Revenue Cycle Key Performance Indicators Part 3

In part 3 of our series on Key Performance Indicators (KPIs) you should be using to monitor the revenue health of your medical practice, our topic is denial rate. It is important to understand why denial rate is a KPI as well as how to calculate it and steps you can take to help improve it. Previous KPIs we’ve talked about include part 1 in our series, monitoring average days in accounts receivable, and part 2 addressing clean claim submission rate. Evaluating these KPIs will help your practice identify its strengths as well as know where improvements can be made for better cash flow.

The denial rate is a key performance indicator (KPI) that measures the percentage of claims that are denied by insurance payers or third-party administrators. A high denial rate indicates that a significant portion of claims are being denied, resulting in delayed or lost revenue for the healthcare practice.

How to calculate denial rate

Denial Rate = (Number of Denied Claims / Total Number of Claims Submitted) x 100

Here are some strategies to help improve the denial rate:

  • Accurate and Detailed Documentation
    Ensure that all patient encounters are accurately and thoroughly documented to help support the medical necessity of services. Being well versed in DME and wound documentation, for which insurance carriers have become more stringent with their requirements and deeper with their reviewing, is essential.

  • Effective Communication
    Clear communication helps identify the root causes of denials. Constructive communication fosters collaboration between billing staff, clinical personnel, administrative teams and providers for a comprehensive understanding of strategies needed for correction, such as necessary clarification or additional documentation.

  • Verify Insurance Eligibility and Benefits
    Understanding the patient's insurance benefits and coverage limitations helps avoid unnecessary denials. It also allows you to inform patients about their financial responsibilities upfront, reducing the likelihood of non-payment.

  • Ongoing Staff Training
    Provide regular training sessions to your billing and coding staff to ensure they are up to date with the latest coding guidelines and payer requirements. This includes training on coding accuracy, claim submission processes and how to effectively handle denials and appeals.

  • Denial Management and Appeals Process
    Develop a structured process for appealing denied claims, including gathering additional documentation, providing supporting information and submitting appeals within the required timeframe. Rather than trying to handle all denials at once, prioritize order to handle, based on level of impact to your practice.

By addressing the common reasons for denials, implementing proactive measures and continuously refining your billing and claims processes, you can reduce the denial rate and optimize revenue collection.

David Swiercz