Practices may boast high clean claim rates yet still bleed revenue; shifting to a first-pass payment focus, smarter workflows and tech-driven visibility can transform reimbursement performance and cash flow.
For a medical practice, revenue cycle management (RCM) is a constant battle against rising pressures, complex payer rules and workflows that can feel like a black box. A key performance indicator that practices often rely on is the clean claim rate, a metric typically provided by their clearinghouse. However, this number can create a dangerous illusion of financial health. The traditional clean claim rate indicates a claim has passed initial edits and has been accepted by the payer; it says nothing about whether that claim was adjudicated and paid. This disconnect means a practice can have a stellar clean claim rate and still suffer from a debilitating denial rate.
A survey conducted by Plutus Health found the biggest hurdles for RCM in medical practices were claim denials (50% of those surveyed) and payer challenges (44% of those surveyed). Bronson Cox, chief operating officer at Encoda, explains why it is time to move beyond this misleading metric and redefine what a clean claim truly means for a practice's bottom line. A more technology-driven framework is needed to gain true visibility and control over the reimbursement cycle.
A common but significant point of confusion in back-office operations is the distinction between a claim rejection and a claim denial. A rejection occurs when a payer turns back a claim before it ever enters their adjudication system, often at the batch or claim status level. In essence, the claim is lost to the payment process. A denial, on the other hand, occurs after a claim has been accepted into the payer's adjudication system—often called the payment floor—but is then deemed unpayable for a specific reason.
This difference impacts how your staff should follow up. If a claim is denied, a call to the payer's customer service department is appropriate, as they can see the claim in the adjudication system and explain the denial. However, if a claim was rejected, that same customer service representative will likely report no claim on file (NCOF). “NCOF doesn't mean the payer never received it. It simply means that claim and those service lines in the claim have not been considered for payment. Upstream, something happened, or worst-case scenario, nothing happened,” explained Cox.
To resolve a rejection, your team must contact the payer's electronic data interchange department, which can trace the submission and identify why it failed to reach the payment floor. Understanding this distinction prevents wasted time and helps staff ask the right questions of the right people, breaking the cycle of confusion caused by the NCOF response.
Many practices follow a multistage claim scrubbing process: a precharge review, another check during claim creation in the practice management system and a final scrub at the clearinghouse. Although well-intentioned, this fragmented approach can be inefficient, with different people reviewing partial information at each step. “I started using a term referred to as 'rebillitis.' Practices resubmit the same claim five, 10, even 15 times,” said Cox. Sending the same claim out and expecting a different result will not solve the problem. If your clean claim rate is 95% but your denial rate is 40%, it is a signal that something in the workflow and data analysis is broken.
Think about the typical claim cycle. Data come from the electronic health record, whether HL7 or another format, and enter a precharge scrubbing stage. Staff or automated systems fix errors as early as possible, then add codes, modifiers and eligibility checks before batching and sending claims to the clearinghouse. Each step adds another layer of review, but often misses issues the payer will eventually reject, like missing authorization numbers or referral details.
“If I've got people looking at the first stage, people looking at the second stage and people looking at the third stage, is it possible to improve efficiency by having that third stage be where I'm catching everything?” posed Cox. By focusing on only reviewing claims that fall outside of your business rules, efficiency and unnecessary rework can be improved. For example, if payers require you to submit codes you know will not be reimbursed, you can configure your system to accept them as business rules, rather than flagging them as errors every time. By moving to an exception-based model, practices can finally move past repeated claim submission.
A clearinghouse's job is to get the claim to the payer, not to get the practice paid. Therefore, their metric reflects their success in transport, not your success in reimbursement. To measure the health of your revenue cycle, practices should adopt the first-pass payment rate. Cox defines this as a claim that is paid on the first submission without human intervention. This metric directly ties claim submission quality to cash flow and provides a clear baseline for improvement. Instead of waiting 30 to 45 days to follow up on a claim, practices should be checking claim status within two or three days. By that point, a payer response should be available, and if not, it is time to follow up. This small change alone can reduce rework and delays, especially when paired with flexible rules that account for nuances like timely filing resets between primary and secondary payers.
Focusing on the first-pass payment rate shifts the practice's mindset from simply submitting claims to submitting claims that are structured to succeed within the payer's black box of rules. “Having the tools and visibility to look at that complete life cycle of the claim and analyze that data will give you an insight that many practices lack,” said Cox. Instead of celebrating a high clean claim rate while battling high denial rates, the goal becomes incremental improvement of the first-pass payment rate. A 1% improvement can have a significant financial impact on the practice. This approach requires visibility into the entire claim life cycle, tracking each submission and its corresponding payer responses to identify and fix root causes rather than reworking individual claims.
Technology plays a critical role, but it isn’t a “set it and forget it” solution. It needs to be configured, refined, and embraced by staff. Billers, payment posters and administrators must see it as an investment in their success, not a threat to their jobs. “Make them understand this technology is there to help them. You're investing in them, and that will improve your back office and their perception,” advised Cox. With buy-in, technology can help identify hidden process failures, like when claims appear accepted in the EDI pipeline but never reach adjudication.
Finally, set a baseline. Even if you lack advanced tools, a simple payment report showing how often claims are paid on first submission versus after zero-payment responses can highlight where problems exist. Use these data to map the life cycle of claims, spot bottlenecks, and retrain staff as needed. “There's a lot of information that will help you positively impact the way your practice runs here and how you can improve,” said Cox.
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