What are Claim Denials?
"Denial" and "rejection" are two words that no physician wants to hear. Yet, the unfortunate reality is that denied claims still occur. Many physician practices lose money daily to claims denied for various reasons. These claims are denied because they fail to meet payer requirements. This article addresses claim denials and tells you all you should know: what they denials, how to prevent them and how to handle denials. It also answers other questions you may have on claim denials
What is Claim Denial?
Claims denial describes the refusal of an insurance company or carrier to honor a request by a person (or their provider) to pay for health care services rendered by a health care professional.
What is Claim Rejection in Medical Billing?
Claim rejection in medical billing describes a state in which a medical claim is rejected for not meeting the required conditions. In this case, the claims are yet to be entered into the computer systems as they do not meet the criteria or contain one or more errors.
What is the Difference between Rejected and Denied Claims?
Claim denial occurs when a claim is submitted by the healthcare provider for adjudication (to pay for the services provided to a patient) and is repudiated by the payer. In contrast, rejection takes place when a claim is submitted to a payer with incorrect or missing data or coding.
What are the Top Claim Denial Reasons?
In September 2014, RemitDATA, a company that provides comparative analytics data for the outpatient provider market, reported that these five procedure codes frequently result in unexpected denials:
- 99213 (outpatient doctor visit, level 3)
- 99214 (outpatient doctor visit, level 4)
- 3641015 (routine blood capture)
- 99232 (subsequent hospital care)
- 97110 (therapeutic exercises)
The company uses a comprehensive electronic remittance database to analyze the most frequent reason codes for each of these denials. Consider the following reasons why these denials occur and note the tips to proactively ensure compliance.
99213-Level 3 Established Office Visit
Reason for denial: Duplicate claims (reason code 18).
Compliance tip: Using an appropriate frequency code may be helpful. This code indicates that a claim is an adjustment of a previously adjudicated claim. This reduces the likelihood that a claim will be denied as a duplicate. BlueCross BlueShield of Oklahoma addresses this issue on its Web site.
99214-Level 4 Established Office Visit
Reason for denial: Inclusion of this service in another service/procedure that has already been adjudicated (reason code 97)
E/M code 99214 may require a modifier of 25 to be added by practices. This modifier indicates that the E/M service was performed on the same day as the procedure. The diagnosis for both the procedure and the E/M service may be the same. However, the service must be separate and distinct from the procedure.
Reason for denial: a lack of information as well as submission/billing errors (reason code 16).Compliance tip:
Check with your specific payer to identify its policy on reporting 36415 (collection of venous blood by venipuncture). Certain payers may not allow separate reimbursement for 36415 when providers bill it in conjunction with a blood or serum lab procedure performed on the same day by the same provider. Note that commercial payer policies regarding this code may differ from those of CMS.
99232-Mid-level Subsequent Hospital Care
Reason for denial: non-coverage (reason code 96).
Compliance tip: Note that payers may deny code 99232 when it's billed with the same date of service as hospital discharge day management procedure codes (i.e., 99238 and 99239). Check with your payer regarding its specific policy.
97110: Therapeutic exercises to develop strength and endurance, range of motion, and flexibility (15 minutes).
Reason for denial: coverage by another payer per coordination of benefits (reason code 22).
This code denotes therapeutic procedures for strength, endurance, flexibility, and range of motion. When payers deny this service with reason code 22, the problem may be that the worker's compensation carrier, not the health insurer, is liable, as the injury or illness for which the therapy is performed could be work-related.
How to Prevent and Reduce Claim Denials?
While navigating the world of insurance claim forms, ICD-10 codes, and payer-specific requirements can be tedious, it can nevertheless be done. Handling and reducing the number of insurance claim denials received at your practice can be achieved if you follow these helpful tips that will keep your revenue stream flowing.
1. Code Diagnosis to the Highest Level of Specificity
The best way to reduce denials is by coding the diagnosis codes to the highest level of specificity. Clinicians who must select ICD-9-CM diagnosis codes should use codes that provide the highest degree of accuracy and wholeness (i.e., the greatest specificity). This means providing an ICD-9-CM code up to the fifth digit.
Like most private payers, the Centers for Medicare and Medicaid Services (CMS) requires all Medicare providers to use ICD-9-CM diagnosis codes with the highest specificity per the Health Insurance Portability and Accountability Act (HIPAA).
As a general rule, assign 4-digit codes if there is no fifth-digit sub-classification for a particular category, and as a corollary, assign the fifth-digit sub-classification code for those categories where it exists.
2. Make certain that you have insurance coverage and that you are eligible.
Before you schedule a patient or provide service, the front office should verify insurance coverage and benefit eligibility. That way, you can ensure that your claim is not denied for these reasons when it is submitted to the payer(s).
