Healthcare News & Insights

Cleaning up claims improves profit and service

teenage-girls-at-medical-clinicAs we enter the third enrollment period for the Affordable Care Act (ACA), some of the initial kinks are getting worked out, but many issues still need attention. For hospitals, one of the main challenges is staying profitable. In this guest post, Yossi Zekri, president and CEO of an identity solutions provider, points out one source of lost revenue and unnecessary costs that’s fixable. 

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As patients struggle with increased premiums and deductibles, they also hope the promised cost savings of the ACA will come to fruition soon. So far, results are mixed.

The influx of newly insured individuals has indeed contributed to rising revenues for insurance companies. The latest numbers from McKinsey indicate that from 2013 to 2014, absolute enrollment grew by 17 million people and absolute revenue grew by $86 billion.

Profit numbers tell a more nuanced story: Only 35% of payors saw a profit in the first year of the ACA. After reinsurance and risk adjustment, payors lost $2.5 billion in the individual market in 2014, an average of $163 per member.

Rejected claims

Controlling costs and maximizing profits are top priorities throughout the healthcare industry.

In hospitals and practices, one obvious source of lost revenue and unnecessary costs is rejected claims. Healthcare claim processing errors can result in a host of troubles for both patients and practitioners, and rejected claims tend to cause the most trouble overall.

Around 10% of all medical claims are initially rejected. Surprisingly, 55% of rejected claims are never filed again. The Centers for Medicare & Medicaid Services reports only a small fraction of rejected claims are due to coding errors; claims are much more commonly rejected due to incomplete or invalid information.

In fact, basic errors in recording patient demographic data (age, date of birth, name and address) and insurance details are the primary reasons that medical claims get rejected.

Lost revenue

If rejected claims aren’t resubmitted or eventually denied, that’s lost revenue. Rejected claims get returned to be fixed, costing an average of $25 per reworked claim. This includes internal resources as well as processing fees.

America’s Health Insurance Plans’ (AHIP) Center for Policy and Research published a study showing that fees for clean, auto-processed claims are under a dollar, but much higher ($3.99 average) for pending and returned claims. Over time, these costs can put a significant dent in profits.

Resubmitting claims takes up valuable time and resources, and can delay the revenue cycle for months, thereby creating cash flow and accounting issues. When the claim error involves patient data, staff will often need to track down the patient and wait for them to respond with the corrected information.

This represents an inconvenience for both staff and patient. In the end, up to 65% of rejected claims are never sorted out. It’s much easier and more efficient to ensure correct data capture while the patient is still present.

Hospitals and medical practices have addressed the issue of flawed and delayed processing by submitting claims electronically. As recently as 2002, less than half of claims were submitted electronically, but now at least 94% are handled this way.

Data capture

While electronic processing is less prone to error, it depends on accurate data being fed into the system. Many facilities are deploying additional technologies to ensure better data capture.

Automated registration processes that use self-service kiosks or card scanners can be integrated with EMR systems and policy databases to make sure patient data is accurate and verified. These systems can significantly reduce errors in patient files and claims submissions, as well as enhancing overall productivity and customer service.

As the ACA system develops and matures, healthcare facilities will have to adapt to a lot of changes. Regulations will continue to shift, coding systems will remain complex, and insurance companies probably won’t get easier to work with.

You can protect your profits by streamlining patient intake and registration, automating data capture and integrating records with verification systems. For the promise of affordable healthcare for everyone to be realized, every stakeholder in the system has to prioritize cost control and improved efficiency.

Rejected claims represent a significant area of resource waste that can be addressed immediately with available technology.

Yossi Zekri is president and CEO of Acuant, a provider of identity solutions. Acuant’s patented credential management solutions automate the intake, processing and verification of unstructured data from ID documents. 

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