It will probably come as no surprise, that medical claim denials are on the rise, for both physicians and hospitals. With this rise come serious and expensive challenges for healthcare organizations and providers alike, with lost revenue projected to run into the billions of dollars. Considering that many otherwise re-billable claims are allowed to languish unbilled and unpaid, denials need to be avoided at the onset and if they occur, dealt with immediately.
Then there is the matter of claims rejection as opposed to claims denial. Knowing the difference is critical to managing your revenue cycle:
Claims rejection – involve unprocessed claims that never go beyond the electronic gate due to clearinghouse, billing or payer rejection.
Claims denial – happens when a claim undergoes processing but once under examination, is rejected for any number of negative determinations.
For the purposes of this blog, we’ll focus on claims that are outright denied, rather than simply rejected, although those also play a part in lost revenue when not properly tracked.
A few stats to ponder:
Administrative annual outlays by hospitals for reworking denied medical claims are now close to $9 billion, according to Change Healthcare. Figures are proportionately high for physician practices and other providers as well.
Appealing denials is more expensive than getting it right the first time: with a potential reimbursement rate of 63 percent on first appeal, additional employee labor and related appeal-filing expenses in 2016 equaled an average outlay of $118 per claim – which in turn takes a huge chunk of revenue off the table.
While denials can occur at different stages of the revenue cycle, the majority of denied claims occur during front-end functions, such as authorization, registration and eligibility. Below is a breakdown of percentages that common problems contribute to denials:
- 15 percent - errors with billing and submissions
- 15 percent - coding-related
- 25 percent - due to problems with utilization
- 21 percent - coverage-related
Since 18.2 percent of denials are related to pre-authorization and medical necessity issues alone, billers need to know whether these were obtained, or if previously used, simply expired. Knowing the real cause for a denial often requires that staff “dig deeper” to find and fix the causes.
Factors influencing denials:
A complex reimbursement cycle, requiring input from multiple points throughout the payment process, is a contributing factor in the growing number of denials, resulting in lost revenue.
1. Utilization issues
25 percent of all denials fall into this category, and include the following issues:
- Pre-authorization codes missing or expired
- Medical necessity not supported by the documentation
- DRG downgrades
- Experimental treatments such as PET scans or 3-D mammography
2. Coverage availability
This accounts for 21 percent of denials and is one of the most preventable causes from the following:
- Errors or omissions in documentation or verification
- COB between primary and secondary or supplemental
- Eligibility rejections, especially if there have been recent plan changes since previous visits, are often flagged by a system’s verification intelligence but overlooked by facilities
3. Contractual issues:
- Bundled payments error can be reduced with edits catching wrong CPT or HCPCS codes
- Per diems
- Wrong APC applications
- Stop-loss limits
- Payer underpayments
- Inaccurate fee schedules
4. Coding and Billing errors
Account for 15 percent of denied claims, including:
- Crosswalks, which translate specific codes, are often sources of denials
- NCCI editing should be utilized prior to sending out claims to catch coding and related mistakes
- Filing errors can include incorrect value and occurrence codes as well as NDC applications
- Demographic mistakes can include incorrect patient information, such as coverage or other critical information that should have been verified at the front desk
5. Submission and re-billing problems
These account for an estimate 15 percent of denials and can include all or some of the following:
- Crossover confusion between supplemental and primary insurance
- Primary EOB is incorrect or missing
- Software bugs and "glitches” in clearinghouse or a practice’s submission software
- Missing, incorrect or incomplete records to support the treatment, diagnosis, or other issues
6. Cash posting errors
Cash posting and related mistakes account for approximately four percent of denials, and usually consist of the following:
- Overpayments and refunds
- Unapplied cash
- Unspecified funds
Steps practices should take to reduce denials
- Consistently check and verify eligibility throughout the care process, not just at the onset of the first visit. Is the procedure or treatment covered or otherwise eligible for reimbursement? Have there been changes in the coverage since the last treatment or visit? Keep employees educated on pre-registration, pre-authorization and other insurance considerations for all admitting and often before treatment is even begun.
- Prioritize areas with the biggest impact on the bottom line: such as a “problem payer” or issues with a physician, specific service line or other contributing factors as well as identify the financial impact – possibly leading to a redesign of the entire process.
- Review and edit claims throughout the processing cycle, not just at the time of submission. Edits should be customizable to a specific payer’s requirements, as well as ensure that rule changes are updated, while checking effective dates.
- Maintain ongoing analysis throughout the revenue cycle by monitoring internal processes, evaluating benefits of implementing newer technologies, as well as updating the skill sets of employees can all reduce denial rates and boost revenue.
How an experienced medical claims management service reduces denials
Since its founding in 2002, M-Scribe has been a leader in helping practices of all sizes and specialties take charge of their medical claims, including proper coding and billing as well as tracking – and thereby boosting revenue. We keep the lines of communication open including work procedures and process flows with your A/R office to maximize your engagement returns.
Contact us at 770-666-0470 or by email to learn more about how we can save your practice time, money and ensure full payer and regulatory compliance, resulting in faster and more complete reimbursements and improving your revenue cycle.