Medical billing denials can significantly impact a healthcare provider's revenue cycle and operational efficiency. Denied claims lead to delayed payments, additional administrative work, and potential revenue losses. Understanding common reasons for claim denials and implementing strategies to prevent them can help providers optimize their revenue cycle management.
What Are Medical Billing Denials?
A medical billing denial occurs when an insurance company rejects a claim due to errors, missing information, or non-compliance with payer policies. Denials differ from claim rejections, which happen when a claim is not processed due to incorrect data. While rejections can often be corrected and resubmitted, denials typically require appeals or additional documentation.
Common Reasons for Medical Billing Denials
1. Incorrect Patient Information
Simple errors, such as misspelled names, incorrect policy numbers, or wrong date of birth, can result in claim denials. Verifying patient details during the check-in process can help mitigate these errors.
Prevention Tip: Utilize an automated system that validates patient information before submission.
2. Duplicate Claims
Submitting the same claim multiple times without proper follow-up can lead to denials. This often happens due to system errors or miscommunication between billing teams.
Prevention Tip: Implement a tracking system to monitor submitted claims and avoid unintentional resubmissions.
3. Lack of Medical Necessity
Medical necessity denials occur when a payer determines the service does not meet established criteria. Proper documentation is crucial in preventing these denials. Understanding medical necessity can help providers ensure that their services meet payer standards and are adequately documented
Prevention Tip: Ensure proper documentation and coding that justifies the necessity of the service. Check payer policies before submission.
4. Incorrect or Missing Diagnosis Codes
Using outdated or incorrect ICD-10 or CPT codes can lead to claim denials. Coding errors result from lack of training, system updates, or improper documentation.
Prevention Tip: Stay updated with coding changes and use certified medical coders for accurate billing.
5. Timely Filing Issues
Most insurance payers have strict deadlines for claim submission. If a claim is submitted past the allowable timeframe, it will be denied.
Prevention Tip: Maintain a claim submission schedule and use automated reminders to prevent missed deadlines.
6. Authorization and Pre-Certification Errors
Certain procedures and treatments require pre-authorization. Submitting a claim without proper authorization can lead to denials.
Prevention Tip: Verify payer requirements and obtain necessary pre-approvals before rendering services.
7. Coordination of Benefits (COB) Issues
When a patient has multiple insurance plans, the primary and secondary payers must be properly coordinated. Incorrect order of benefits can lead to claim denials.
Prevention Tip: Collect and verify insurance details during each visit and confirm the primary and secondary payers.
8. Bundling and Unbundling Errors
Some procedures are billed together as a bundled service. Billing them separately (unbundling) or incorrectly bundling unrelated procedures can cause denials.
Prevention Tip: Use accurate CPT and modifier codes to ensure correct billing practices.
9. Non-Covered Services
Some treatments or services are excluded from an insurance policy's coverage.
Prevention Tip: Verify insurance benefits before providing services and inform patients about out-of-pocket expenses.
10. Out-of-Network Provider Issues
If a provider is not within a patient’s insurance network, the claim may be denied or reimbursed at a lower rate.
Prevention Tip: Check insurance networks before scheduling appointments and discuss alternative coverage options with patients.
Medical Billing Denial Codes and Reasons: Understanding Claim Rejections
Enhancing your understanding of medical billing denials involves associating specific denial codes with their corresponding reasons. Below are common denial scenarios, each accompanied by relevant Claim Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RARCs):
1. Incorrect Patient Information
Errors such as misspelled names, incorrect policy numbers, or wrong dates of birth can lead to claim denials.
- CARC Code 31: "Patient cannot be identified as our insured."
2. Duplicate Claims
Submitting the same claim multiple times without proper follow-up can result in denials.
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CARC Code 18: "Duplicate claim/service."
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RARC Code N522: "Duplicate of a previously processed claim."
3. Lack of Medical Necessity
Claims may be denied if the service provided is deemed not medically necessary.
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CARC Code 50: "These are non-covered services because this is not deemed a 'medical necessity' by the payer."
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RARC Code N115: "This decision was based on a Local Coverage Determination (LCD)."
4. Incorrect or Missing Diagnosis Codes
Using outdated or incorrect ICD-10 or CPT codes can lead to claim denials.
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CARC Code 16: "Claim/service lacks information or has submission/billing error(s)."
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RARC Code M76: "Missing/incomplete/invalid diagnosis or condition."
5. Timely Filing Issues
Submitting claims beyond the payer's deadline can result in denials.
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CARC Code 29: "The time limit for filing has expired."
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RARC Code N211: "You may not appeal this decision."
6. Authorization and Pre-Certification Errors
Certain procedures require prior authorization; lacking this can cause denials.
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CARC Code 15: "Authorization/Pre-certification required."
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RARC Code N517: "This service requires prior authorization."
7. Coordination of Benefits (COB) Issues
When multiple insurers are involved, incorrect coordination can lead to denials.
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CARC Code 22: "This care may be covered by another payer per coordination of benefits."
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RARC Code MA04: "Secondary payment cannot be considered without the identity of or payment information from the primary payer."
8. Bundling and Unbundling Errors
Improperly billing services that should be bundled or unbundled can cause denials.
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CARC Code 97: "The benefit for this service is included in the payment/allowance for another service/procedure that has already been adjudicated."
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RARC Code N56: "Procedure code billed is not correct/valid for the services billed or the date of service billed."
Understanding these codes and their associated reasons can help effectively address and prevent claim denials.
Best Practices for Reducing Denials and Preventing Delinquent Claims
Reducing medical billing denials requires a proactive claim submission and revenue cycle management approach. Additionally, preventing delinquent claims—claims that remain unpaid due to various reasons—helps improve financial stability. Here are some best practices:
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Regular Staff Training: Educate staff on coding updates, insurance policies, and documentation best practices.
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Use Advanced Medical Billing Software: Implement medical billing software that includes denial management tools and follow-up tracking.
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Pre-Visit Eligibility Checks: Verify patient insurance and benefits before appointments to avoid delays and denials.
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Standardized Documentation Procedures: Ensure comprehensive and consistent medical documentation to justify claims and prevent disputes.
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Regular Audits: Conduct internal audits to identify and correct potential claim errors before submission.
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Follow-up on Outstanding Claims: Implement an automated follow-up system for unpaid claims to reduce the risk of delinquency.
Managing Denials and Delinquent Claims Effectively
When a denial occurs, having a structured approach for appeals can improve reimbursement rates. Steps include:
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Analyze the Denial: Identify the root cause of the denial.
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Correct and Resubmit: Make necessary corrections and resubmit the claim.
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Appeal if Necessary: If the denial is unjustified, submit an appeal with supporting documentation.
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Track Denial and Delinquency Trends: Use analytics to recognize patterns in denials and unpaid claims and address systemic issues.
Final Thoughts
Claim denials and delinquent claims can significantly impact a provider’s revenue cycle, but a strategic approach to medical billing can reduce these issues. By leveraging practice management software and ensuring compliance with payer policies, providers can enhance their billing efficiency and financial performance.
For more insights on optimizing your billing and reimbursement process, visit our Medical Billing Services page.
For best practices, refer to the American Medical Association's medical billing guidelines to ensure compliance and accuracy in medical billing. Additionally, the Centers for Medicare & Medicaid Services (CMS) billing resources provide essential regulatory information to streamline claims processing and minimize denials.
By implementing these strategies, healthcare providers can reduce denials, prevent delinquent claims, streamline operations, and improve financial outcomes.
