Claim denial is one of the most complex issues faced by healthcare organizations. Checking and re-submitting claims is taxing and time-consuming. Besides wasting the doctor’s and coding and billing staff’s time, it can be frustrating for the patient as well. “About 48.3 million rejected claims accounted for 16.6% of the total in-network claims submitted in 2021,” spilled out one research.
With about two-thirds of recoverable denials of the 5-10% claim denials, it is important to resubmit the rejected claims within the permissible timeframe. The longer the denied claims are kept from being re-submitted, the lesser the chances of recovering the maximum amount from the insurance company. Roughly 90% of claim denials can be avoided with claim denial management. Healthcare organizations must have an effective claim denial management plan to identify, settle, recover, and minimize claim rejections.
Claim Denial Management: Enhancing Revenue Cycle Efficiency
Claim denial management is a crucial component of the revenue cycle for healthcare providers. It encompasses both the identification and resolution of denied claims and proactive steps to prevent future denials. By effectively managing claim denials, healthcare organizations can navigate the complexities of the healthcare reimbursement system while maintaining financial stability and providing high-quality care to their patients.
In a complex healthcare setting, claim denial is commonplace, and they can be attributed to a variety of reasons, such as coding errors, insufficient documentation, non-covered services, eligibility issues, and more. These denials can have a significant financial impact on healthcare providers, leading to delayed reimbursement and increased administrative burdens.
The benefits of claim denial management are multifaceted. By reducing denials and increasing the approval rate of claims, healthcare organizations can improve their financial performance, increase cash flow, and enhance operational efficiency. Additionally, addressing denials promptly can lead to more accurate and timely billing, which contributes to an overall positive patient experience.
What is Claim Denial Management?
Claim denial management is a critical process within the healthcare industry aimed at optimizing financial performance and ensuring the seamless flow of revenue. It involves monitoring, analyzing, and addressing instances where health insurance claims are rejected or denied by payers, whether they are private insurance companies, government programs like Medicaid or Medicare, or other healthcare payers. The ultimate goal of claim denial management is to minimize the number of denied claims, recover any revenue potentially lost due to denials, and enhance the overall efficiency of the revenue cycle.
Claim denial management comprises a series of systematic steps. It begins with the identification and tracking of denied claims. Once denied claims are identified, they are reviewed to determine the root causes of the denial. This investigation can reveal trends, common denial reasons, and areas that require corrective action. After identifying the reasons behind denials, healthcare organizations can take steps to address these issues, whether it involves correcting coding errors, improving documentation, or revising processes to ensure timely filing.
An effective claim denial management system not only focuses on addressing denials but also places a strong emphasis on preventing them. This preventive aspect involves ongoing training for staff, the use of technology to streamline processes, and maintaining open communication with payers to ensure compliance with their specific requirements.
Why is Denial Management for Hospitals Essential?
Denial management for hospitals plays a pivotal role in ensuring financial stability, operational efficiency, and the provision of high-quality patient care. This critical process involves identifying, analyzing, and addressing the reasons behind insurance claim denials to minimize financial losses and administrative burdens.
First and foremost, denial management is essential for hospitals to optimize their revenue cycle. Denied claims can significantly impact a hospital’s financial health, resulting in delayed or lost revenue. By addressing denials promptly and effectively, hospitals can maximize their cash flow, allowing them to allocate resources for better patient care, invest in staff development, and expand their services.
Furthermore, effective denial management for hospitals are crucial in enhancing operational efficiency. It ensures that billing and coding processes are accurate, claims are submitted on time, and documentation is comprehensive. These factors not only lead to a smoother revenue cycle but also reduce the administrative workload on hospital staff, allowing them to focus on patient care rather than claims rework.
Denial management also has a positive impact on the patient’s experience. Patients benefit when claims are processed accurately and efficiently, as it leads to faster reimbursement and fewer billing disputes. This contributes to improved patient satisfaction and trust in the hospital’s services.
In an era of increasing healthcare costs and evolving reimbursement models, denial management for hospitals is not just a financial necessity but a strategic imperative. It not only safeguards their financial stability but also ensures that they can continue providing exceptional care to their patients and meet the ever-growing demands of the healthcare industry.
Claim Denial Reasons to Monitor
Claim denial management is a pivotal aspect of the revenue cycle for healthcare organizations. To safeguard financial stability and operational efficiency, it’s essential to closely monitor and address the reasons behind a claim denial. Understanding the common denial reasons allows healthcare providers to implement preventive measures, streamline the claims process, and reduce administrative burdens. Here are some key claim denial reasons that healthcare organizations should proactively monitor:
Coding Errors: Incorrect coding is one of the leading causes of claim denials. Simple mistakes, such as using the wrong CPT (Current Procedural Terminology) or ICD-10 (International Classification of Diseases) codes, can result in denied claims. Regular coding audits and staff training are essential to mitigate this issue.
