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Medical Claim Denials Causes, Prevention & Appeal Strategies

Medical Claim Denials: Causes, Prevention & Appeal Strategies

Medical claim denials continue to be a considerable challenge and a major complexity of the U.S. healthcare system’s revenue cycle.

Although it is rare for a medical practice to forfeit payment for a service rendered because of a claim denial, each denial presents an administrative and financial burden. Denials require additional work to determine the reason for the denial, resolve the issue and, if necessary, resubmit or appeal the claim.

To properly manage its financial and cash flow resources, a practice must work to minimize claim denials.

What Is a Medical Claim Denial?

A medical claim denial is an insurer’s decision not to reimburse a claim or payment for a service. There are many reasons an insurer may deny payment for a claim.

Common Reasons for Medical Claim Denials

Some of the reasons for denial may include, but are not limited to:

  • Providing claim and/or patient information to the payer in an incomplete or inaccurate manner
  • Submitting claims without the necessary authorization or pre-approval
  • Coding errors
  • Failing to provide sufficient or appropriate supporting documentation to the payer
  • Incorrect or incomplete claim information
  • Failure to meet payer requirements

Claims may also be returned by the payer for additional information before the payer processes the claim. These circumstances also increase the administrative and financial burden on a practice.

Some issues can be found by verifying insurance before the appointment. This includes:

  • A beneficiary being on the wrong plan
  • Insurance being terminated
  • Insurance coverage changing

1. Eligibility Problems

Some claim issues can be identified before the patient’s appointment by verifying insurance eligibility.

Eligibility verification can help identify situations such as:

  • A beneficiary being on the wrong insurance plan
  • Terminated insurance coverage
  • Changes in insurance coverage
  • Incorrect insurance information

Identifying these issues before services are provided can help practices reduce avoidable claim problems.

2. Missing Prior Authorization

Preauthorization is required by some payers for a member to access specific services or benefits.

A claim may be denied for a service when the required authorization is:

  • Missing
  • Expired
  • Incorrect
  • Not applicable to the service provided
  • Does not justify the service

Preventing authorization issues requires an effective process to monitor and manage authorizations.

3. Coding Errors

When payer rules or standard industry guidelines are not followed when assigning codes, claims may be denied or delayed.

Complying with payer rules may result in challenges in assigning the correct codes.

Coding may also suffer from inconsistencies.

Timely medical coding services may assist the practice with coding challenges and help support accurate claim submission.

4. Claim Submission Errors

Incorrect, incomplete, or missing information may result in claim rejection.

An in-depth edit check of the claim may help identify potential issues before the claim is submitted.

Claim submission errors may involve:

  • Patient information
  • Insurance information
  • Provider information
  • Coding information
  • Missing claim data
  • Incorrect claim data

5. Timely Filing

To protect their financial interest, payers may set claims submission deadlines.

Claims submitted after the applicable deadline may be denied unless an exception applies.

Practices should maintain effective processes for timely claim submission and follow-up.

6. Medical Necessity

Not all services are covered by all payers. The medical necessity of a service may also vary across payers.

Accurate documentation and coding can confirm the medical necessity of the services provided.

Practices should ensure that clinical documentation and coding appropriately support the services billed.

7. Duplicate Claims

Sending the same claim more than once results in a denial.

This can be prevented by maintaining an effective track of the claims and by improving the claim billing workflow.

Proper claim tracking can help practices identify previously submitted claims and reduce unnecessary duplicate submissions.

How Claim Denials Affect Medical Practice Cash Flow

Denying a claim puts a medical practice’s cash flow at risk.

Practices should view claim denial management as an essential function of their revenue cycle process to improve net collections and cash flow.

Due to the thousands of claims processed by a medical practice each month, it is imperative to employ a comprehensive revenue cycle management strategy to reduce claim denials.

Taking an integrated approach to:

  • Claim processing
  • Revenue cycle management
  • Medical billing
  • Denial management
  • A/R follow-up

can help practices improve collections.

Some practices benefit from outsourcing revenue cycle management functions.

RCM Denial Management

Denial management includes more processes than just the appeals process.

