Friday, July 9, 2010

Task Management versus Denial Management

Accounts Receivable Management: Task Management versus Denial Management

The process of medical accounts receivable (A/R) management is truly a misnomer. In a perfect world, accounts receivable would require nothing more than collection—not management or process. However with growing complexity, payment ambiguity, payer plans, co-pays, co-insurance and other factors that drive up costs in healthcare delivery, the management of the accounts receivable process continues to demand more attention. With an average of 30 percent in denial rates and informed speculation of 15 percent in lost revenues on an annual basis, we must conclude that the management processes currently in place are woefully inadequate and costly. Unfortunately, the national healthcare debate on improvement does not address the A/R  management process (or lack thereof) where significant cost savings could achieved.

Symptoms of an Infirm Process

According to most industry publications, the majority of medical providers collect a portion of their charges within 60 to 70 days from the date of service as compared to five to 10 days required of most retail service providers. Why the difference?

  • On average, medical providers have over 60 various contracts with payers for services
rendered that do not typically include the reimbursement amounts.

  • Each patient has a unique status within annual healthcare insurance plans as it relates to
eligibility, allowables, network status, coinsurance, and covered services—factors not available to medical providers in advance of the visit with any consistency or clarity from the various payers.

  • The allowables and eligibility are reset and, in many cases, change annually. This eliminates
any consistency from payer, procedure and patient over the years.

  • A 30 percent denial or reject rate for services rendered would incur significant financial
hardship on the provider.

  • The cost of collection approximates 20 percent of the benefit. To justify this cost, each
claim requires an average cycle process of two to four times from provider to payer to resolve the balance owed. If the cycle cost were $5.00 each, the average cost would be from $10.00 - $20.00. With an estimate of $100.00 paid per cycle, the cost would be 10 percent to 20 percent. These figures are substantially higher than the cost of collection for other retail service providers.

The result of these simple factors creates the increasing demand for accounts receivable management systems to clear a path through this murky process. Today, there are two competing methods to manage the process. They are Task Management and Denial Management.

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