Denial Rate
Description:
This metric can be reported by total dollars or claims showing the amount being denied by managed care companies.
Why is This KPI Important?
There are very few things worse than a denied claim in a Pediatric practice. With the fairly low margins due to high labor costs, practices need to make sure that every penny is accounted for. Accounting for every penny means tracking the frequency and dollar amount of denied claims. By tracking denied claims, the practice can leverage that misfortune to avoid the same mistake in the future. There is an old adage that states "If you do not measure it, you cannot manage it".
This KPI is the first step in managing denials.
Claim Frequency - One approach is to simply count the number of denied claims. While this approach was reliable in the past, managed care plans can deny individual lines on the claims form instead of the entire claim. As such, this method has lost some validity, since a denial may be for a vision screen or tympanogram during the office visit. These denials are not quite the same as getting a denial for a well check. Therefore, it is important to classify denials as either office visit or ancillary related. This information will be helpful as you prepare for managed care contract negotiations.
Claim Amount - This approach looks at the dollar amount denied as compared to the total charges submitted. If the practice submitted $500 in claims to Acme Managed Care and the vision screen was denied in the amount of $15.00, the denial percentage would be 3.00%. Some Pediatric practices go so far as to examine their denial percentage based on what is allowable. For example, if the total allowed amount for the $500 in claims to Acme Managed Care is $300 and the allowed amount for a vision screen is $4.00, the denial rate would be 1.33%.While there are many things to take into consideration when running this KPI, the most important thing is consistency.
PMI Recommended Frequency to Run this KPI:
Weekly and Monthly
Formula:
Claim Frequency- Total Claims Denied / Total Claims Submitted
Claim Amount- Total Amount of Denials / Total Charges Submitted
Show the Math:
Claim Frequency- 5 / 100 = 5%
Claim Amount-$1,500 / $100,000 = 1.50%
How Should I Track It?
This KPI can be tracked using an Excel spreadsheet by Practice and/or Department.