Why Claim Denials Are So Costly for Healthcare Providers

Claim denials can be a costly issue for healthcare providers, impacting their revenue, administrative expenses, patient satisfaction, and reputation. Discover the reasons behind claim denials, the costs for healthcare providers, and strategies for reducing the frequency of denials.

blog image

For healthcare providers, it’s critical to be paid for services rendered to patients. Claim denials represent a significant roadblock to this goal and can cost providers both financially and nonfinancially. From incorrect coding to missing information to insufficient documentation, the reasons for claim denials can vary. But regardless of the reason, it’s paramount to reduce instances leading to claim rejection and quickly address denials.

Understanding claim denials

While physicians are focused on helping people manage their health, they also must ensure the financial viability of their practice. They invest significant time, resources, and expertise in treating patients. The reimbursement they receive for their services is essential for operational continuity and sustainability.

Claim denials occur when a provider’s request for reimbursement is rejected by an insurer or payer. Denials result in delayed or reduced payments, increased administrative burden, and decreased revenue — all of which affect a provider’s ability to deliver quality care.

The costs of claim denials for healthcare providers

The inability to recoup the full cost of a submitted claim creates a financial burden for healthcare providers. Claim denials cost providers as much as $31.50 per claim, which can easily extrapolate into thousands of dollars each month based on claim volumes.

Besides lost revenue from denied claims, providers often incur additional administrative expenses associated with reworking and resubmitting denied claims. These costs include staff time and resources required to identify and correct billing errors, as well as any peripheral costs from delays in finally receiving reimbursement. There’s also the potential of unknown costs arising due to delayed reimbursement. Denied claims can disrupt a provider’s cash flow and even impact their ability to invest in their practice.

Claim denials can also have nonfinancial consequences, leading to patient dissatisfaction and negatively affecting patient loyalty and practice reputation. Providers may see a decrease in referrals if patients lose trust in their ability to manage billing. As patient experience and loyalty wane, so does the potential for future revenue.

How to reduce claim denials

Healthcare providers can take several simple steps to lower the prevalence of claim denials and the costs accompanying them.

  • Proper documentation and coding practices can decrease the likelihood of denials. Providers must ensure all necessary documentation is included in claim submissions and billing codes accurately reflect the services rendered.
  • Managing the claims process is also critical. Regular staff training on payer policies and regulations can prevent common billing errors, and audits across the scope of revenue cycle management (RCM) are great ways to reduce claim errors and rejections.
  • Utilizing technology, such as RCM software, can optimize reimbursement rates. In lieu of using reimbursement tracking software, outsourcing RCM to a specialist can also net lower rejection and improved reimbursement rates.

Avoid claim denials at all costs

The longer a claim goes unresolved, the more it costs the practice. The best solution is to prevent claim errors that lead to rejections and denials. Afterward, a swift audit and remediation process is the best line of defense. Whether undertaken by the practice or a preferred RCM partner, claim denials must be a top priority with a swift resolution.

Explore solutions for minimizing claim denials at trubridge.com.