The Ultimate Guide for Avoiding Claim Denials
Improperly denied medical claim denials can wreak havoc on a healthcare provider’s revenue and stall the cash flow necessary to operate the business. An estimated 5% to 10% of a practice’s net medical claims are denied each year, and the average cost of appealing a denied claim approximates $118. Practices can stop this financial hemorrhage by implementing effective medical documentation and claims submission processes.
An estimated 20% of all medical claims are denied, rejected, or underpaid each year,[1] with the average practice experiencing a 5% to 10% claim denial rate. These claim denials, in turn, can account for up to 5% of a practice’s total revenue. Among the claims which are initially denied, more than half are ever appealed or resubmitted,[2] even though an estimated 63% of denied claims can be successfully recovered.[3] Healthcare practices often choose not to appeal denied medical claims because of the substantial time, cost, and effort of the claim appeals process: it costs an average of $25[4] to resubmit a denied claim and an average of $118[5] to appeal the denied claim.
By implementing effective medical documentation and claim submission protocols, healthcare practices can prevent up to 90% of medical claim denials.[6] Identifying the reasons behind your practice’s claim denials and creating protocols to prevent future denials are essential to reducing your claim denial rate.
Top 5 Causes of Medical Claim Denials
Although claims can be denied for a variety of reasons, the most common causes of denials are:
Failure to Verify Insurance Coverage and Eligibility for Services.
Failure to Obtain Prior Authorization
Lack of Medical Necessity
Missing or Invalid Claim Data
Inaccurate or Insufficiently Specific Coding
Best Practice Guidelines
Verify the Patient’s Insurance and Eligibility at the Time of Patient Check-In.
An effective claim denial strategy begins at the time of patient registration. As a best practice, you should require office staff to verify the patient’s insurance coverage and benefits at the time of the patient’s check-in, not during or after the patient’s visit. Office staff should verify that the patient’s insurance coverage has not lapsed or changed and that the existing insurance covers the proposed medical tests and services. This protocol will help avoid claim denials due to lapsed insurance coverage or due to patient ineligibility for the prescribed services.
Utilize practice management software that automatically verifies the patient’s insurance and eligibility at the time of check-in, and which alerts office staff to any changes in the patient’s insurance policy which will go into effect at the time of the scheduled appointment or service.
At the time of patient registration and immediately before the commencement of the service, verify that the patient’s insurance remains in effect and has not been replaced by another policy.
Verify whether a patient who identifies as self-paying is covered by Medicare or Medicaid, or under a Medicaid/Medicare HMO Plan. This step allows you to reclassify an individual who would otherwise be uninsured as insured, thereby obtaining payment for your services.
Alert staff about potential coordination of benefits issues in which the patient is eligible for insurance coverage under multiple policies. Medical claims are often denied because practices sent duplicate claims (and super-bills) to multiple insurers or billed the wrong insurer first.
Establish a process for informing the patient of his/her financial responsibility and payment options if the procedure is not eligible or covered under the patient’s insurance plan.
2. Become Well-Versed with Each Payer’s Prior Authorization Requirements and Verify Whether a Proposed Service or Procedure Requires Prior Authorization Before Providing the Medical Product or Service.
To avoid unnecessary claim denials, healthcare practices should verify that a proposed medical test or procedure does not require pre-authorization from the patient’s insurer.
Create and maintain a universal list of each payer’s pre-authorization requirements for your practice’s most commonly billed codes.
Consider investing in a practice management software that alerts office staff about pre-authorization requirements at the time of patient check-in.
When submitting claims for services that require prior authorization, ensure that the correct authorization code is documented in the appropriate box of the claim form.
Verify a patient’s prior authorization several days before the scheduled procedure and on the day of the service to ensure that the patient’s eligibility for the service has not changed.
3. Educate Staff and Healthcare Providers about the Medical Necessity Requirements of Your Top Payers and Provide Detailed Medical Documentation to Support the Level of Care Provided.
To avoid medical necessity denials, ensure that each claim is accompanied by comprehensive medical documentation that supports the level of care and services provided. The medical documentation should show that the medical service corresponded to the patient’s medical diagnosis and constituted the most appropriate level of service. Remember, insurers will only reimburse providers if all of the elements that make the procedure medically necessary are documented in the medical record. The AAPC offers a helpful tool for selecting the most appropriate CPT code for E/M visits.
