Managing Workers’ Compensation claims in healthcare is complex and time-consuming. Unlike traditional payers, work-related claims require specialized knowledge of payer rules, state-specific regulations, federal guidelines, an understanding of common mistakes, and employer preferences. This complexity often leads to high denial rates, severely impacting a provider’s cash flow and overall financial stability.

In this blog, we’ll explore the financial implications of claim denials and how healthcare providers can reduce denial rates to improve cash flow and save millions annually. We will highlight key insights from a UHS Health Systems Case Study and discuss actionable strategies to reduce denials.

The Cost of Workers’ Compensation Benefits Claim Denial

Average denial rates for Workers’ Compensation claims range from 15% to 30%, significantly higher than in other financial classes. Each claim denial represents lost revenue and additional administrative costs for resubmitting claims. According to UHS data, the average value of a Workers’ Compensation claim is $4,500. Reducing denial rates can have a substantial financial impact on healthcare providers.

For example:

• 1,000 claim denials at $4,500 can be as high as $1.2 million in lost revenue.
• Reducing denials from 15% to under 2% can save up to $585,000 for every 1,000 claims.

These numbers illustrate the critical importance of proactive denial management with Workers’ Compensation claims for hospitals and health systems.

Why Are Workers’ Compensation Claims Denied?

In such cases, several factors are at play and have their own set of challenges. Common reasons for claims denials include:

1. Incorrect Payer Information: Errors in identifying the correct payer or employer can result in claims never making it into the payers system.

2. Late Filing: Workers’ Compensation claims have strict, timely filing and appeal deadlines that vary by state and employer. This too results in lost revenue.

3. Incomplete Documentation: Missing information or attachments can delay payment and result in lost revenue.

4. Lack of Prior Authorization: Many claims are tied to services that require prior-approval before treatment is provided, which can result in lost revenue if the authorization is obtained after services have been provided. 

These issues are often exacerbated by manual processes and limited automation, increasing the likelihood of errors.

The Financial Impact of High Denial Rates on Healthcare Providers

High rates of initially denied claims not only delay payments but also increase operational costs. The longer a claim remains unpaid, the less likely it is to be recovered. Many providers with high denial rates often experience:

• Extended AR Days: Claims remain unpaid for longer periods, impacting cash flow.
• Increased Rework Costs: Staff must spend additional time correcting and resubmitting denied claims.
• Lost Revenue: Some denied claims are never recovered, leading to permanent revenue loss.

According to the UHS Health Systems Case Study:

• A Midwest health system reduced its denial rate from 15% to under 2%.
• Collections increased from $6.9 million to $10.9 million annually.
• Days in AR decreased to 37 days, improving cash flow predictability.

These results demonstrate the tangible financial benefits of reducing denied claim rates.

How to Reduce Workers’ Compensation Claim Denials

To reduce denial rates and improve financial performance, healthcare providers should focus on the following strategies:

1. Proactive Eligibility and Prior Authorization Verification

• Verify patient eligibility and complete the prior authorization process before submitting the claim to the payer.
• Leverage robotic process automation (RPA) to complete manual tasks and to ensure compliance.

2. Accurate Payer and Employer Identification

• Utilize a payer specific CRM to identify the correct payer and employer and key personnel—like adjusters.
• Confirm payer specific details like the “bill to” address before submitting the claim to the payer.

3. Automate Documentation and Submission Processes

• Implement workflows to ensure all necessary documentation is included with each claim.
• Use electronic data interchange to submit claims and attachments directly to the payer.

4. Continuous Denial Monitoring and Management

• Track claim denial reasons and adjust workflows to address common issues.
• Use analytics to identify trends, to get a better understanding of specific challenges, and to prevent future denials.

The Role of Unified Health Services in Reducing Workers’ Compensation Claim Denials

Unified Health Services (UHS) specializes in managing complex Workers’ Compensation claims. By partnering with UHS, providers can leverage:

• Advanced Technology: UHS uses robotic process automation to streamline eligibility verification and the claim submission process. In many instances UHS will begin their processes while the patient is still in the hospital or facility.

• Expert Knowledge: The UHS team has a detailed matrix specific to Workers’ Compensation workflow, reducing errors, and ensuring compliance with federal (i.e., Department of Labor) and state-specific requirements.

• Proactive Denial Management: UHS monitors claim status and addresses potential denials before they occur.

According to the case study, UHS’s approach resulted in:

• Denial Rates Below 2%

• Improved First-Pass Rates Over 95%

• Increased Cash Flow by Millions of Dollars

Conclusion

The financial impact of denials can be devastating for healthcare providers. By implementing proactive strategies and partnering with a specialized RCM provider like UHS, healthcare organizations can boost denial management, reduce denial rates, improve cash flow, and save millions annually.

Reducing denial rates from 15% to under 2% is not just a possibility—it’s happening and can transform a medical provider’s financial performance, reduce rework, and increase cash flow.

Ready to reduce your workers’ compensation denial rates and improve cash flow? Contact Unified Health Services today to learn more about our comprehensive denial management solutions.