Denied claims are a key concern for hospitals, health systems and physician practices. Reports indicate that, each year, about 5-10 percent of claims submitted by physician practices are denied by payers. In fact, addressing claims denial is a crucial element in medical billing services. Denial of a claim is defined as “the refusal of an insurance company or carrier to honor a request by an individual, or his or her provider, to pay for a health care services obtained from a health care professional (Beckers Hospital Review).
Denied claims lead to lost/delayed) revenue and are also costly to rework. A proper claims denials management and prevention strategy is essential to manage, correct and prevent denials.
Types of Claims Denials
Understanding the reasons for claims denial is the first step in preventing it. Beckers Hospital Review classifies claims denials into various types:
- Soft Denial: Reasons include non-receipt of medical records, missing or inaccurate information, coding or charge issues, etc. This type of denial can be corrected with effective follow-up action and no appeal is necessary.
- Hard Denial: This type of denial results in lost or written-off revenue and appeals are necessary. Reasons for hard denials include – no-preauthorization, uncovered service, bundling and not filing on time.
- Preventable Denial: a hard denial resulting from action or inaction on the part of the service provider. Examples are inaccuracies in patient registration, not eligible for coverage, invalid codes, medical necessity, and credentialing
Payment denials on the basis of medical necessity, length of stay or level of care are referred to as clinical denials. Coding clarification, requirement for additional documentation Requests for medical records and itemized bills are examples of reasons for Technical or Administrative Denials.
Steps for Successful Claims Denial Management
- Identify the Reason for the Denial: The first step in managing claim denial is understanding the reason, the problem, and its root cause. Payers use specific claim adjustment reason codes (CARC) and understanding them is critical to know why the claim was denied. For example, CO-4 indicates: “the procedure code is inconsistent with the modifier used or a required modifier is missing. Resubmit the claim with the appropriate modifier for the procedure”. It’s crucial to stay on top of denial codes and insurer communication and statements to identify why a claim was not paid.
- Analyze Denial Data to Identify the Source of the Errors: This can identify where the errors are occurring. Providers need to track denials by volume, type, payer, and reason to understand the trigger points by frequency. This is important to understand the source of the error that led to the denial – whether it is human, due to workflows, technology, or data. Claims can also be rejected to changes in payer policies. Continuous monitoring and audits can identify the source of the errors so that they can be corrected quickly to prevent future denials.
- Manage the Denial: Create a structured, organized workflow is to manage each type of denial. This can speed up the handling of denial management. For instance, all coding-related queries can be routed directly to medical coders for assessment and action. As most payers have specific requirement and time limits for claims resubmission, it is important to keep these aspects in mind while resolving issues and resubmitting claims. Depending on the payer’s rules, rationale for payment may have to be submitted in writing. Proper documentation of the service rendered, pertinent medical literature and sections from the CPT code book can be submitted to support resubmitted claims.
- Ensure Effective Payer Contract Management: Understanding and managing payer contracts effectively is important for providers to stay on top of each payer’s specific requirements to avoid errors in claim submission.
- Take Proactive Steps to Prevent Denials: Perform insurance eligibility verification regularly. Patients should be asked about changes in coverage and other relevant information at each visit. Claims scrubbing or auditing is a crucial denial prevention strategy. Audits can detect and eliminate coding and billing errors so that they can be addressed before they are submitted to the payer. Claims scrubbing can significantly reduce denials and rejections.
Get Expert Assistance
These are the important aspects of claims management, but not all. There’s much more to this challenging process. Payer rules are constantly changing, and complex criteria and varying requirements in payer contracts are complicating matters. Payers are also implementing advanced methods to identify inaccuracies and reject claims, notes a Revenue Cycle Intelligence article. These challenges make it more difficult for providers to submit accurate claims. That’s why getting expert assistance is highly recommended to win the battle against claims denials.
Partnering with an experienced medical billing company is the best option when it comes to claims management. Staff in these companies stay up to date on payer rules to ensure accurate claim submission. With timely review of denial and audit data and ongoing communication with payers, an expert can help healthcare providers minimize errors that lead to denials.
Holding a CPC certification from the American Academy of Professional Coders (AAPC), Natalie is a seasoned professional actively managing medical billing, medical coding, verification, and authorization services at OSI.