This article is initially available on our podcast. Click here to listen.

I just wanted to talk about denials and the rate of denials that is common in the healthcare industry: the frequency, infographics, quotes, metrics, things like that. When people talk about the number of denials in the United States, they try to quantify the hundreds of billions of dollars in denials that occur, usually in an attempt to sell some product or service that relates to preventing denials or medical billing or something like that. It’s not uncommon that we see actual numbers concerning the average for denials. I did want to share a little bit of data.

Look at the range

First of all, the range is massive. What I mean by that is, the long tail goes very, very long, meaning it’s not uncommon to have 20-25% denial rates. Again, a little bit of this varies by specialty and type of provider: Whether it’s outpatient or hospital.

One thing to note is the difference between the median (people basically at 50%, average by definition). Further, the top quartile is only about 3%, which means it’s pretty clustered in something that we might call close to a log-normal kind of distribution. 

Consider where there’s an awful lot of people in the relatively low percentage and then a very long tail going out to the high rates of denials. That means that the average is slightly over 11% for the number of denials on a dollar basis. So that means if you’re billing $100 million a year, you’re doing $11,5 million in denials, on average, or something like that.

Calculate the differences

As I mentioned, the difference between the median and the top quartile is about 3%, which means if you’re at an 8% denial rate, then you’re in the top quartile of all providers. That’s good relative to your peers. It’s still a very, very large number, though. I think that’s the critical thing that we want to point out. Do you care about being top quartile if it’s still 8%? 

What if you’re the best in the country, which means that you’re 5%, or 4,5% or something like that? I’m not giving specific numbers because there’s no way to know what the best in the country is, but that’s still an extraordinarily high percentage. These percentages are pretty significant.

What’s the denial rate?

We talked in another podcast about how somebody suggested that they only have a 1% denial rate. Well, I’d like to see that data because I don’t know if I believe it. Let’s do some deviations and think about, like, “What would it take to be at 1%?” I mean, that’s extraordinarily unlikely. Even if you’re at the top quartile where you’re “the best in the country,” you can still always do better.

An important question, even more than “Where do you rank?” is “What can you get to?” Or what should you get to? What percentage can you achieve? The output of that or really where you want to get to ultimately is prescriptive, which is, “How do you get there?” Of course, the key to all of this is to start with a foundation of quantifying and tracking. You need to have good data. If there’s no baseline, you have no idea what’s going on, and there’s no way to put in place programs to improve things.

Start with reporting

A denials management program has to start with excellent reporting. That means a strong baseline, good data over time, the ability to quantify and track improvement or changes, and even sort of look at personal changes that you made relative to individuals in the organization (perhaps it’s training those individuals, maybe it’s an individual department, whatever it might be: eligibility, documentation, coding, and so on). 

Next, identify that change in that point of time, see it in the data in terms of the output from a billing standpoint, and then see where that changes down the road some number of months later to see your dramatically improved rate in terms of denials.

In conclusion

The story’s moral is that good is sound, great is great, and there is always better. So make sure you have excellent reporting and analytics to figure out how you can get better, how much better you can get, and ultimately how to get there.