In certain cases, it may be mandatory to obtain a referral or authorization number, as these claims may be denied without a valid one.
Usually, authorizations are active for a specific date range and may expire if not used during that period. Some authorizations also cover a period and/or a specified number of treatments or visits. However, note that obtaining prior authorization is still not a guarantee of payment. The submitted claim must meet the following conditions:
- It must be based on medical necessity;
- It must be filed within the timeframe specified; and
- It must be submitted by the provider identified in the referral or authorization.
3. File Claims on Time
Every payer has different time requirements regarding claims to be filed. If you miss a deadline, the claim will usually be denied. Therefore, be careful not to risk having your claims denied for a mere oversight or office backlog.
Develop processes and cheat sheets to ensure every payer's deadlines are met. Use the patient schedule as the starting point to ensure that all claims have been filed and are not just lost. Also, establish a system that ensures that all claims submitted, physically and electronically, have indeed been received by the payer. After all, there have been several instances where even electronic claims fall through the cracks and never reach the payer, despite the clearinghouse showing a successful transmission to the payer.
Most insurance companies will not consider claims filed past deadlines, so it's also worth the expense of paying overtime to get claims billed promptly. You should also consider outsourcing your medical billing services to ensure that all your claims get submitted on time.
4. Stay Current with Payer Requirements
Medical billing rules and regulations are constantly changing. Hence, physicians and administrators need to spend time and money on continuous education, software, or staff training to stay current. This has a direct impact on the cash flow and profits of the practice, so it is very crucial. Several codes are discontinued each year, and several other codes are introduced each year to reflect commonly performed procedures. Your medical billing company needs to stay abreast of these rules and changes to lower your chances of having a denied or rejected claim.
5. Track the Claim throughout the Entire Process
Follow-up is key. You must keep track of the claim throughout the payment process. Otherwise, you'll be unable to identify the problem, if there is any, and get a solution so you get the claim paid.
Finding solutions may be quite costly, and even more so if the problem is identified late. A study conducted by a doctor at the University of California found that practices spend 8–14 percent of total revenue on clerical follow-up on rejected claims. A more cost-effective approach to working is to have the medical billing company employ proactive processes to ensure that all your claims are well monitored and get paid the first time.
6. Beware of Data Entry Errors.
Entry errors may seem trivial. However, they may be very costly. Millions of claims are automatically denied by front-end claims systems because the patient's name is spelled incorrectly, the ID number is incorrect or missing, or other identifying information is incorrect. 90%-93% of rejections are due to preventable data entry mistakes such as transposing numbers or misspelling names. So, be sure to pay careful attention to demographic information. An error such as recording a patient's name as Bob instead of Robert (as it appears on his insurance card) may cause your claim to be rejected.
So, verify all insurance and demographic information before the patient comes for the visit. Also, ensure that you re-verify it at the time of the appointment.
7. Verify Referrals on the Front End.
You need to read the referral. Many referrals are only valid for 30 days. Unfortunately, practices don't take the time to update the referral or obtain a new one when the former expires or runs out. Failure to validate this information before the patient visit results in unnecessary delays in cash flow, which is the last thing you need when trying to ensure a claim is paid.
8. Get to Know Your Carrier.
Each carrier is unique. Every carrier has different deadlines and rules for claim submission, as well as follow-up protocols regarding denials and rejections. Compile the following information for each of the top five carriers of the practice.
- Deadline, address, and submission requirements for timely filing.
- Deadline, address, and submission requirements for appeals.
- Corrective claim deadlines, addresses, and submission requirements
- Your provider relations representative's name and contact information
Oftentimes, carriers also have specific requirements to use their forms and/or submit them via an online portal or other methods. Non-compliance can result in additional denials. Also, there is no way to comply if you have no idea of what you ought to comply with.
9. Learn the lingo.
Start with the Explanation of Benefits (EOB). The EOB includes so much information. You'll be surprised at what you find on it when you go through it.
Also, pay close attention to claim adjustment reason codes (CARC) as well as remittance advice remark codes (RARC), both of which provide greater insight into the algorithms that cause the denial. RARC may vary by carrier.
What to Do After a Claim Is Denied?
Sometimes, despite doing your best to see that your claim is paid, it is still denied. If that happens, here are a few tips to mitigate denials and rejections.
1. Know the Difference between Rejected and Denied Claims.
A rejected claim does not include the information necessary to determine coverage. Physicians can't appeal these claims. Instead, they must correct and resubmit them. It is great practice to cease auto re-submission for rejected claims. This is because by hitting "resubmit," you just delay your payment.
On the other hand, a denied claim does not meet coverage criteria. For the most part, physicians can appeal these claims. However, some denials, such as those for deductibles and coinsurance issues, benefit limitations, benefit exclusions, and membership issues, are not appealable.
