Medical Claim Denials and Rejections in Medical Billing

Healthcare is an ever-changing industry. Increased pressure from numerous factors, such as expanding regulatory oversight, clinicians working on paperwork rather than patient care, and reduction in reimbursement are responsible for decreased healthcare revenues.
The Medical Group Management Association’s most recent stat poll asked healthcare leaders if their organization had seen an increase in denials in 2021. Over 69 percent said yes. Furthermore, a recent study in the Annals of Internal Medicine found that doctors spent twice as much time completing electronic health records as seeing patients—almost 50 percent of their time.

According to Danielle Ofri, M.D., “Medicine has devolved into a busywork-laden field.” And no matter the reason, medical claim denials and rejections stand in the way of reimbursements and, ultimately, practice revenue.
The American Medical Association’s most recent National Health Insurer Report Card showed that insurance payers deny almost 30 percent of claims, with $0 for payment. Each year, these rejected and denied claims cost healthcare providers millions of dollars.

Unfortunately, most healthcare providers believe that these denied claims rates are unavoidable. However, the statistics show this is not true.
Over two-thirds of rejected and denied claims are recoverable. But because of the complexity and cost of the appeals process, only about one-third of providers take action to appeal these claims. This small percentage of appeals leaves millions of legitimate healthcare reimbursement dollars on the table as lost revenue annually.

Claims Errors

Claims errors tend to be categorized as administrative or clinical. Administrative errors typically include missing demographic information and eligibility errors. Complex insurance eligibility requirements that change by plan and even state lead to many of the errors on claims.
Coding mistakes include typos, incorrect modifiers, or incorrect dates of service. Clinical errors include diagnosis coding errors, medical necessity issues, and pre-authorization and validation issues, all leading to medical bill denial in healthcare.
The most common mistakes found in rejected or denied healthcare claims include:

• Eligibility and accuracy of consumer identification missing
• National Provider Identifier (NPI) missing or invalid
• Upcoding and erroneous coding
• Duplicate claims and duplicate coding

Yet these errors are just a handful of the causes of denied or rejected claims. What’s more, appealing these denied claims has cost the healthcare industry roughly $8.6 billion in additional administrative costs annually.

Minimizing Claims Denials

Human errors cost time and revenue. As the Medical Group Management Association found, the average cost to rework a denied claim is approximately $25. Therefore, streamlining administrative processes to ensure accurate information has become crucial in claims management.
For help, many providers are now turning to professional medical billing companies. In addition to filing claims, these services should provide a robust denial management services system to avoid revenue loss due to denials and rejections. An important part of the process is managing and tracking claims. Additionally, a well-designed system avoids duplicate claims and minimizes time spent correcting claims and filing appeals.
But claims denial management systems do not replace the need for a well-run, proactive medical office. Files must still be kept up to date. Providers must also collect the appropriate patient and service information and adhere to state, federal, institutional, and professional rules and regulations.

Tips for Proactively Reducing Denials in Healthcare

1. Embrace your patient outreach procedures, confirming demographic information and eliminating missing or invalid information. Obtain copies, verify eligibility and benefit coverage dates, and obtain authorization when needed.
2. Check the payer ID—use the correct payer ID for the type of claim submitted. Understand that payer IDs may change within a company, depending on the plan. And secondary payer IDs may be necessary.
3. Avoid duplicate billing. Always check claim status before rebilling. Also, avoid automatic rebilling. Automatically resending a claim without first correcting the claim or exhausting the appeals process will most likely result in a duplicate denial code in medical billing and may violate billing policies depending on the insurance carrier. Medicare, also known as the Centers for Medicare and Medicaid Services (CMS), has clear guidelines on duplicate claims, including “Claims for multiple and/or identical services provided to an individual patient on the same day, may be denied as duplicate claims.”
4. Ensure medical necessity documentation is in place. Proper documentation is required for each patient visit and should be completed by the treating provider. Narrative descriptions carry more weight than checklists with insurance companies and are less likely to receive a medical denial.
5. File claims appropriately. Missing filing deadlines can cause a claim to be rejected. And depending on the insurance carrier, negate any possibility for appeal.
6. Ensure proactive ICD-11 CM coding at the highest possible level for diagnosing procedures. Codes that are not specific enough will prompt denials. So will unbundled charges.
7. Keep your forms and records current. Using outdated superbills or combining improper CPT and HCPCS codes can lead to rejection or medical denials. .
8. Use proper modifiers to clarify coding and prevent rejections and denials
9. Confirm the diagnosis and referral details from the referring provider.
10. Know your billing policy. Whether coding and billing are performed in-house or by a claims management service, providers who know the National and Local Coverage Determination policy details are less likely to have claims rejected or denied.

Another common reason for denied claims, especially in laboratories and other high-volume practices, is non-covered services. Denials for non-covered services may result from a payor’s lack of medically necessary determination or an erroneous diagnosis.

How to Reduce Medical Claims Denial Rates

Developing a stepwise process ensures that medical claims acceptance rates improve. First, review rejected claims for insight into common mistakes. Next, educate staff members with education and implement alerts. Then, determine if changing internal processes would help or hinder revenue. Let this information guide your organization, highlighting mistakes and informing where assistance is needed.

Previously, denial management in medical billing was considered the purview of large healthcare systems. However, with increased regulatory oversight and reimbursement controls, many smaller and privately-owned practices are turning to outsourced billing and claims denial management services.

Medcare MSO provides medical revenue cycle management (RCM) services ranging from credentialing and insurance verification at the beginning of the cycle to collecting on old AR accounts at the end. At the heart of the revenue cycle, our system for managing claims has proven to be so effective that we can guarantee a revenue increase to our clients. Give us a call at 800-640-6409 or click to schedule a demo to find out more and discuss how we can increase your own revenue!