Cash flow is critical in healthcare, especially considering the gap between when services are rendered and when reimbursements are paid. Shortening this gap and improving cash flow are a matter of creating a well-managed claims process to minimize errors that could result in denied claim write-offs. Reducing denied claims can have a significant impact on a practice’s revenue cycle — even despite protracted reimbursement timelines.
The landscape of denial write-offs
Denied claim write-offs occur when insurance claims are rejected for things like coding errors, incomplete documentation, or authorization issues. As a result, many practices find themselves writing off substantial sums of unrealized revenue each year in denied claims.
The good news is, claim denials and write-offs are preventable. By taking a proactive approach to revenue cycle management, healthcare practices can focus on submitting clean claims for preauthorized services, with the coding and information necessary for swift acceptance and processing.
The costs of denied claims
When claims are denied, practices face a loss of revenue from uncompensated services. But this is only the beginning of the true cost of a denial. There’s also a notable allocation of administrative resources toward the resubmission and follow-up of denied claims, increasing overhead costs.
The indirect costs of denied claims further exacerbate the issue. Staff productivity takes a hit, as valuable time and effort are diverted from other tasks to rectify denials. This shift in focus impacts practice efficiency, which can spill over to affect patients. If patients feel neglected or find themselves bearing the burden of financial responsibility for a denied claim, they’ll lose trust in the provider, which can hinder future cash flow.
The cumulative effect of these costs paints a clear picture of the broader ramifications of denied claims, emphasizing the urgent need for robust strategies to prevent and address denials.
Cash flow implications
Maintaining a positive, healthy cash flow is an important aspect of practice management — and it hinges on your revenue cycle management (RCM) practices. Claim denials and write-off adjustments impact cash flow and are a direct result of RCM.
Denied claims create delays (or gaps) in reimbursement, leading to a trickle-down effect that hampers the practice’s ability to meet financial obligations. The gap between service capture and reimbursement is already long enough. When reimbursement never comes, it puts considerable strain on the practice’s financial outlook.
The effects extend beyond the financial realm. Cash flow issues can damage a practice’s reputation and operational stability. This makes addressing denied claims not only a revenue concern but also a strategic necessity to ensure practice integrity.
You can’t afford write-off adjustments
Denial write-offs are financially crippling for any healthcare practice. They don’t just represent lost revenue. Their persistence indicates an ongoing revenue cycle management problem that could be affecting your practice in many ways. Getting to the root cause of claim denials and resolving them will boost cash flow, financial health, and the integrity of your revenue cycle.
Learn more about how to avoid denial write-offs and improve RCM practices with TruBridge.