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Seven numbers that add up to non-compliance (and how to reduce them)

It’s a balancing act keeping an organization compliant and financially stable these days; the tightrope keeps shrinking and there’s little room for error.

With every mandatory update, coding gets more complex, and the risk of over- or under-coding can quickly cut millions of dollars in revenue from your organization.

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Compliance and cash flow graphic
Here are seven numbers you should pay attention to when it comes to compliance and cash flow.
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    A medium-sized hospital can lose up to $1M per year from write offs.

    From 2011-2017, hospitals and health systems saw a 90 percent increase in uncollectable claim denials. For a health organization with 350 beds, this adds up to a $3.5 million loss over four years, or $875,000 per year.


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    An estimated $262B in claims are initially denied each year.

    A Change Healthcare analysis found that nine percent ($262 billion) of claims per year are denied when first submitted. To put that number in context, there is more money tied up every year with claim denials than the valuation of Walmart ($246.2 billion).


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  • Percentage claim denied graphic

    Roughly 5 - 10% of claims are denied.

    Denial rates directly impact a health organization’s cash flow and business sustainability. If coding and charge entry mistakes aren’t caught by internal auditing processes, the result can be hundreds of thousands in lost revenue from rejected claims.


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  • Medicaid denaisl graphic

    Medicaid denies nearly 10% of managed care claims and 20% of fee-for-service claims.

    Similar to fee-for-service, Medicaid claim processing is more complex and more inclined to deny payments for coding errors.

    Medicaid’s managed care denial rate is six percent higher than that of Medicare and private insurance, and its denial rate for feefor-service is 17.8 percent higher.

     


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  • Registration error cause denials gaphic

    Registration/eligibility errors make up 23.9% of denials.

    The most common cause for denied claims is registration or procedure eligibility, and the runner up is “missing or invalid claim data” with 14.6 percent.

  • 16 days graphic

    Denials and appeals take 16 more days to recognize payment.

    Payment denials have a major impact on an organization’s cash flow. When a claim denial is resolved, payment will typically take up to 16.4 additional days.

  • Denied claim recoup cost graphic

    The average cost to recoup each denied claim is $118.

    While most denied claims are considered recoverable, hospitals spend roughly $118 appealing each claim, adding up to about $8.6 billion in administrative costs in the United States.


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Avoid blind spots

  • To move your organization toward better compliance, start with your coding and compliance processes. Most facility coding departments can’t see what their professional services coding counterparts are doing, much less the audit and compliance teams (and they are the ones who can raise awareness and correct course when coding errors block revenue).

    When all coding, audit and compliance teams are working from the same patient record and documentation, good things—like timely coding corrections—can happen.


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Knock down barriers between revenue cycle teams

  • Health information management teams that practice transparency and accountability by reducing procedural and software/system barriers can achieve good, clean-claim rates. Hospitals and healthcare systems that have leveraged software to improve team cooperation have realized major productivity gains, fewer denials and faster cycle times.

    Platforms such as the 3M™ 360 Encompass™ System cover multiple, key steps in the revenue cycle on one system, delivering better visibility, team collaboration and faster, more compliant claims.


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Limit potential for human error

  • People are a critical asset in the compliance process. Because of the increasingly complex nature of medical coding and auditing, human error is bound to happen. 

    This is where technological advances such as computer-assisted coding (CAC), computer-assisted clinical documentation improvement (CDI) and automated reporting can lend a hand. The 3M™ 360 Encompass™ System deploys all of these technologies to help improve pre-bill accuracy, while also keeping all the data and reporting in one place, accessible to those who need it.


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Consistent self-auditing

  • Because coding regulations inevitably increase and denials always cripple cash flow, revenue cycle teams must run consistent, frequent audits on their coding processes. Knowing where previous processes have failed means you can dodge those mistakes in the future.

    With the 3M™ 360 Encompass™ Audit Expert System and its Code Audit module, you can automate auditorworkflows with computer-assisted audit capabilities on facility inpatient records, while keeping all the tracking data and reporting in the same system where the records were coded. This means auditors can focus on understanding and learning from the data, rather than simply compiling it.


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Get started

  • Change in any organization or industry is never as easy as an e-Guide makes it sound. Change begins with understanding the key issues holding your organization back and detecting the patterns and details underlying those issues. With this information in hand, you can then go to work on changing course.

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  • References
    *1 LaPointe, Jacqueline. “Hospitals Write Off 90% More Claim Denials, Costing up to $3.5M,” RevCycle Intelligence, Practice Management News, November 21, 2017. Accessed June 19, 2019. https://revcycleintelligence.com/news/hospitals-write-off-90-more-claim-denials-costing-up-to-3.5m. 2 Gooch, Kelly. “Denial rework costs providers roughly $118 per claim: 4 takeaways.” Becker’s Hospital Review, June 26, 2017. Accessed June 19, 2019. https://www.beckershospitalreview.com/finance/denial-rework-costs-providersroughly-118-per-claim-4-takeaways.html. 3 American Academy of Family Physicians. “Your Revenue Cycle: Denial Rate.” Accessed June 19, 2019. https://www.aafp.org/practice-management/administration/finances/denial-rate.html. 4 The SSI Group. “Claim denials and Delayed Payments Cost Hospitals Billions.” Accessed June 19, 2019. http://thessigroup.com/claim-denials-and-delayed-payments-cost-hospitals-billions/.
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