Did you know that 15% of all claims submitted to payers for reimbursements get denied initially? This stat highlights the significance of effectively addressing an underlying problem: payment denials. For healthcare professionals and insurers, understanding the root cause of payment denials has been of significant importance in improving the overall workflow and efficiency.
Understanding Payment Denials in Healthcare
Payment denials happen when the insurer refuses to release payment for the treatment offered. These denials contribute to disruptive workflow cycles and may strain provider-patient relationships as well. While some denials happen due to clerical-type errors, few others are destined to occur, like the “not medically necessary” type denials, which can be quite complicated to resolve.
What Are the Top Reasons for Payment Denials?
- Prior Authorization: Certain treatment procedures require insurance prior authorization (PA) and when it isn’t obtained prior to the rendered service, the insurer may deny the request. Therefore, it is important to either set up a pre-authorization team or automated tools to promptly track and handle such situations, or ensure you are well-informed about what all procedures require PA and are acquired before the treatments are given.
- Incorrect/Missing Information: Incomplete documentation is one of the most common reasons as to why claims get denied. A simple error – misspelled name, date of birth or wrongly entering other patient details can lead to a denial. Implementing a robust patient registration process and utilizing electronic verification tools can reduce errors. Also, duly informing your staff about the significance of precisely entering details can help.
- Technical Errors: Coding errors – usage of incorrect, outdated or missing medical codes – contribute to payment denials. Coding issues normally arise when the respective coder is not updated with the latest ICD-10/11 or CPT codes updates. The solution would be to utilize medical coding software and ensure your staff is regularly trained and updated with the latest codes.
- Crossed Deadline: It is normal for insurers to have deadlines by which submissions are to be made. Failure to meet these deadlines, even by a day, could result in lapsed claims. Therefore, it is important to periodically monitor claims to identify and get a reminder of these cutoff dates. Make sure to set up an automatic reminder or hire a third-party medical billing company with expertise in meeting payer specific timelines.
- Non-covered Services: Insurance plans often cover only limited services. Therefore, claims for services that are outside the scope will be outright denied. It is important to familiarize with the plan’s coverage details, minute policy information and communicate with your patients before the treatment even begins.
- Duplicate Claims: Submitting the same claim multiple times (by accident or a regular follow-up) can lead to denials and eventually cause a rift between the patient and provider. By standardizing follow-up procedures and utilizing advanced claim tracking platforms, you can minimize these challenges to an extent.
What Are the Best Practices to Prevent Payment Denials?
- Invest in Technology: Advanced revenue cycle management (RCM) tools can help in providing a seamless management experience with automated workflow, tracking and report generation, and accurate claim tracking. It is common knowledge as to how technology can reduce errors and enhance first-pass acceptance rates.
- Perform Internal Audits: Conducting regular audits can help identify common errors and inconsistencies, thereby improving overall workflow efficiency. These audits can not only identify errors but also allows for long-term improvements in the claim management process.
- Continuous Staff Training: Imparting regular training for the staff on integral processes and details are crucial. Continuous education on the latest codes, payer policies and documentation standards can help reduce errors during claim submission.
- Encourage Payer – Provider Collaboration: It is important to foster a healthy communication channel between insurer and healthcare provider to eliminate any misunderstandings. Regular meeting and feedback loops can enhance mutual understanding of payer policies and expectations.
How to Effectively Appeal Denied Claims?
When claims are denied, a structured appeals process can often result in reimbursements. Follow these steps for effective appeals:
- Review the Reason for Denial: Analyze & identify the reason why the claim was denied.
- Collate Supporting Documentation: Gather all relevant medical records, authorization letters, and other necessary documents.
- Follow Payer Guidelines: Stick to the insurer’s specific appeal process and timelines.
- Maintain Clear Communication: Keep patients in the loop of the appeal process.
Final Thoughts
Payment denials are a never-ending challenge in the U.S, with hospitals and health systems spending about $10.6 billion, arguing over claims that should have been paid initially and providers, who spend an average of $43.84 per claim to resolve claim denials, which amounts to an eye-watering $20 billion per year.
However, by identifying the root causes, utilizing advanced automation technologies like AI, healthcare providers and payers can mitigate claim denials and ensure healthier revenue cycles.
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