Healthcare Facilities, Providers and the US medical billing companies that handle their billing, have faced a lot of complexities during medical claims billing. As they already have too much to handle, adapting to the new changes introduced by the Affordable Care Act is truly burdening. The claims get denied by the Payers before they can get a handle on the new coding updates and this result in a poor first-pass ratio. So, what is this first-pass ratio? See below to learn its importance:
What happens after billing a claim? There are two stages at which claims can possibly get denied and it is essential that Providers and outsourced medical billing companies understand the first-pass ratio and its importance.
- Claim Rejections at Clearing House: When the medical billing software finishes billing a few batches of claims, they are uploaded to the respective clearinghouse accounts of the Provider or the US billing company. Then, the clearinghouse checks for errors in the claims uploaded. The error-free claims are securely transferred to the concerned Payer electronically (meeting HIPAA standards – 837), while the erroneous claims get rejected and sent back to the Provider or the US billing company.
- Claim Denials at the Payer Level: The next stage where claims can get denied is at the Payer level. The insurance carrier analyzes the claims once again, looking for errors that were overlooked by the clearinghouse. When an erroneous claim is detected, then a claim denial status message is sent back either via the EOBs or ERAs, which then gets updated to the Provider’s medical billing software.
First-pass Ratio: When a Provider or an outsourced US medical billing company uploads say, for instance 100 claims, to the clearinghouse and if 20 claims get rejected, then the first-pass ratio is 80%. If this claims rejection is eliminated, then the claims can easily pass through to the Payer level accounting for quicker reimbursement. On the other hand if erroneous claims are submitted, then they will get denied at the Payer level, causing more work like AR pile-up and TFL issues.
To Improve First-pass Ratio:
- The medical billing staff or the software (edits) must work exceptionally well to avoid trivial errors, which will be hard to find out if claims get denied.
- The clearinghouse claim rejections must be analyzed and worked frequently, finding better solutions to avoid errors occurring in the future.
Many US medical billing companies are at risk of losing their hard earned goodwill from clients due to poor first-pass ratio and re-work, due to the changes in the healthcare domain. They also lose a big chunk of their profit margins, if a higher % claims need to be re-worked or handled by AR as Denials. One of the best solutions would be to outsource medical billing functions to an offshore medical billing company that has a higher first-pass ratio. One such company is eCare!