Does it make financial sense for you to switch over to Electronic Medical Claims Filing? You can do a quick analysis of your numbers to see if it makes financial sense for you. First, go to the Electronic Medical Claims Lost Revenue Recovery Worksheet . This worksheet will only take a few minutes to fill out, and it does not matter if you have got the exact numbers or not. The purpose of the worksheet is to give you an idea of where you stand.
Take a look at the worksheet; you will notice that there are four columns: Columns 1 and 2 are examples of doctors using industry averages; first without using Electronic Medical Claims Filing, and then using electronic medical claims filing. Then columns 3 and 4 are for you to write in your numbers…. Again, both without and with using electronic medical claims filing.
Row A of the worksheet is where you write in how many insurance claims your practice files in a year. This is an estimate; don’t need to get bogged down with the exact numbers. Just make a good guess for now. You can do this by estimating how many claims you file a day, and then multiplying that number by 250 days a year of seeing patients. Go ahead and fill those numbers in on the worksheet for your practice in column 3 and 4. You will see that in columns 1 and 2 where we have got the example, the doctor files about 6,250 claims a year. That is about 25 a day, 5 days a week, for 50 weeks. Your numbers may be higher or lower; that is what this worksheet is for—to give you an opportunity to see where YOU stand.
In row B, fill in the average amount for all of your insurance claims. The industry average is about $225, so that is what we have used for the example. Write in what your average claim is in Row B, and then multiply that amount by the total number of claims you get in the year, and write that amount in Row C. That is your annual billing of insurance companies. Or in other words, that is how much money the insurance is SUPPOSED to be paying you every year—if you could just figure out how to properly jump through all of their ridiculous hoops. The doctor in our example is billing insurance companies just over $1.4 million a year. Again, fill in your numbers for your situation in the appropriate columns right now.
Is Your Rejection Ratio Killing Your Practice?
Row D is where things start to get a little bit interesting; this is the insurance claims rejection ratio. Remember we said earlier that the industry average is 31% of all claims get rejected. For the example, we have conservatively estimated that just 22% of the claims are rejected; that translates into 1,375 claims a year that are get kicked out of the system and returned to the doctor! That is well over a thousand claims a year that the insurance companies send back to be dealt with from scratch all over again. Write your rejection rate in column 3 right now. Is it 5%? 15%? 20%? 30% or more? Whatever the number is, write it in now.
Now notice that in columns 2 and 4 we have changed the rejection rate to just 1%. That is a realistic number of claims that you can expect to be rejected when you outsource your billing to us to file electronically. Sometimes it runs as high as almost 2%, but 1% is still very realistic. That immediately lowers the number of rejected claims from over thirteen hundred a year in the example to just 63. And that is for the entire year! Without Electronic Medical Claims Filing, that number could easily be over 100 rejected claims A MONTH! When you multiply your number of rejected claims by the average dollar amount per claim, the numbers start to get pretty staggering. Without using electronic medical claims filing, the doctor in the example is getting over $300,000 of claims rejected a year. Now that is a lot of money!
Of course, those claims are not thrown out forever. At this point, the doctor still has a chance to resubmit the claims again to try to get payment. That is nice in theory—but in practice, it does not always work out so easily. First of all, just because a claim is filed a second time does not mean that it will be accepted and paid. So that is a problem: claims that are rejected more than once. But the biggest problem is that for many doctors, because the entire process of filing claims and dealing with the rejected ones is so overwhelming, they just do not get around to getting them all resubmitted.
When rejected claims come back to the doctor’s office, they are often thrown in a big pile of rejected claims where they sit for months…or longer. One thing that amplifies this problem is that many doctors have high turnover of office personnel, and there is very little coordination when it comes to dealing with these rejected claims. Many doctors feel triumphant just to get all of their original claims out, and have no real system in place or time to handle the rejected ones. The rejected claims come with deadlines of usually 3 to 12 months to resubmit that often come and go without any action being taken. Those outdated, rejected claims then become write offs for these unfortunate doctors.
All of these factors contribute to what many industry insiders suspect is a 30% to 50% ratio of rejected claims that are NEVER collected on. Of course, many doctors do handle rejected claims with systematic efficiency; but the fact is that vast majority don’t. They are doctors, not bankers or accountants. The paperwork is just a necessary evil.
