in financial instability and make it difficult to plan for long-term growth.

d. Impact on Staff Morale and Productivity

The time and effort spent on managing denied claims can detract from the primary focus of healthcare practices—providing care to patients. Staff members who are bogged down by claim denials may feel demotivated, affecting their productivity and job satisfaction. A lack of focus on patient care can harm both the staff and patient experience, which is detrimental to the overall success of the practice.

e. Negative Effect on Patient Relationships

When claims are denied, patients may become involved in the process, especially if they are responsible for covering some of the costs. This can result in confusion, frustration, and a negative experience for the patient. A poor experience related to billing can damage the relationship between the practice and the patient, potentially leading to a loss of future business and referrals.

3. How a Medical Billing Company Can Help Fix Denied Claims

A medical billing company plays a crucial role in addressing the challenges of denied claims. By outsourcing the billing process to experts in the field, healthcare providers can streamline their revenue cycle and significantly reduce the number of denied claims. Here's how a medical billing company like Thrive Medical Billing can help fix denied claims and minimize their impact on your bottom line:

a. Expert Knowledge of Billing Codes and Guidelines

One of the most common reasons for claim denials is improper or outdated coding. Insurance companies require accurate and specific coding for each procedure or service provided. A medical billing company has extensive knowledge of medical codes and the guidelines used by various insurance companies. At Thrive Medical Billing, we stay up-to-date with coding changes, regulations, and payer-specific requirements to ensure that claims are coded correctly and meet the standards set by insurers.

By submitting properly coded claims, the chances of a denial due to coding errors are significantly reduced. Our team’s expertise in billing codes and documentation helps prevent errors that could lead to rejected claims.

b. Timely Follow-Up on Denied Claims

When a claim is denied, it’s critical to follow up immediately to understand the reasons for the denial and take appropriate action. A medical billing company will proactively monitor claims and handle denials promptly. Instead of letting claims sit in limbo, Thrive Medical Billing ensures that each denied claim is quickly reviewed, and necessary adjustments or appeals are filed.

By handling denials in a timely manner, we increase the chances of getting the claim approved on resubmission, reducing the financial impact on the practice.

c. Comprehensive Denial Management Strategy

Denial management is a systematic approach to identifying the root causes of claim denials, correcting errors, and implementing processes to prevent future denials. A medical billing company like Thrive Medical Billing creates a customized denial management strategy for each practice. This includes reviewing denial trends, identifying recurring issues, and streamlining the billing and coding process to eliminate common causes of denial.

Through comprehensive denial management, we help practices improve their overall claims submission accuracy, reducing the likelihood of future denials and enhancing revenue generation.

d. Appeal Process and Resubmission of Claims

Some denied claims may be eligible for appeal, and resubmitting them with additional documentation can result in reimbursement. A medical billing company handles this complex process on behalf of the healthcare provider. Our team at Thrive Medical Billing specializes in filing timely appeals, ensuring that claims are properly resubmitted with all required information to increase the chances of approval.

Appealing denials is a time-sensitive process that requires expertise in the specific policies of each insurance provider. By outsourcing this task to professionals, healthcare providers can focus on patient care while we handle the intricacies of the appeals process.

e. Prevention of Future Denials

A medical billing company not only addresses current denials but also works to prevent future denials from occurring. By analyzing the root causes of past denials, Thrive Medical Billing identifies inefficiencies and makes necessary adjustments to the practice’s billing and coding processes. This proactive approach ensures that the practice’s revenue cycle runs smoothly and that the likelihood of future denials is minimized.

f. Improved Cash Flow and Reduced Financial Stress

By reducing the number of denied claims and increasing the success rate of appeals, a medical billing company helps practices improve their cash flow. With timely and accurate reimbursements, healthcare providers can eliminate the financial stress associated with delayed payments and uncollected funds. This leads to improved financial stability and a more predictable income stream.

4. Conclusion

Denied claims are a significant threat to the financial health of healthcare practices, causing revenue delays, increased administrative costs, and disruptions in cash flow. The good news is that these challenges can be mitigated with the help of a medical billing company like Thrive Medical Billing. Through expert knowledge of coding, timely follow-up, and a comprehensive denial management strategy, we help reduce the frequency of denied claims and ensure that practices get paid for the services they provide.

By outsourcing your billing processes to Thrive Medical Billing, you can focus on delivering high-quality care to your patients while we handle the complexities of revenue cycle management. Together, we can improve your practice’s financial health, minimize denials, and enhance your bottom line.

Contact Thrive Medical Billing today to learn how we can help you reduce denied claims and optimize your revenue cycle.