How to Handle Billing Claim Rejections and Denials

Healthcare is constantly evolving, and with these changes come new challenges. Today, the industry faces mounting pressures from expanding regulations, the burden of paperwork on clinicians, and decreasing reimbursement rates. These factors are contributing to billing claims and rejections.

A survey by the Medical Group Management Association found that more than 69 percent of healthcare leaders saw an increase in claim denials in 2021. Additionally, a study in the “Annals of Internal Medicine” highlighted that doctors now spend nearly 50 percent of their time on electronic health records, which means they are spending more time on paperwork than with patients.

Dr. Danielle Ofri has pointed out that medicine has become overloaded with administrative tasks. These claim denials and rejections are major obstacles to reimbursing and maintaining practice revenue. According to the American Medical Association’s latest National Health Insurer Report Card, almost 30 percent of insurance claims are denied without any payment. These rejected claims cost healthcare providers millions every year.

Many healthcare providers believe that high denial rates are just a fact of life. But that’s not entirely true. In reality, over two-thirds of denied claims could be recovered. Yet, the appeals process is often so complicated and costly that only about one-third of providers bother to pursue it. This means that a significant amount of potential revenue is left unclaimed each year.

This blog is your cheat sheet about claim denials and rejections. We will let you know the reasons that lead to the denials and how to tackle them proactively. 

Understanding Denials

Denials are a big problem in medical billing and can mean delayed or lost revenue for providers. Understanding why denials happen is key to preventing them and getting paid on time. Denials can happen for many reasons including lack of information, non-covered or excluded charges and coding or billing errors. By identifying and addressing these issues upfront providers can improve their revenue cycle and reduce denied claims.

Claim Denials vs. Claim Rejections: What’s the difference?

Claim denials happen when an insurance company processes a claim but decides it can’t be paid for various reasons. These denials often come down to errors that are flagged during processing. Common reasons for claim denials include:

• Issues with provider credentials
• Services not covered by the insurance plan
• Services deemed medically unnecessary
• Missing referrals from a primary care doctor to a specialist
• Incomplete provider information
• Incorrect patient details
• Mistakes in point-of-service codes (which indicate where the service was provided, like pediatrics or an emergency room)

Resubmitting a denied claim isn’t as simple as it might seem; it requires some extra steps. First, the billing department needs to figure out why the claim was denied. Insurance companies usually provide a denial code and reason, which helps the medical biller or claims processor correct and resubmit the claim. If you resubmit a denied claim without this information, it could be rejected again as a duplicate. So, the billing or claims department must get in touch with the insurance carrier to understand the resubmission process.

There are two types of denials: hard denials and soft denials. A hard denial is a firm refusal to pay that is difficult to overturn, while a soft denial contests claim data points but can be revised and resubmitted. If a claim is denied, you can request a reversal by appealing the decision.

Rejected claims are a bit different. These are flagged before they are processed because they have one or more errors that are usually easy to fix. Rejections might be due to:

• Coding errors
• Mismatches between procedures and ICD-10 codes
• An expired insurance policy

These mistakes could be something as simple as a typo in the patient’s insurance number or sending a claim to an outdated insurance provider. Since rejected claims haven’t been processed yet, they can be corrected and resubmitted. Some providers use electronic medical record systems that catch these errors before they are sent out, but sometimes the insurance carrier’s system will still find issues. It’s important to quickly address these errors to ensure the claims can be resubmitted smoothly.

Common Reasons for Denials

Denials can be broken down into three types: clinical, technical and administrative. Clinical denials are related to medical necessity and appropriateness of care, often questioning whether the services were necessary. Technical denials are due to coding, billing and administrative errors such as incorrect procedure codes or missing documentation. Administrative denials are due to patient eligibility, coverage and authorization issues such as expired insurance or lack of required referrals. Knowing these categories helps providers identify the root cause of denials and how to avoid them.

Lack of Information

Lack of information in a submitted claim is a common reason for denials. This can include incomplete patient info, incorrect procedure codes or missing supporting documentation. Providers should prioritize data entry, verification and documentation to ensure complete and accurate claims. By doing so they can reduce the likelihood of denials and make the billing process smoother.

Non-covered or Excluded Charges

Charges for services that are non-covered or excluded by a patient’s insurance plan can lead to denials. Effective communication with patients about their insurance coverage is key. Staff should be trained to identify services that are excluded and know the patient’s insurance plan, coverage and exclusions before providing services. This upfront approach can avoid unexpected denials and make patients aware of their financial responsibility.

Denial Codes and Reasons

Denial codes are used by insurance companies to explain why a claim was denied. Knowing denial codes and reasons is key to revenue cycle management (RCM) and getting paid for healthcare services. These codes give providers insight into what specifically caused the denial so they can take corrective action and avoid denials in the future.

Claim Adjustment Group Code (CAGR) and Claim Adjustment Reason Code (CARC)

Claim Adjustment Group Codes (CAGCs) and Claim Adjustment Reason Codes (CARCs) are standardized denial codes used in Electronic Remittance Advice (ERA) transactions. CAGCs indicate the category or type of adjustment being made to a healthcare claim, CARCs explain the financial adjustment. Knowing these codes is important to identify the reason for denial and take corrective action to avoid future denials. By getting to know these codes providers can improve their revenue cycle and get paid for their services.

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. Secondary payer IDs may be necessary.
3. Avoid duplicate billing. Always check the 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 an 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.

Billers and Payers Should Work in Collaboration to Avoid Denials 

Medical billing and insurance can work together to avoid claim denials by:

Collaborating

Billing and clinical teams can work together to ensure proper coding of services, which can reduce the likelihood of coding-related denials. They can also quickly identify and address claim denials, which can lead to faster resolutions and reimbursements.

Following Best Practices

Here are some other best practices that can help reduce claim denials:

• Verify insurance and eligibility.
• Collect accurate and complete patient information.
• Verify referrals, authorizations, and medical necessity determinations.
• Stay up-to-date on pandemic-related billing changes.
• Get to know your payers and their rules. 

What to Do If Denial or Rejection Happens?

Developing a step-by-step process ensures that medical claim acceptance rates improve. 

• First, review rejected claims for insight into common mistakes. Next, educate staff members and implement alerts. 
• Then, determine if changing internal processes would help or hinder revenue. Let this information guide your organization, highlighting mistakes and informing you 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 claim 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 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 for 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 revenue!