If your practice uses Electronic Health Records, calibrate the software to alert staff about services that the insurer deems not medically necessary or for which special requirements must be met.
Create a universal list outlining each insurer’s “medical necessity” requirements for your practice’s most frequently billed codes.
Determine whether the medical tests or services commonly performed by your practice are more likely to be denied on medical necessity grounds and take extra precautions when completing medical documentation for this service. The medical tests and services which are most likely to be denied on medical necessity grounds include laboratory chemistry tests (38% denial rate), laboratory general tests (28% denial rate), operating room services (18% denial rate), laboratory hematology services (15% denial rate), and PET scans (9% denial rate).
Insurers often deny a service that is medically necessary because it is “experimental” and not covered by the patient’s policy. Examples of treatments that are commonly deemed experimental include PET scans, 3D mammograms, and computer-aided detections (CADs). Educate your staff about which treatments are more likely to be deemed “experimental” and use software to alert staff to tests or procedures which will be denied on medical necessity grounds.
4. Proofread Medical Documentation and Claims Forms for Errors, Typos, and Duplicates.
Healthcare practices should strive to submit “clean claims,” defined as claims which are not rejected or denied upon initial submission, and which are free of errors. Your practice should have a process by which each claim is proofread for errors, missing information, and typos before it is submitted. It may be worthwhile to invest in practice management software that automatically scrubs each claim for errors before submission.
Verify that the patient identification information is correct (consider using Universal Patient Identifier software which checks patient demographic data against its own database to eliminate any mistakes).
Ensure that the patient’s insurer ID has not been changed or updated.
Verify that the medical documentation and claim form lists the correct date of the accident, date of a medical emergency, and date of onset.
Avoid software settings that automatically resubmit claims which have not been paid every 30 to 60 days. Such duplicate claim submissions can cause claim denials.
5. Educate Staff About Coding Requirements to Streamline the Pre-Authorization Process, Prevent Coding Mistakes, and Avoid Submission of Duplicate Claims.
It is vital to provide ongoing medical coding education to both clinical and billing staff to ensure that medical services are correctly coded to the highest level of specificity. Third-party coding reference services, such as AAPC’s Codify,[10] can be a useful tool for selecting the optimal service codes.
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Not using a female-specific diagnostic code for a male patient; or
Not using a procedure code that is intended exclusively for neonates to bill for services provided to an adult patient.ion text goes here
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E/M services provided on the same day as a procedure are likely to be bundled into the procedure code unless you can show (using modifier code 25) that the E/M was sufficiently in-depth and time-intensive to warrant separate payment.
Verify whether a pair of codes are considered “bundled” under CMS’ Correct Coding Initiative edits. Typically, the less comprehensive service should not be billed.
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Modifier 25: Use to demarcate a separate E/M service that is provided on the same day as another procedure or service, but which should be paid separately from the other service.
Modifier 59: used to indicate that a procedure or service was distinct from another procedure because it was provided during a separate encounter or performed on a separate organ or structure.
6. Keep Track of Claim Submission Deadlines and Ensure that Claims Are Submitted on time.
Healthcare practices must keep track of the claim submission deadlines when submitting patient claims. Each payor maintains its own claims submission deadlines which, if missed, result in claim denials. In addition, the practice generally cannot balance bill a patient when it has missed the claim filing deadline.
As a best practice, create an electronic list of appeal deadlines for each payer (appeal deadlines can range from 30 to 365 days from the date of denial) to prioritize which claims are appealed first. Consider using practice management software that automatically alerts office staff of upcoming filing deadlines and tracks a claim denial’s appeal process.
Many untimely claim submissions are caused by incomplete or misplaced super-bills which are never submitted to the payer. Consider using practice management software that notifies staff about scheduled appointments with no corresponding charges or claims, and which submits automatic reports of missing superbills/statements.
7. Calculate your Claim Denial and Reimbursement Rates to Determine the Health or Your Revenue Cycle.
The denial and reimbursement rates are key barometers of the profitability of your practice, allowing you to calculate the amount of revenue that is lost to claim denials over a specific period of time. AAPC provides a useful free online tool for calculating the amount of revenue your practice is losing to claim denials and the cost spent on reworking each denied claim.
The denial rate measures the percentage of a healthcare practice's claims that are denied over a certain period. Denial rates for practices generally range between 5%- 10% of total submitted claims. To optimize your revenue stream, your practice should strive for a denial rate of 5% or less. To calculate your practice’s denial rate, divide the total dollar amount of claims that have been denied over a given period by the total dollar amount of all claims that were submitted during that period.
