When ASCs proactively monitor and analyze key performance indicators (KPIs), they can effectively influence their facility's revenue cycle performance by catching problems that decrease revenue, profits, and staff productivity and performance. Once identified, surgery centers can apply data-driven improvements that reverse these trends.
This fourth article in an ongoing series about improving ASC KPIs focuses on three related metrics: clean claim percentage, denial rate, and denial reason trending. Note: Access the previous article on days in accounts receivable (AR) and AR greater than 90.
Why you should monitor these KPIs
Tracking clean claim percentage — which is calculated by measuring the percentage of payers' rejections of claims — is critical as the submission of clean claims helps reduce the denial rate and better ensures timely payment.
Tracking the denial rate is important because when ASCs fail to address denials in a timely fashion, this will negatively affect the majority of a center's KPIs. It can also cause an ASC to lose money, such as in the form of lost interest or completely lost payments when claims are permanently denied.
Just as significant as monitoring denial rate, tracking denial reasons helps an ASC identify whether it is experiencing an issue with a single claim or facing a possible trend that can contribute to growing and ongoing denials.
The industry standard for clean claim percentage is around 98%.
The standard benchmark for denial rate is less than 5%, although a rate as low as 1% is achievable. High-performing ASCs will inevitably experience claims denials, even if they are unjustified.
Red flags to watch for
A high volume of rejections that leads to a drop in the clean claim percentage is likely indicative of an ongoing claims or clearinghouse issue.
A high denial rate percentage indicates an ASC has one or more problems, including coding issues, billing issues, documentation/dictation issues, and performing cases without proper medical necessity approvals.
Concerning denial reason trending, keep an eye out for continuous denials by a specific payer, for a specific case or specialty, for a specific code(s), and/or denials associated with a specific provider or business office team member. Any such development is an indicator of a breakdown in at least one revenue cycle component.
Identify problems, implement solutions
An ASC's clean claim percentage declines each time a claim is submitted and rejected. There are many possible causes for rejections of claims, which an ASC's clearinghouse should identify and share. If the clean claim percentage decreases below 98%, evaluate the rejection reasons and implement a process to avoid them going forward.
There are many possible contributors to an increasing denial rate. These include claim submission errors, failure to submit documentation required by the payer (e.g., invoices, medical records), billing for procedures not covered per local coverage determinations (LCDs) requirements, and front office issues, such as failure to secure procedure authorization and incorrect verification of benefits and coverage specific to the scheduled procedure.
To improve the denial rate, an ASC should perform quality assurance review on all claims prior to submission to help ensure accuracy. The charge entry team must understand specific contracts and payer rules on required documentation for full payment of the claim, with documents consistently submitted up front.
Coding and billing teams should understand when a code will not be payable. If the coding or billing team identify such a code, the business office should be notified immediately. If a non-payable code is issued, ASCs should conduct a code review with all medical records to determine whether an alternative code that is payable and compliant exists. If no such code is available, review the case along with the LCD requirements to determine whether an amended report is justified.
Finally, many front office issues can inflate the denial rate. For example, authorization is commonly associated with denials. Denials related to authorization can occur if an insurance representative fails to provide the correct information, the insurance verifier is not asking the correct questions, or the scheduled procedure code differs from what was actually performed. If the code changed and authorization was required, ASCs should address this immediately. Some payers will only change an authorization up to two weeks (14 days) past the date of service. If the change is not completed during this period, the payer will likely issue a permanent denial.
Concerning denial reason trending, there are three metrics worth examining. For denials related to ICD-10, track the types of denials specific to the codes set and provide ongoing provider education. For authorization denials, ASCs should ensure they include authorization numbers on claim forms to avoid erroneous denials. If billing a different CPT code from what was scheduled, confirm whether updating the authorization is permissible with the payer or if a denial is first required before submitting an appeal. Immediately address instances of any insurance verification team members failing to obtain required authorizations. For medical necessity denials, provider education is the most important solution to decrease such denials.
Next in the KPI series…
Stay tuned for our next article is this KPI analysis series, which will focus on percentage of collections for cases greater than 90 days; write-off percentages; and credit balance, refund trends, and collection agency referrals.
Angela Mattioda (firstname.lastname@example.org) is vice president of revenue cycle management services for Surgical Notes. Surgical Notes is a nationwide provider of revenue cycle solutions, including, transcription, coding, revenue cycle management (RCM), and document management applications for the ASC and surgical hospital markets. Mattioda oversees the SNBilling RCM service, the fastest-growing component of Surgical Notes' complete end-to-end revenue cycle solution offering.