A process should be in place to understand:

  • The reasons for denials
  • Whether any denial trends exist
  • Which payers generate the most denials
  • Which services or codes are frequently denied
  • Where workflow problems may be occurring

For example, a pattern may emerge in which the majority of denials from a payer are due to a lack of prior authorization.

The best approach here is not to simply appeal the denials.

The practice should explore the reasons for the breakdown in the workflow to capture the prior authorization.

This is known as proactive denial management.

Otherwise, denial management is reactive.

Proactive vs. Reactive Denial Management

Proactive Denial Management

Proactive denial management focuses on identifying the underlying cause of denials and improving the workflow to prevent similar problems in the future.

Reactive Denial Management

Reactive denial management focuses primarily on addressing claims after they have already been denied.

A comprehensive denial management strategy should focus on both resolving existing denials and preventing recurring problems.

How to Analyze Medical Claim Denials

When reviewing medical claim denials, it is important to analyze the following:

  • Payer
  • Provider
  • Location
  • Date of Service
  • CPT Codes
  • Diagnosis Codes
  • Reason for Denial
  • Specialty
  • Amount Denied

If a billing office captures and analyzes this data and charts it over time, there is an opportunity to identify bottlenecks and unusual patterns in the billing process.

An analysis of denied claims also offers an opportunity to better understand the payer and may suggest opportunities for:

  • Staff training
  • Workflow improvements
  • Coding improvements
  • Authorization process improvements
  • Claim submission improvements
  • Payer-specific process changes

A/R Follow-Up Processes

Denied claims ultimately become part of the accounts receivable.

Without a follow-up process, claims may remain denied indefinitely.

While the focus of a revenue cycle management process should be on the cash, there are other reasons to perform follow-ups on claims.

For example, if a payer denies a claim, the revenue cycle management process should identify the reason for the denial.

Once the reason is documented, other adjustments can be made to improve the processing of similar claims in the future.

An effective follow-up process can help practices:

  • Identify unresolved claims
  • Determine the reason for denial
  • Correct claim issues
  • Submit additional documentation when required
  • Follow up with payers
  • Track outstanding A/R
  • Improve future claim processing

Our services empower your office staff to spend more time on critical billing activities by managing the follow-up process for claim submissions and denials.

Medical Billing Services and Denial Management

There are several billing and automation services available to help practices manage different aspects of the revenue cycle.

These services assist practices with:

  • Identifying claim deficiencies
  • Improving claim editing
  • Managing claim denials
  • Supporting claim follow-up
  • Reducing administrative workload
  • Monitoring revenue cycle activities

Practices benefit from incorporating automation technology to aid in resolving claim deficiencies, thereby reducing the time spent on administrative tasks and allowing staff to concentrate on more complex claim payer-to-payer collection activities.

There are several limitations associated with replacing the human element in claim review and payer collection activities.

Technology cannot automatically capture and represent a payer’s policy and adjudication edits.

The final determination of a claim’s payability rests with a human claims adjudicator.

What Should a Practice Do After Receiving a Claim Denial?

Practices should develop and maintain a standard denial management process.

Practice staff should first understand the reason for the denial to ensure the claimed service or supply was not already provided or furnished.

Staff should review the payer’s policy to determine if the denial was equitable.

A review of the claim may also assist in determining the reason for the denial.

If staff is unable to resolve the reason for the denial, it may be necessary to review the medical record and other supporting documentation.

The final step is to adjust and/or correct the record and/or claim as required.

Step 1: Understand the Denial Reason

Review the payer’s denial information and determine why the claim was denied.

Step 2: Review the Payer’s Policy

Staff should review the applicable payer policy to determine the requirements related to the denied service or claim.

Step 3: Review the Claim

Review the submitted claim to identify potential errors or missing information.

Step 4: Review Medical Records and Supporting Documentation

If necessary, review the medical record and other supporting documentation to determine whether the billed service is appropriately supported.

Step 5: Correct the Issue

Adjust and/or correct the record or claim as required.

Step 6: Resubmit or Appeal the Claim

Depending on the reason for the denial, the practice may need to resubmit an adjusted claim, provide additional documentation, or file an appeal.