The reimbursement rate measures the percentage of the total dollar amount of submitted claims which the provider receives fromt they payer. To calculate the average reimbursement rate, divide the sum of total payments received during a certain period by the total dollar amount of submitted claims.
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The total dollar amount of claims denied: $50,000
The total dollar amount of claims submitted: $200,000
Average Denial rate = $50,000/$200,000 or 25% of all billed claimstext goes here
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Sum of total payments: $300,000
Sum of total charges submitted: $400,000
Average reimbursement rate= $300,000/$400,00 or 75% of total dollar amounts charged.n text goes here
8. Identify and Categorize the Root Causes of Your Claim Denials and Update Your Claims Submission Process to Address Them.
It is vital to conduct a meta-analysis of your practice’s claim denials to identify areas that cause the greatest financial impact on your revenue cycle. Then, refine your medical documentation and claim submission process to prevent future similar claim denials.
Categorize claim denials by denial reason and organize them by provider, dollar amount, insurer, CPT code, etc. Pay attention to whether the denials accumulate around a certain provider, CPT code, service, or payer.
After identifying the key trends behind your claim denials, address the issues that cause the greatest revenue loss first.
Calculate, on a bi-monthly basis, your practice’s average claim denial rate and reimbursement rate to stay up to date about your practice’s claim denial trends.
9. Outsource Medical Coding and Billing to a Third-Party Professional.
It may be worthwhile to retain a medical coding professional to review and edit your practice’s claims before they are submitted. As the rules for medical documentation and coding become more complex and specific, outsourcing these duties to a professional can save your practice significant time and revenue. If outsourcing to a third-party coding professional is not financially feasible, consider investing in continued coding and billing education for your staff. By staying abreast of the latest changes to the terminology and coding, you can take actionable steps to prevent future claim denials.
For more in-depth guidance on minimizing and appealing medical claim denials, contact Bull Owen Law, PLLC for your free consultation.
[1] Reducing the Expenses of Claim Denial Mgm’t Through Automation, HealthiPASS (May 31, 2016), http://insights.healthipass.com/blog/reducing-the-expenses-of-claim-denial-management-through-automation.
[2] Tina Graham, You Might Be Losing Thousands of Dollars Per Month in ‘Unclean’ Claims, Medical Group Mgm’t Ass’n (Feb. 1, 2014), https://www.mgma.com/resources/revenue-cycle/you-might-be-losing-thousands-of-dollars-per-month.
[3] The Denials Challenge: A Cross-Functional Approach to Denial Prevention and Management, Change Healthcare (Oct. 2017), https://www.beckershospitalreview.com/pdfs/Change%20HC_Webinar%20Slides_Nov17.pdf.
[4] Tina Graham, You Might Be Losing Thousands of Dollars Per Month in “Unclean” Claims, Medical Group Mgm’t Ass’n (Feb. 1, 2014), https://www.mgma.com/resources/revenue-cycle/you-might-be-losing-thousands-of-dollars-per-month.
[5] Healthy Hospital Revenue Cycle Index, Change Healthcare (last visited Nov. 22, 2020), http://healthyhospital.changehealthcare.com/wp-content/ uploads/2017/06/change-healthcare-healthy-hospital-denials-index-2017-06-a-2.pdf.
[6] An ounce of prevention pays off: 90% of denials are preventable, The Advisory Board Company (Dec. 11, 2014).
[7] Mackenzie Bean, 7 Strategies to Prevent Claim Denials, Becker Hospital Review (Nov. 13, 2017), https://www.beckershospitalreview.com/finance/7-strategies-to-prevent-claims-denials.html.
[8] Mackenzie Bean, 7 Strategies to Prevent Claim Denials, Becker Hospital Review (Nov. 13, 2017), https://www.beckershospitalreview.com/finance/7-strategies-to-prevent-claims-denials.html.
[9] Healthy Hospital Revenue Cycle Index, Change Healthcare (last visited Nov. 22, 2020), http://healthyhospital.changehealthcare.com/wp-content/ uploads/2017/06/change-healthcare-healthy-hospital-denials-index-2017-06-a-2.pdf.
[10] The AAPC website also provides numerous free coding education tools to help practices optimize the claims process.
