Medicine is an essential service. Yet, healthcare providers still need to make enough profit to cover their overhead costs if they want to keep their doors open. That is why it is essential for your business and community that claims are processed accurately and that you get reimbursed for your services.
Unfortunately, claim denials are on the rise, up more than 20% since 2016.1 The COVID-19 pandemic only exacerbated the situation. There was a sharp rise in patients seeking medical care and an 11% increase in claim denials nationally. Although almost 85% of these denials are preventable, approximately one-quarter of them cannot be recovered.1
Rejected claims are different from denied claims. Rejected claims contain errors or omissions and are returned to the practice without being processed by the payer’s clearinghouse. Once appropriate adjustments have been made, you can resubmit the claim. Denied claims are considered received and processed by the payer, but the payer has deemed the charges unpayable. Depending on the type of denial, you may or may not be able to resubmit the claim for reimbursement.
Even a few denied claims can have major consequences for your practice. Therefore, it is important to understand when and how they can occur, how to resolve them, and how to prevent future denials to protect your revenue cycle.
Why Do Claims Get Denied?
If a payer denies a claim, there has likely been an administrative or clerical error somewhere between the patient scheduling an appointment and the accounting staff submitting the claim. However, troubleshooting exactly what went wrong can be difficult, as errors can occur at any point in the revenue cycle.
Before the Patient Is Seen: Front-End Issues
More than one-half of claim issues occur at the front end of the revenue cycle before the patient even sees the provider.2 The most common reasons claims get denied are related to registration and eligibility. Essentially, this means that the information submitted does not match the information the payer has on file. For example, reversing 2 numbers in a patient’s identification number, misspelling a name, or selecting the wrong demographic category on a form can easily lead to a claim being denied. Front-end issues can also occur if the administrative staff fails to obtain proper prior authorization for services, if the patient’s plan does not cover the service or provider, or if the patient has exceeded the maximum number of visits covered by their plan.
During Coding: Mid-Cycle Issues
Mid-cycle refers to the time when the patient is with the provider. A payer may deny a claim if the diagnosis described does not match the treatment, test, or procedure coded for on the paperwork. Incorrect use of modifiers can also cause issues. Other times, the insurance company may reject a claim because they deem the intervention performed medically unnecessary. Sometimes, they may require additional medical documentation to verify that the treatment or test coded for was medically necessary. With some emergency room visits or hospitalizations, the payer may determine that the condition could have been treated by a primary care provider and did not necessarily require hospital care. Since emergency room and hospital visits cost significantly more than primary care, payers may deny claims on the grounds of avoidable care.3
During Claim Submission: Back-End Issues
The back end of the revenue cycle occurs after the patient’s visit has concluded and the claim is submitted to the payer. Usually, back-end errors are the result of clerical mistakes made by whoever submits the claim. While eligibility and registration issues are the leading cause of claim denials, the second largest culprit is a back-end issue: missing or invalid claim data.4 Something was entered incorrectly or omitted entirely in the paperwork submitted to the payer. If you are submitting a secondary claim, the remittance advice information may contain missing or invalid information. These claims are usually “soft denials,” meaning you have the opportunity to fill in or correct the missing or incorrect data and resubmit the claim to get reimbursed.5 There is usually a deadline for filing a claim for reimbursement. This could be as little as 90 days after the service was provided to up to a year. If you do not file the claim within the allowed timeframe, your claim will be rejected. Generally, this will be a hard denial.
Back-end revenue cycle staff members are responsible for seeing that all claims are properly resolved and that the practice and healthcare providers are paid the appropriate amount.
What Can Happen If a Claim Is Denied?
If the payer denies the claim, your practice is not paid for its services. This means that revenue is either lost or delayed. Either your billing department will have to follow up with the patient to have them pay out of pocket for their visit, or you will have to fix any errors and try again to get the claim approved. Appealing a denied claim will cost you both money and time. It costs $30 to reconsider a claim on the low end, but the maximum cost is more than $100 per claim.6 Your staff will also have to study the Explanation of Benefits included with the denial, determine where an error was made, and redo the paperwork to ensure everything is correct. However, this is not a guarantee that the claim will be accepted this time. There are many cases where the claim gets denied for a second time.
How to Manage Denied Claims
As stated earlier, the vast majority of denied claims are preventable, and it saves your practice time and money to submit claims correctly the first time rather than try to get a denied claim repealed. As most claims are denied due to clerical issues, it is important to train your front- and back-end staff on appropriately collecting patient information and filing paperwork. Before any visit, procedure, or test is scheduled, front office staff should verify the patient’s eligibility and coverage to ensure that any services they receive will be covered by their insurance. If there is any copay, the exact amount should be collected immediately. When submitting paperwork, automated claim scrubbing software can help flag missing or invalid data for review.
- Tornese N. What are the different types of denials in medical billing? Updated March 1, 2023. www.outsourcestrategies.com/blog/what-are-the-different-types-of-denials-in-medical-billing/. Accessed May 12, 2023.
- Rivet Health. How to avoid and prevent denials throughout the revenue cycle. www.rivethealth.com/blog/how-to-avoid-denials-throughout-rcm. Accessed May 12, 2023.
- Williams JP. ‘Avoidable’ ER visits fuel health care costs. July 22, 2019. www.usnews.com/news/health-news/articles/2019-07-22/avoidable-er-visits-fuel-us-health-care-costs. Accessed May 12, 2023.
- Change Healthcare. The Change Healthcare 2020 revenue cycle denials. www.ache.org/-/media/ache/about-ache/corporate-partners/the_change_healthcare_2020-revenue_cycle_denials_index.pdf. Accessed May 12, 2023.
- The SSI Group. The five most common types of medical claim denials. May 24, 2022. https://thessigroup.com/ssi-claim-denials-management-series-part-2-of-3/. Accessed May 12, 2023.
- Farnen H. The financial impact of denied claims in medical billing: bigger than you think. Updated January 5, 2023. www.rxnt.com/the-financial-impact-of-denied-claims-in-medical-billing/. Accessed May 12, 2023.
About Revenue Cycle Coding Strategies and RC Billing
Revenue Cycle Coding Strategies (RCCS) has provided specialty medical coding, revenue cycle, and compliance consulting services, as well as educational and training materials to the healthcare industry for more than 20 years. To learn more about RCCS’ services and resources, go to https://rccsinc.com.
RCCS’ sister company, RC Billing, is the largest privately held oncology company based in the United States. Founded in 2003, it specializes in putting revenue-enhancing billing and collection systems in place that will help streamline operations and improve profitability where possible. To learn more about RC Billing’s services and resources, go to https://rcbilling.com.