Step 7: Track the Result

You should not consider your work completed until you have documented the final result of the adjustment or collection of the amounts due, and you have noted that result on the patient account.

How We Can Help

Managing the revenue cycle can be a challenge for many medical practices.

We have extensive experience and training in all areas of the revenue cycle, including:

  • Medical coding
  • Claims processing
  • Denial management
  • A/R collections and follow-up
  • Payment posting
  • A/R reporting
  • Revenue cycle analysis

Revenue cycle management is vital for the financial success of your practice.

By outsourcing these activities, you can allow your practice staff to engage and interact with your patients and practice your specialty.

We offer medical billing, medical coding, and revenue cycle management services.

Our services support medical practices with billing and collections.

Frequently Asked Questions

What Is the Most Frequent Reason for Medical Claim Denials?

The most frequent reason varies across medical specialties and payers.

The causes may include:

  • Insufficient authorization
  • Eligibility issues
  • Coding errors
  • Documentation issues
  • Claim-related errors
  • Processing-related errors
  • Failure to meet payer predetermination requirements

Can Claims Be Re-Filed After They Are Denied?

Some claim denials may be resolved by resubmitting an adjusted claim.

Other denials may require the submission of additional supporting documentation or an appeal.

The appropriate action depends on the reason for the denial and the payer’s requirements.

How Can Claim Denials Be Reduced?

Practices may implement procedures and initiatives to improve:

  • Authorization
  • Eligibility verification
  • Coding
  • Documentation
  • Claim submission
  • Denial management
  • A/R follow-up

These processes can help reduce avoidable claim denials and improve revenue cycle performance.

Importance of Denial Prevention

Avoiding claim denials benefits practice cash flow and staff productivity.

A proactive approach can help practices identify problems before they result in repeated claim denials.

Rejected and Denied Claims

A claim can be rejected or denied for various reasons.

A rejected claim is generally returned because of an error or missing information before the payer fully processes the claim.

A denied claim has generally been processed by the payer but determined not payable as submitted.

Both rejected and denied claims require appropriate follow-up to prevent unnecessary reimbursement delays.

Appealing Denied Claims

Practices should analyze the reason for the claim denial and decide if it is more prudent to amend and re-submit the claim or file an appeal.

The appropriate approach depends on:

  • The reason for the denial
  • Payer requirements
  • Claim information
  • Supporting documentation
  • Applicable payer policies

Impact of Claim Denials

Claim denials negatively impact:

  • Practice cash flow
  • Staff productivity
  • Administrative workload
  • Accounts receivable
  • Reimbursement timelines

Recurring denials can also indicate problems within the practice’s billing or revenue cycle workflows.

Positive Impacts on the Revenue Cycle

Efficient management of the revenue cycle can help reduce the practice’s accounts receivable.

Effective processes for eligibility, authorization, coding, claim submission, denial management, and A/R follow-up can support improved revenue cycle performance.

Revenue Cycle Management

Practices can manage their revenue cycle and minimize denial rates by efficiently managing:

  • Authorizations
  • Eligibility
  • Medical coding
  • Claim submission
  • Denial management
  • A/R follow-up
  • Payment posting
  • Revenue cycle reporting

An integrated revenue cycle management process can help practices identify problems and improve the overall billing and collection workflow.

Impact of Denials on Medical Practices

Practices should closely examine denials to determine if internal process improvements are necessary to more effectively manage their billing and collection practices.

Analyzing denial trends can help identify recurring issues and opportunities for workflow improvements.

Medical Billing and Revenue Cycle Services

Doctor’s Office Solutions provides medical practices with various services aimed at improving practice cash flow and reimbursement.

These services include:

  • Medical billing
  • Medical coding
  • Revenue cycle management
  • Claims processing
  • Denial management
  • A/R collections and follow-up
  • Payment posting
  • A/R reporting
  • Revenue cycle analysis

By supporting these important revenue cycle activities, Doctor’s Office Solutions helps medical practices manage billing and collections while allowing practice staff to focus more on patients and day-to-day clinical operations.