The Buck Starts Here: Front-End RCM’s Contribution to Claims Denials

The variables that influence a healthcare revenue cycle can resemble a tangled web. Even when things run efficiently, there are still front-end and back-end processes to manage.

In Q2 2024, Inovalon conducted a survey of more than 400 healthcare respondents, including hospitals, skilled nursing facilities, home health and hospice, and physician practices. The respondents held managerial roles and above, with a significant portion involved in selecting RCM vendors. The goal was to take a deeper look at claims denials in each care setting.

In this blog, we'll explore the financial impact claims denials can have on healthcare organizations and how they can work to address these challenges.

What causes claims denials?

Although claims denials are a top concern for executives across care settings, each views denials differently. For example, 9 in 10 hospital RCM managers and leaders at mid-large hospitals say that denials are a significant challenge. The financial impact of claims denials for larger hospitals is detrimental, with estimated annual monetary losses ranging from $1 million to $10 million.

Meanwhile, 74% of specialty physician practices feel significantly challenged by claims denials. In fact, smaller physician practices report having an estimated annual monetary loss of $5,000 to $50,000 due to claims denials. Even 83% of respondents from home health practices report feeling significant challenges due to claims denials.

To help explain where the initial claims denials are stemming from, 67% of respondents shared that three front-end RCM workflows are the top contributors to denied claims:

• Insurance eligibility and benefits verification
• Authorization/pre-certification
• Patient registration/information verification

Interestingly, despite reports of staffing challenges across the industry, the survey disputed burnout as a cause of claims denials. In fact, our survey found that only 2% of respondents reported overworked revenue cycle staff. This suggests that the most important contributors are in the data flowing from patient registration down through claims submission.

Consider how emergent cases can make it difficult or impossible to collect the necessary patient data right away. This leads to claims that are incomplete or inaccurate simply because the information wasn't available.

Dollars and cents: impacts of claims denials

Hospitals and health systems are busy, and their resources are stretched thin. Despite most organizations having 1-2 full-time employees (FTEs) devoted to claims denials, some hospitals have more than 20 FTEs. Even then, half of hospitals and health systems recover less than 50% of denied claims charges, damaging their bottom line.

Physician and specialty practices are also leaving money on the table. Only 2 in 5 ambulatory practices recover 75% or more of denied claims charges; but a nearly equal number recover less than half.

That's why it's never been more important to get claims right the first time - so they are accepted and paid on time and in full.

Denial prevention is the end goal

While a detailed, efficient denial management process is important, reduction and prevention will always be key.

Front-end RCM staff should have access to as much data as possible with software that does the heavy lifting. Inovalon brings a powerful combination of smart automation and data analytics to execute essential front-end tasks, including:

• Correcting and updating patient or resident demographic information at the beginning of the RCM workflow
• Accelerating all-payer eligibility checks to help find the correct coverage the first time
• Discovering additional active and potential patient or resident coverage to boost reimbursement opportunities

Inovalon can help all care settings take the first step toward claims automation and data supplementation that makes a significant difference in operations.

For more info or to dive deeper into the survey findings on claims denials, download the white paper.

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