Claim denial management is critical because DME/HME payments are the result of a successful claim process. A well-managed revenue cycle helps prepare a claim application swiftly and without errors or incomplete entries. A recent report says that across HealthCare.gov issuers, about 17% of in-network claims were denied in 2019 and about 14% were denied in 2018. Rates for specific issuers varied significantly around these averages.
- Loss in profitability
A startup or small DME/HME business needs to diligently track profitability. When claim denials occur, they result in a loss of profitability for the business. Denials result in higher accounts receivables, uncollected payments, and eventually, write-offs. A report by the Healthcare Financial Management Association says that claims processing inefficiencies cost between $21 billion and $210 billion per year.
If the frequency of claims denials is high, DME/HMEs can sustain losses in profitability enough to threaten the sustainability of the business.
- Costs incurred in appeals
Healthcare system appeals can be used to recover funds lost in claim denials, but appealing is a complicated process. According to the KFF report, consumers rarely appeal claims denials to issuers; when they do so, the original decision is usually upheld. Statistics say that in 2019, HealthCare.gov consumers appealed just over one-tenth of one percent of denied in-network claims and issuers upheld 60% of those appeals. Appeals can also be time-consuming and expensive. This means that appealing a claim denial is actually an expensive way to recover funds.
- Loss of productivity and time
Given the way in which margins on healthcare have shrunk and the massive negative impact of COVID-19 on the economy, it is difficult for DME/HME businesses to absorb the costs of denials. Further, even if cost, attention, and time is devoted to it, returns are not guaranteed. For a startup or a small DME/HME, this is worse: it takes away time and focus from pursuing new business activities and revenue generation channels.
Managing Claim Denials
Claim denials can result directly from poorly managed billing processes, including inefficiencies in patient data and information management, that may be due to lesser staff as in startups or due to not having electronic systems in place. Even if electronic systems —such as the Electronic Health Record system — are present, if they are not synchronized with the patient data, they cannot help the business optimize billing processes. Systems may not be able to report these basic challenges, allowing them to snowball into larger problems, such as denials.
Outsourcing medical billing to professionals, or entering into an arrangement such as a DME partnership can help DME/HME businesses tap into robust and reliable medical billing assistance that can keep the denials at a minimum. Professional help addresses temporary, quick-fix solutions to systems and processes. Instead, professionals can streamline the entire billing process and revenue cycle to ensure smooth claim application and processing, month to month. Eventually, this contributes to a streamlined process for the DME/HME, helping them stay poised for higher-level growth.