Each year many hospitals lose millions of dollars due to denied or rejected claims, with especially significant lost opportunity from outpatient infusion claims. These denials and rejections are often attributed to a complex, reactive remittance process with multiple opportunities for breakdowns to occur during the approval process. These breakdowns often have negative financial impacts on both the system and the patient, as well as a negative impact on the patient experience.
During a July webinar hosted by Becker's Hospital Review and sponsored by Cardinal Health, David W. Emison, Cardinal Health vice president of strategy and business development, and Laura McIntire-Hansel, RN, director of Cardinal Health™ Reimbursement Solution, discussed an enhanced, proactive way for hospitals to approach their revenue cycles.
Four key takeaways:
1. It is time to rethink the status quo: On average, nearly 10 percent of claims submitted by hospitals are rejected or denied and most health systems believe that they are unavoidable. "This translates to an average loss in revenue of up to $5 million for the average hospital each year," Mr. Emison said. About two-thirds of rejected and denied claims are recoverable, yet only about one-third of providers appeal these claims. Claims tend to be categorized as coding errors, medical necessity issues, clinical validation denials or front-end issues – yet those are just a handful of the causes. Appealing these rejected and denied claims contribute to hospitals amassing $8.6 billion in additional administrative costs, which can be preempted with a different remittance model.
2. Process breakdowns affect both the hospital and patients: Ms. McIntire-Hansel said 90 percent of errors that trigger rejected or denied claims are avoidable, but once an error has occurred, it is very time consuming to correct it. A key cause of rejected and denied claims is a fractured, inconsistent process because of the many handoffs that occur in the claims’ "relay race." "Each of these handoff points represents an opportunity to stumble or create a drop in the claim submission cycle," Ms. McIntire-Hansel said. "A rejected claim is retouched five to seven times, costing an average of $181 in wages to correct each one."
These process issues negatively affect all patients, regardless of insurance coverage. For example, if a payer denies or rejects a claim, the patient may be responsible for an out-of-pocket payment. Many patients are unable to pay and default on their payment and may choose to stop critical treatment. Ms. McIntire-Hansel pointed out that 60 percent of the unpaid patient balance at discharge is written off by hospitals as bad debt and sent to collections.
3. A proactive "process-to-product" model is a game changer for health systems: Instead of being reactive, a more proactive revenue cycle process identifies savings opportunities from industry programs, prevents rejected and denied claims and minimizes time spent correcting claims. "Adopting a proactive approach and using a product-to-process model can help achieve up to an 80 percent reduction in denied or rejected claims," Ms. McIntire-Hansel said.
The Cardinal Health™ Reimbursement Solution is one of the only proactive models available to systems today. Per Ms. McIntire-Hansel, the Cardinal Health solution "delivers immediate financial results." It increases workflow efficiency; decreases rejection and denial of claims and results in quicker claims submission, less staff time spent on rejections and denials, decreased bad debt and more.
4. Hospitals of every size and type benefit from a proactive model: A medium-sized health system with four hospitals identified about $6 million at risk from just one hospital and uncovered patient assistance support worth $1.4 million in added value. Shifting to a proactive model had a 6-to-1 return on investment for this facility. Even a 40-bed rural hospital can experience a significant ROI: almost $1 million at risk and a 5-to-1 return on investment with this proactive model.
To learn more about how a proactive remittance model can benefit your organization, visit cardinalhealth.com/rethinkrevenueprocess.