Insufficient Documentation: Inadequate documentation to support the medical necessity of a service or procedure is a frequent cause of claim denials. Healthcare organizations should ensure that their clinical documentation is thorough and aligns with payer guidelines.
Non-Covered Services: Some services may not be covered by specific insurance plans or may require pre-authorization. Identifying these services and informing patients beforehand can help avoid denials.
Timely Filing Issues: Missing deadlines for claim submission can lead to a claim denial. It’s crucial to monitor and adhere to the timely filing limits imposed by payers.
Duplicate Claims: Submitting duplicate claims for the same service or procedure can result in denials. Implementing claim tracking systems and verifying claims before submission can help prevent this issue.
Coordination of Benefits (COB): When patients have multiple insurance policies, determining the primary and secondary payers is crucial. Failing to coordinate benefits correctly can lead to denials.
Eligibility Issues: Verifying patient eligibility and insurance coverage in real-time is essential to prevent eligibility-related denials. Integration of real-time verification into the workflow can help.
Authorization and Referral Issues: Some services require prior authorization or referrals from primary care providers. Failing to obtain these, when necessary, can lead to denials. Implementing clear procedures for authorization and referral processes is vital.
Medical Necessity Denials: Payers may question the medical necessity of certain services. Ensuring that healthcare providers document medical necessities effectively can help prevent these denials.
Payment Denials: Payment-related issues, such as incorrect billing codes or fee schedules, can lead to denials. Regularly updating fee schedules and verifying billing information can prevent these issues.
By actively monitoring these common denial reasons, healthcare organizations can develop targeted strategies to reduce denials and streamline the claims process. These strategies may include regular staff training, advanced claims editing tools, automation of claims verification, and implementing comprehensive policies and procedures for prior authorizations and referrals. Additionally, clear communication with payers, following up on denied claims, and establishing a structured appeals management process can further enhance claim denial management.
In an environment where healthcare costs are rising and financial stability is paramount, monitoring and addressing these denial reasons is essential for healthcare organizations to thrive. Effective denial management for hospitals can significantly boost cash flow, ultimately contributing to the provision of high-quality patient care. Having said that, let’s explore in detail the claim denial reasons that can be easily avoided to boost cash flow.
9 Claim Denial Reasons to Avoid
Claim denial management is a critical aspect of ensuring the financial health and stability of hospitals. Avoiding common claim denial reasons is pivotal in streamlining the revenue cycle and minimizing administrative burdens.
Some key denial reasons to be vigilant about include coding errors, insufficient documentation, non-covered services, duplicate claims, and timely filing issues. By proactively addressing these denial reasons, hospitals can significantly improve their denial management process.
Implementing effective denial management for hospitals involves a multi-faceted approach, from optimizing coding and documentation practices to utilizing technology that can flag potential errors before claims are submitted. Hospitals must also maintain open lines of communication with payers, follow up on denied claims promptly, and have a structured appeals process in place. Prioritizing comprehensive denial management for hospitals not only safeguards financial stability but also ensures that hospitals can continue to provide top-tier healthcare services to their patients.
- Incomplete Information
A claim that does not have all the information required to process the request will always be denied. Even if the form seems to be completed, you may want to check it again to ensure all the details pertaining to the insureds and the medical practitioners have been thoroughly filled out as per the guidelines. As a healthcare organization, you may need to document the medical journey of a patient – how the patient was suggested a particular treatment, why the initial treatment did not benefit, or that the patient was diagnosed with a specific medical ailment after lab tests.
The lack of proper medical evidence and specific documentation to support the treatment is one of the primary reasons for claim denials.
- Transcription Mistakes
Of total claim denials, a whopping 46% of people have been denied insurance claims due to minor typing errors. But what causes these errors? While recording the patient’s information on paper, the doctor may misspell something. When this information is entered into the electronic health record by the billing staff, the claim will bear an error. Common transcription errors include wrong spellings of the patient’s name, incorrect date of birth, typing errors in the medical coding, etc. Such transcription errors can have a significant impact on hospital finances. Denial management for hospitals becomes even more critical considering these common issues. By adopting efficient denial management practices, hospitals can not only reduce the financial losses associated with such errors but also enhance overall operational efficiency. Timely identification, correction, and resubmission of claims can make a substantial difference in claim acceptance rates and, subsequently, in maintaining the financial health of healthcare institutions.
