If you own or manage a behavioral health facility, you know all too well the feeling of disappointment when receiving an influx of claims that have been denied. While it’s normal for one or two claims to come back denied every once in a while, this is not something that should be happening on a regular basis. If you are seeing claims coming back as denied over and over again, it’s clear that something is amiss.
So what is a healthy denial rate? This is a question we hear time and time again at Integrity Billing, and it’s good information to know. Your claims denial rate can tell you a lot about the state of your revenue cycle. Let’s talk about how low this percentage should be, why behavioral health facilities often fail to reach this goal, and how to lower it.
The Short Answer: Aim for 5% or Lower
Across the healthcare space, revenue cycle professionals often find that an initial denial rate under 5% is an acceptable target for operations. Initial denial rates fall mostly within the 5%-10% range. Anything over 10% is, in most cases, an indicator that money is bleeding away from the organization.
Behavioral health facilities tend to fall into the upper range of denial rates on average. While being at the upper range isn’t ideal, there are effective steps you can take to bring your denial rate down to a healthier number.
How to Calculate Your Denial Rate
Before any moves are made to improve denial rates, it’s good to understand how they’re calculated. The calculation is simple: divide the number of denied claims by the total number of claims submitted during a given period, then multiply by 100.
As an example, if your organization submitted 1,000 claims last month, and you received 80 denied claims, your denial rate would be 8%.
Another popular way to calculate denial rates is to use dollar values rather than the number of claims that have been denied. Having a couple of denied residential or PHP claims can be far more damaging than having a couple dozen denied outpatient claims.
Another good metric to look at is your initial vs final denial rate. Final denial rates, or claims you’ve ultimately failed to collect, have more long term financial consequences than denied claims initially submitted. A high initial rate means your front-end processes need work. A high final rate means money is being written off for good.
Why Behavioral Health Facilities Often Have Higher Denial Rates
Billing for behavioral health facilities tends to have some unique challenges that facilities in other specialty areas don’t necessarily face. Denials for behavioral health facilities tend to happen primarily for three reasons: medical necessity, utilization review, and credentialing.
Utilization review requirements are frequently complicated and demanding, requiring reauthorizations at all stages of a patient’s continuum of care. And, unless your organization has a thorough and comprehensive credentialing protocol in place, it’s possible to have claims denied due to an insurance company finding a provider to be out of network.
Other issues that cause more denials for behavioral health facilities than others include prior authorization requirements, eligibility changes, payer specific billing and coding requirements, and documentation that doesn’t clearly support the level of care rendered.
The most disheartening part about increased denial rates within the behavioral health space is that many of these denials are preventable. Many of these denials are not due to poor patient care but rather holes in an organization’s procedures.
If the causes of preventable denials within your organization are unknown, a fresh set of eyes can be beneficial. Integrity Billing offers a free forensic assessment to determine what, within your organization’s revenue cycle, may be leading to preventable denials.
What a High Denial Rate is Really Costing You
A denied claim doesn’t just mean that a claim didn’t get paid. Denied claims require staff time to research, correct, and resubmit or appeal, negatively impacting cash flow. And if the staff working on these denied claims don’t have the bandwidth, denied claims may simply be cut off and the receivables written off as bad debt, quietly drained from the facility’s revenue.
Over months or years, this can add up to far more than the value of the originally denied claims, putting a large strain on the facility’s bottom line and investment in resources.
How to Reduce Your Denial Rate
Preventative measures to reduce denied claims begin well before a bill is sent to a payer.
- Verify insurance eligibility and benefits
- Obtain required authorizations
- Stay current on credentialing requirements
- Document clinical notes that support medical necessity
- Maintain communication between the facility’s clinical and billing departments regarding denied claims
- Categorize denials by type whenever possible
- Maintain an organized appeals process to recover receivables
Understanding how to appeal denied claims effectively and meeting payer deadlines can also improve recovery rates and prevent avoidable revenue loss.
Partner With a Team That Can Help You Navigate The Complexities of The Revenue Cycle
At Integrity Billing, we deal exclusively with billing for behavioral health facilities and understand the unique burdens that they face when dealing with the revenue cycle. We assist facilities with issues of utilization review, credentialing, denial management, and appeals to keep their revenue flowing and their doors open. If your organization’s denial rate is higher than you’d like or you’re completely unsure of what it is, reach out to Integrity Billing today at 888-368-7461 and discuss how we can assist your organization.
A healthy denial rate is rarely the result of pure luck, but instead the result of the right tools and know-how. That’s where we come in.