Denied! Healthcare claim denials persist. The real cost is worse than anyone has been telling you.

Part 1 of a 3-part series on how to fix your denial problem using prevention practices and technology. (4 minute read)

5-10%.¹ That’s the range for the average physician practice denial rate. If we do the quick math on the annual revenue value of an Ophthalmology practice @ $1.04M, that’s upwards of $104,000 in revenue expectation.² And if a practice wants to go get that revenue, what’s the cost to do so?

Welcome back to the Systeem Blog where you can find insights for achieving peace with technology by making it work for you. I’m your host and physician practice technologist Michael Patrick. Today’s post is the first in a three-part series on how to fix your denial problem using prevention practices and technology.

Back to the question at hand, and more importantly, the answer.

If one wants to go get that $104,000 in expected revenue, first determine an accurate understanding of its value. The average margin for a physician practice is 13%³ or $13,520 based on annual revenue of $1.04M. That means the cost of the revenue is 87% or $90,500 BEFORE appeals. Now apply the average cost for denial appeals ($26,000).⁴ Here’s what the math looks like in a table:

So IF the appeal win rate was 100% on $104,000 (100% win rate being improbable if not impossible), the practice nets a loss of $12,500.

I don’t know about you, but I’m not a fan of working really hard to convince someone to pay me a dollar I already earned by spending what amounts to my 13.5 cents of margin on that dollar plus an additional 12.5 cents just to prove the earned-but-unpaid dollar is actually mine. And oh yeah, I will only get between 50 and 70 cents on that original dollar anyway. So actually, I forfeit 54 cents plus 26 cents, for a total of 80 cents spent to get 50 cents back. That’s a -37.5% loss. Wow.

What’s the practical impact to an Ophthalmology practice with 10 physicians? $12,500 per year per physician equals more than $10,000 per month lost in pursuit of denied claims. That doesn’t even consider the emotional toll on the physician and the practice. It also doesn’t account for the only constant in claim processing: change.

So why even bother, right?! Look I’m no fan of doom and gloom. But I am a fan of the truth. And while this scenario is a picture of truth, it doesn’t have to be. You can change your picture by reducing your denied claims to 2-3% while also reducing the appeals cost.

The answer is within operational prevention practices and supporting technology. You likely already have some of both in place…even if your denial rate skews on the high side. You just have to arrange the pieces correctly and start executing.

That brings us to the conclusion of the first part in this three-part series on how to fix your denial problem using prevention practices and technology. Part two covers understanding the depth of your denial problem and scoping the right solution.

Again, I’m Michael Patrick, your physician practice technologist. I trust you are finding value in this new series. Keep on the lookout for part 2 coming your way soon. Until then, like, share and/or comment on this post. Do you have any success stories, questions, or other thoughts?

1. Sourced from a report published by the American Academy of Family Physicians
2. https://www.merritthawkins.com/uploadedFiles/MerrittHawkins/Content/Pdf/Merritt_Hawkins-2016_RevSurvey.pd
3. https://www.forbes.com/sites/sageworks/2013/12/01/business-trends-doctors-offices-industry-data/#6cda4c123588
4. Sourced from a study performed and published by the American Medical Association.

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