Know the top 10 causes of denials, and then prevent them

Medical Billing DenialsDenials continue to be problematic for both physician practices and hospitals. A 2017 analysis by Change Healthcare revealed that out of roughly $3 trillion in medical claims submitted by U.S. hospitals in the U.S. last year, almost 9% of charges were initially denied.

For the typical health system, this means that as much as 3.3% of net patient revenue, or $4.9 million per hospital was put at risk due to denials. The report further stated that even though an average of 63% of those claims was recoverable, that effort came with a price tag of roughly $118 per claim.

The analysis found that “registration/eligibility” was the leading cause of denials (23.9%), followed by “missing or invalid claim data” (14.6%).

With these statistics, it’s easy to see that denials management should be a critical part of your day-to-day business operation, whether you work at a hospital or private practice. Keeping denials to a minimum can mean more revenue coming into your organization.

Knowing the difference

To be able to reduce denials, it’s important to know the difference between a denial and a rejected claim. A rejection occurs because the submission lacks pertinent data or proper coding. Denials, on the other hand, are received and reviewed, but found to be inadequate from the perspective of the insurance company, be it due to insurance plan coverage, limits, or an untimely filing. Here is a further breakdown:

Rejected claims

  • Do not meet the specific data requirement or the basic format necessary
  • Will not be processed because they are not considered to have been “received” by the payer, thus do not make it to the adjudication system
  • Must be resubmitted when the error(s) is corrected appropriately
  • Beneficiaries of a rejected claim cannot be held liable because the services were never actually billed

Denied claims

  • Were received by the adjudication system of the payer and cannot be resubmitted because the payment determination has already been decided upon
  • Can be appealed by the request of the payer to necessitate the proper modifications, additional required documents, etc.

Why you might be denied

Denials cannot be resubmitted, but they can be appealed. But appealing denials can be costly. So it’s best to prevent them in the first place. Here are a few of the most common reasons for denials:

  1. Patient not eligible. As mentioned above, this is the #1 cause of denials. The patient is not eligible for care delivered by the insurance plan. This is simple to solve by doing eligibility checks up front, before a patient is even seen.
  2. Insufficient information. This is the second leading cause of denials according to the survey. Not enough information on the claim goes out. If it’s “pending for information” and you don’t respond, the insurance company doesn’t have to pay.
  3. Duplicate billing. A similar or equivalent claim is often sent due to clerical errors, or overlap in office duties.
  4. Improper CPT or ICD-10 codes. The code must correspond to the diagnosis, or it can be denied. A claim scrubber, similar to system used by Quanum RCM, can make sure that everything matches appropriately.
  5. Untimely filing. You only have so many days to file the claim. Timely filing starts when the provider performs the service and when the payer receives the claim. If the claim is rejected, it is as if it never existed.
  6. Service is not covered. Sometimes the patient’s coverage can be terminated, or their maximum benefit has not been met (often in the case of physical therapy) and the service isn’t covered by their plan.
  7. Out of network. A lot of patients have plans that require doctors and practitioners to be “in network” for coverage.
  8. Outdated codes. The codes change every quarter, and this determines what is paid. Your practice is responsible for these updates. Make sure you are working with a vendor that refreshes these for you.
  9. Problems with modifiers. Many errors can result from submitting invalid modifier combinations, and this can cause medical claims to be denied payment. Many invalid modifier combinations can be avoided with properly trained coding personnel or a medical billing service like Quanum RCM.
  10. Prior authorization required. Some payers want authorization or a referral from another physician before services can be performed.

It’s important to have internal processes in place that can find and correct mistakes before submitting a claim. While you certainly want to work any denials that occur, it’s better to get things right the first time.  Quanum Revenue Cycle Management (RCM) service can handle all aspects of the billing process to help reduce denials. When properly integrated with our Electronic Health Record (EHR) and Practice Management (PM) systems, the patient check-in process can be streamlined and errors can be reduced throughout the revenue cycle.

For more information on reducing denials, watch the webinar, “Improve your bottom line by reducing claim denials,” featuring Mark Anderson, CEO of AC Group and healthcare IT futurist. Mark will break down the complexities of denial management and provide useful steps to reduce the risk of denials.

Consider reading another post about reducing denials.


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