- Billing to the Wrong Insurer
Insurance rates keep fluctuating – as a result, new insurance providers keep entering the healthcare business every now and then. It is obvious for consumers to switch between health insurers quite often. This increases the risk of insurance bills being sent to the wrong firm. The patient may not be availing the services from the same insurer as last year. The service dates and coverage need to be checked carefully to make sure that the bill is sent to the correct company. In this ever-changing insurance market, effective claim denial management is crucial. Patients switching between insurers can lead to billing inaccuracies. Thoroughly verifying service dates and coverage is essential to ensure bills reach the correct insurance provider. Claim denial management plays a pivotal role in addressing these complexities.
- Patient Obligation
Claim denials are coded according to the reason for denial. If a denial has been coded as a patient obligation, it may imply various reasons. It may mean the following.
- The services are not covered under insurance.
- The patient was asked to provide a referral.
- Another insurer covers that particular medical treatment. Confirm if the patient is covered under some other plan.
- The patient has not met their deductible.
- The submitted claim does not have the information required to determine whether the medical treatment is covered under the insurance or not.
- Contractual Obligation
Health insurance organizations and healthcare providers have independent contracts. When a patient agrees to these terms, they give their consent to fulfill some billing necessities. If the medical claim denial is rejected due to contractual obligation, it implies that the submission has not met the insurer’s parameters. These may include the following.
- The claim has not been filled in by the given timeframe.
- The claim was already settled.
- The claim does not justify the need for medical treatment, or the medical practitioner administered more services than required.
- Duplicate Billing
As healthcare organizations continue to turn to payment automation services, duplicity in billing has become a common error. Duplicate billing can occur in the following instances.
- The same treatment, procedure, or diagnostic tests have been billed to a patient more than once. For instance, a patient is billed for consultation, but the billing software generates consultation fees to be paid for the services rendered. This is duplicate billing for whichever was not paid.
- Billing for the treatments and services that were not provided.
- Billing for incorrect services.
- Not checking if the patient has already been billed for a particular treatment before.
In some cases, duplicate billing may seem to be duplicate even when it is not. It can be tough to get through issues like these, so the insurers simply reject the medical claims.
- Overlapping claims
A claim is said to be overlapping when the duration of services in one claim seems to be overlapping the other. Claim denials due to overlapping are common when a patient seeks medical help from multiple healthcare practitioners. A patient with congestive heart disease may be seeing two doctors simultaneously without asking for a second opinion referral. He/she is likely to face a rejected claim as the two consultations overlap. In this case, it is important to provide information about the reason for overlap so that the patient can reason it out. Before submitting an unpaid claim, find out if the insurance company is still processing the claim or if not, why the claim was not paid.
- Noncovered or Excluded Charges
Treatment of issues such as insomnia has been a common exclusion. With the introduction of the Affordable Care Act, these denials have become less common. Even the basic treatments must be covered by the insurers, and they cannot deny a service. If a patient’s claim is denied for any health benefits covered under the Affordable Care Act’s 10 Essential Health Benefits, the denial can be challenged. Quite often, the claim is rejected not due to the exclusion of service but due to the usage of an incorrect medical code. This shift has made claim denial management for hospitals more focused on coding accuracy. Even if the service is covered, an incorrect medical code can lead to denials. Ensuring precise coding is crucial for effective denial management.
- Coding Issues
Incorrectly coded bills are usually rejected. Medical codes are long strings of numbers that can be transposed easily. Coding problems may include sever things, such as:
– Missing code.
– Using incorrect code.
– Not using the correct coding system for the insurer.
– Not using updated medical codes as issued by the regulating authorities.
Coding errors are usually simple typing issues that can be fixed and compensated easily by paying more attention. However, the process is time-consuming and annoying so you may want to track down medical billing issues with the help of specialists to submit the rejected claims and be paid quickly.
Claim denials lead to loss of revenue. A study suggests that about 73% of medical facilities claim to witness rejected claims 5% – 15% times. This implies that one out of three healthcare organizations bear denials 10% to 15% times. Each year, claim denials cost healthcare providers billions of dollars. This money can be allocated towards providing better care for the patients, adding to the staff benefits, and rendering services to the needy at discounts and more.
Claim denial management for hospitals is not just about financial recovery but also optimizing resources to enhance patient care. The financial toll of denials is substantial, with billions of dollars lost annually. By reducing denial rates and recovering denied claims, healthcare organizations can redirect these funds towards improving patient services, offering better staff benefits, and extending discounts to those in need. Effective claim denial management is a crucial step in ensuring that financial resources are channeled for the betterment of healthcare delivery and patient outcomes.
Such a claim denial can be prevented and managed easily with Jindal Healthcare. Our specialists help identify problems in denials and process the resubmitted claim efficiently. Get in touch with our team to understand how we can help generate more revenue for your medical business.