August 9, 2023

AdminRCM

Claim denials are one of the most frustrating and costly challenges for healthcare providers and patients. A claim denial occurs when a payer rejects or refuses to pay for a service that a provider has rendered to a patient. This can result in delayed or reduced reimbursement, increased administrative burden, and dissatisfied patients.

According to a report by the American Medical Association, the average claim denial rate across commercial payers was 1.63% in 2020. However, this rate can vary significantly depending on the payer, the provider, and the service. Moreover, some claim denials can be appealed and overturned, while others are final and non-negotiable.

The best way to deal with claim denials is to prevent them from happening in the first place. However, if a claim is denied, it is important to understand the reason behind it and take appropriate steps to resolve it as soon as possible. In this blog, we will discuss some of the common reasons for claim denials and their solutions.

What Causes Claim Denials?

Reason 1: Paperwork errors or mix-ups

One of the most frequent and avoidable causes of claim denials is paperwork errors or mix-ups. These are mistakes or omissions in the patient information, billing codes, or modifiers that are submitted to the payer. For example, a claim may be denied if:

• The patient name, date of birth, insurance ID number, or address is incorrect or missing
• The diagnosis code or procedure code is invalid, outdated, or mismatched
• The modifier is inappropriate, missing, or duplicated
• The date of service, place of service, or provider name is inaccurate or incomplete

To prevent these errors, it is essential to verify the patient data, use accurate and updated codes, and double-check the claims before submission. You can also use software tools that can help you validate and scrub your claims for errors and inconsistencies.

Reason 2: Questions about medical necessity

Another common reason for claim denials is questions about medical necessity. This means that the payer does not consider the service to be medically necessary or does not find sufficient documentation to support its necessity. For example, a claim may be denied if:

• The service is not consistent with the diagnosis or treatment plan
• The service is not in accordance with the payer’s guidelines or criteria
• The service is considered experimental, investigational, or cosmetic
• The documentation does not justify the need, frequency, duration, or intensity of the service

To avoid these denials, it is important to obtain prior authorization from the payer for services that require it. You should also follow the payer’s guidelines and criteria for medical necessity and provide clear and detailed clinical notes that explain the rationale and outcome of the service.

Reason 3: Cost control

A third reason for claim denials is cost control. This means that the payer wants the provider to use a less expensive alternative or follow a specific protocol for the service. For example, a claim may be denied if:

• The service is not on the payer’s preferred drug list or formulary
• The service exceeds the payer’s quantity limit or frequency limit
• The service requires step therapy or prior trial of another drug or treatment
• The service is performed by an out-of-network provider or facility

To prevent these denials, it is advisable to review the payer’s policies and contracts for cost control measures and exceptions. You should also communicate with the payer about any special circumstances or requests that may affect the claim. Additionally, you should educate your patients about their plan coverage and benefits and inform them of their financial responsibility and payment options.

Reason 4: The service is not covered by the plan

A fourth reason for claim denials is that the service is not covered by the patient’s plan or benefits package. This means that the service is excluded from the scope of coverage or subject to limitations or exclusions. For example, a claim may be denied if:

• The service is cosmetic, elective, experimental, or investigational
• The service is related to a pre-existing condition, injury, or illness
• The service is performed by an out-of-network provider or facility
• The patient has exhausted their annual or lifetime benefit limit

To avoid these denials, it is crucial to check the patient’s eligibility and benefits before providing the service. You should also inform your patients of their plan coverage and benefits and any services that are not covered by their plan. Furthermore, you should offer your patients alternative services or payment options that may suit their needs and preferences.

Tips For Avoiding Medical Claim Denials & Getting Paid

Here are some tips for avoiding medical claim denials and getting paid:

Tip 1: Train your staff on the latest billing and coding rules and regulations

You can also use online resources or courses to keep yourself updated on the changes and trends in the industry.

Tip 2: Implement a verification and validation process for every claim

You should check the patient information, insurance information, service information, and documentation for accuracy and completeness before submitting the claim.

Tip 3: Use electronic claims submission whenever possible

Electronic claims are faster, easier, and more secure than paper claims. They also reduce the chances of errors, delays, or lost claims.

Tip 4: Track and monitor your claims regularly

You should follow up with the payers on the status of your claims and resolve any issues or discrepancies as soon as possible. You should also keep a record of your claims and their outcomes for future reference.

Tip 5: Appeal denied claims promptly and professionally

You should review the denial reason and the payer’s appeal process and submit the necessary documentation and evidence to support your claim. You should also be polite and respectful in your communication with the payer and follow up until you receive a response.

Conclusion

Claim denials can hurt your revenue cycle and frustrate your patients. However, by understanding the common reasons for claim denials and their solutions, you can reduce their occurrence and impact. You can also use software tools that can help you manage your claims more efficiently and effectively.

If you need more information or assistance with claim denials, please contact us today. We are here to help you optimize your billing process and improve your cash flow.

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