Look on Row G on the Lost Revenue Recovery Worksheet. You will see that in the example, we have put down 40% for the percentage of rejected claims that never get recovered. So what we do is take 40% of the $309,375 that is being rejected and come up with a total of $123,750 that NEVER gets collected. And here is the worst part: that $123,750 is money that would otherwise be PROFITS if the doctor could just collect it. It would go straight into the doctor’s pocket.
This Is Real Money That You Have Already Earned That You Can Now Collect
Now, remember what happened in column 2 to the doctor in the example when he started outsourcing his billing to us for Electronic Medical Claims Filing? His annual insurance billing, in Row C, stayed the same at $1.4 million. But since we have allowed him to now lower the rejection rate to just 1%, the number of rejected claims fell to just 63, for a total of just $14,175 a year in rejected claims. Let us assume that the doctor, for the reasons mentioned a minute ago, still cannot manage to collect on 40% of his rejected claims. Now that 40% only amounts to $5,670 a year, compared to $123,750 when he is not using Electronic Medical Claims Filing. That is increased revenue of $118,080 a year based on money he is now able to collect. Now you should be able to see why this is called the “Lost Revenue Recover Worksheet.” We’re not talking about money you can save. We’re talking about money that you have already earned that you can now actually deposit into your bank account.
Fill out the numbers in columns 3 and 4 on the worksheet now to reflect YOUR numbers. How many dollars worth of claims are being rejected back to YOU each year? And what is YOUR percentage of rejected claims that are never collected? Is it 40% like the doctor in the example? Is it higher? Lower? Whatever it is, write it in row G, and then calculate how much money you are not collecting every year because of rejected insurance claims. Is it $20,000 a year? $50,000 a year? $100,000 a year? More than that?
What we are trying to do with this Lost Revenue Recovery Worksheet is get you to see what a good financial decision outsourcing Electronic Medical Claims Filing can be for your practice. But before we finish this discussion, let us look at one more facet that we have not discussed in detail yet. You will find it toward the bottom of the Worksheet. It has to do with the amount of money it costs to process each insurance claim. Industry statistics show that the average amount of money it takes to process a claim is $11.35. That number takes into account everything from data entry, phone time, postage, overhead costs, and the like. On the worksheet on Row J, we have written in that number. If you multiply $11.35 to process each claim by 6,250 claims a year like in the example, that comes to a whopping $70,937 for the year, just to process claims!
Using Electronic Medical Claims Filing, that number drops to drastically. For this example, let us say that the doctor is paying $4 dollars each to have his claims electronically filed. For the same 6,250 claims, now the doctor would only be spending $25,000 a year to process them, which is a savings of almost $46,000 a year. That is the number you will find in Row L. Now if you add the savings from filing electronically to the additional revenue the doctor was actually able to collect from the insurance companies, the total amount of extra money that he sticks in his pocket for the year is over $164,000. $164,000!
So now let us finish filling in your numbers. In Row J, fill in how much your paper claims are costing you to file. This might be a little bit difficult to figure out, since it is sometimes hard to determine exactly how much it is costing you in terms of people time and overhead. Using the industry average of $11.35 is probably a pretty safe bet, though. Now calculate how much it would cost you to file electronically, using $4.00 as a cost per claim filed. What kind of savings do you show for your practice using Electronic Medical Claims Filing? Then add that number to Row I and see what your total amount of increased revenue is from using Electronic Medical Claims Filing. Very few doctors find this number to be LESS than $50,000. And it is not uncommon for that number to top six figures. It is no wonder the insurance companies are getting richer and richer, is it?
So How Did You Do?
This has been an exercise to answer the question, could Electronic Medical Claims Filing make financial sense for you in your practice. This worksheet has walked you through an example to show you the difference Electronic Medical Claims Filing can make for a doctor, and given you the opportunity to see for yourself using your own numbers. By this time you should at least have a good idea whether or not this service makes sense for you. If you still have questions, you can contact us to setup a time to discuss your specific situation. Thank you for your time and have a wonderful day.