Two Critical Revenue Cycle KPIs Your Organization Needs to Watch to Prevent Healthcare Denials

[SSI Claims Denial Management Series: Part 1 of 3]

May 24, 2022

Stopping healthcare denials on the front end of your revenue cycle is a better strategy than trying to manage denials on the back end. Recent research shows hospital claim denial rates are nearing the “danger zone,” with average denial rates increasing over the past few years to between 6% and 13%.  This blog post addresses the latest industry insights about these types of healthcare denials plus offers denial prevention strategies.

In SSI’s recent eBook: Claims Denial Management – Key Strategies to Help You & Your Organization Make Improvements, we show how effective claims denial management and prevention strategies help close gaps and reduce the chances of healthcare denials ever occurring. Today, we’re starting at the beginning with a quick primer on clean claim rates and initial denial rates to help you get a handle on your revenue cycle denial management operations

90% Clean Claim Rate 

The first critical KPI to track is a Clean Claim Rate (CCR). Clean claims are those where no manual intervention or touches were required to process, and a CCR is the trending indicator of claims data as it impacts revenue cycle performance.

For example, when a provider processes a claim, it’s programmatically run through a claim scrubber to apply appropriate edits and then sent to the insurance carrier via a clearinghouse. In this case, no person interacted with the claim after the edits were applied. However, some organizations have adopted their own rules for claims processing, which require human interaction to edit or change claims for reasons specific to them.

Remember – touches equal time and time equals money. Any manual intervention can increase the time to process healthcare claims and delay payment. In any case, adopting a CCR target of ninety percent is ideal for most provider organizations, leaving enough room for realistic scenarios where additional claims handling may be required.

5% Initial Denial Rate (IDR)

On the back end of your revenue cycle, it’s essential to keep an eye on your initial denial rate (IDR). An IDR is the percent of claims denied at the first initial response from the payer. This rate is calculated by taking the total initial denied claims and dividing that number by the total number of claims submitted.

These calculations can get complicated as you consider which numbers to include or omit. Most organizations exclude rebills from these totals, but others do not. For SSI clients, we recommend excluding rebills when calculating your IDR. The important thing to remember is always to ask what is and is not included when reviewing this metric. SSI recommends a five to ten percent IDR benchmark, with five percent being the ideal target.

Additionally, be sure to look at your organization’s IDR by payer. For example, if you run your IDR calculations by your highest volume payers, you may be able to quickly identify those that are having the most significant impact on your IDR. Then you can appropriately focus your resources to make improvements on the claims going to those specific payers. Keep a close eye on any positive correlation between your IDR and CCR. For example, what you don’t want to happen is for your CCR to improve, and as a result, your IDR increases.

When comparing your organization’s CCR and IDR rates to other organizations, compare them against those of like type – size, location, specialty, etc..

That’s all for Part 1 of our Claims Reporting & Management series. In Part 2, we look at the top 5 most common types of claim denials. Part 3 provides a detailed Q&A with SSI’s revenue cycle experts regarding key strategies to help improve your claims denial management operations.

Take RCM Denial Management Further with Expert Guidance and Insights

Since 1988, SSI has been ensuring healthcare providers are paid timely, efficiently, and accurately. Download our free eBook: Claim Denial Management – Key Strategies to Help You & Your Organization Make Improvements for convenient, all-inclusive exploration of Parts 1-3. Or, request a demo to learn more.

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