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Solve the following problem:

A medical office is experiencing a cash flow problem because of claim denials. They file 750,000 claims per year. The office gathers data about yearly denials and creates a chart so that the team can see where the bulk of denials are coming from. The data is shown in the table below.

**Reasons for Denying Medical Claims:**
- Duplicate claim: 18,012
- Timely Filing: 13,245
- No beneficiary found: 10,215
- Claim lacks Information: 4,548
- Service not covered: 2,154
- Medical necessity: 1,423
- Date of service issue: 526

1. What is the DPMO (Defects Per Million Opportunities) that this office operates on?
2. What is the sigma level of this office?
3. What, in your view, is the quickest way for this office to improve their sigma level?

Note: You will find the following chart helpful in solving this problem.

| DPMO | Sigma Level | Percent Meeting CCR's |
|-----------|-------------|-----------------------|
| 500,000 | 1.5 | 50 |
| 308,500 | 2.0 | 69.15 |
| 158,700 | 2.5 | 84.12 |
| 66,800 | 3.0 | 93.3 |
| 22,700 | 3.5 | 97.7 |
| 6,210 | 4.0 | 99.37 |
| 1,350 | 4.5 | 99.86 |
| 230 | 5.0 | 99.97 |
| 3.4 | 6.0 | 99.999 |

Answer :

To calculate the DPMO (Defects Per Million Opportunities) for this medical office, we need to determine the total number of defects and the total number of opportunities for defects.

Looking at the table, we can see that the office experiences denials due to various reasons.

The count of each reason represents the number of defects.

Adding up all the counts gives us the total number of defects:

18012 (duplicate claim) + 13245 (timely filing) + 10215 (no beneficiary found) + 4548 (claim lacks information) + 2154 (service not covered) + 1423 (medical necessity) + 526 (date of service issue) = 50,123 defects

The total number of opportunities for defects is given by the total number of claims filed per year, which is 750,000.

Now, we can calculate the DPMO using the formula: DPMO = (Total Defects / Total Opportunities) * 1,000,000

DPMO = (50,123 / 750,000) * 1,000,000 ≈ 66,831.33

Therefore, this office operates at approximately 66,831.33 DPMO.

2. To determine the sigma level of this office, we can use the DPMO to Sigma conversion chart provided.

Looking at the chart, we can see that the DPMO of 66,831.33 falls between the DPMO values for a sigma level of 3.0 and 4.0. However, to find the exact sigma level, we can interpolate between the two values.

Using the formula: Sigma Level = (Higher Sigma Level - Lower Sigma Level) * (DPMO - Lower DPMO) / (Higher DPMO - Lower DPMO) + Lower Sigma Level

Sigma Level = (4.0 - 3.0) * (66,831.33 - 66,800) / (66,800 - 66,210) + 3.0 ≈ 3.0006

Therefore, the sigma level of this office is approximately 3.0006.

3. The quickest way for this medical office to improve their sigma level is by reducing the number of defects or denials. By identifying the main reasons for denials, the office can implement targeted strategies to address these issues.

For example, if the office finds that a significant number of denials are due to "duplicate claims," they can implement measures to reduce duplicate claims, such as improving their claim submission process and conducting thorough checks before submitting claims.

Similarly, if "timely filing" is a common reason for denials, the office can establish clear timelines and reminders to ensure claims are filed within the required time frame.

By addressing the root causes of denials and continuously monitoring and improving their processes, the office can reduce the number of defects and ultimately improve their sigma level, leading to better cash flow and overall efficiency.

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