2. Appeal Denials.
If you do receive a denial, appeal it. According to MGMA, only 35% of providers filed appeals after denials. This amounts to leaving money on the table. Some of these issues can be avoided by simply automating your insurance billing procedures.
3. Patients should be Involved in the Process.
Never forget that insurance contracts are between the patient and his or her carrier. So the patient is largely involved. When claims aren't paid, ensure that you carry along the patient with the process.
4. Take a Thorough Approach.
When appealing claims, ensure that you include the following documents:
- Providers' progress notes
- Provider orders
- Nursing notes
- Pathology reports
- Notes from the consultant
- Lab reports
You should also include any other document that supports the appeal. Be thorough in your approach. Check to make sure that all documents are legible before sending them. Then, once sent, follow up within 15 days of submission. And, don't forget to note down the name of the individual with whom you speak during this process.
5. Have an Established Financial Policy.
Also, be sure to have an established financial policy, as establishing a financial policy is critical to the overall process. This policy should specify whether and when patients will be billed for non-covered services. For example, some practices debit a patient's credit card if the claim isn't paid within 90 days. Ensure that patients read and sign this policy annually.
How to Document and Manage Denials?
According to the Medical Group Management Association, the highest performing medical practices average an insurance denial rate of only 4%.>
Given the complex maze often required to get medical claims paid by third-party payers, it's remarkable that these practices keep their denial rate this low. But it's important to do so. Otherwise, you risk delaying payment for your practice by weeks or even months, and that impacts your bottom line. Here are a few points to consider when documenting and managing denials.
1. Manage both Denials and Rejections.
With reimbursements coming under severe pressure, it is incumbent on small practices to adhere to the proven tips highlighted above and better manage both claim rejections and claim denials.
According to the Medical Group Management Association (MGMA), it costs $25 to $30 to manage the average denial. You need to shift from a system designed to "work" denials to a system that is designed to identify the denials that can be prevented and take meaningful action to improve upfront revenue cycle processes.
2. Being Proactive Rather than Reactive.
The key to compliance is the ability to identify your practice's most common denials—which may or may not correspond with the codes listed in this article—and then take steps to reduce denials before claims are sent to payers. Constantly monitoring and trending patterns of denials paves the way toward an uninterrupted revenue stream.
Consider the following general tips:
- Monitor any and all remittance advice. Look for trends in terms of denials related to certain codes, reasons, physicians, and/or payers.
- Perform staff education. Ensure that coders receive up-to-date training on code changes annually and that all practice management software, templates, etc. are updated with any new codes.
- Ensure a comprehensive registration process. Patient registration should include a detailed review of the patient's insurance as well as relevant demographic information. Ensure accurate capture of the patient's name, date of birth, insurance ID number, circumstances surrounding the illness or injury, etc.
- Stay updated on payer guidelines. Payers change their guidelines regularly, and someone within the practice must ensure that the information on which billing decisions are made is accurate and updated.
3. The Need for a Strong Denial Management Strategy.
If practices take the time to invest in monitoring denials, they'll most likely reap the benefits shortly thereafter. As the industry continues to move toward ICD-10, practices should incorporate a strong denial management strategy to offset any denials that occur in the short-term due to the transition.
4. Develop a Spreadsheet for Tracking Purposes—and Keep it Updated.
Each time a denial occurs, track the following data points:
- Specific reasons for the denial
- The number of denied line items and their monetary value (charge)
- Specific provider's name
- Specialty (if the practice includes more than one specialty).
- Location (if the practice includes more than one office).
Tracking this information allows practices to understand the bigger picture in terms of denial management and also dig deeper into the data to effect change. For example, is the denial rate due to one particular provider's poor documentation? Are there specific reasons why denials typically occur? If so, it becomes much easier to implement targeted interventions to address each problem.
Also, be sure to track the outcomes. What percentage of the time is the practice successful at appealing denials? How often do patients pay? All of this information can provide critical insights into the performance of the overall revenue cycle.
5. Know what to do Once Denials Occur.
Practices essentially have four options when denials occur:
- Correct and resubmit the bill— Call or email the payer to better understand why the denial occurred and what you need to do to correct it. Ask how the practice can avoid these denials going forward.
- Initiate an appeal Increase the efficiency of the appeals process by drafting an appeal template that can be customized to suit individual denials.
- Bill the patient directly—This may be an option if the patient has signed an Advanced Beneficiary Notice (ABN) and/or the practice's policy is to hold patients financially responsible for any services that aren't covered by their insurance company.
- Write-off the bill. Use this option when it's clear that the practice cannot collect for services rendered. This might occur because there is no insurance coverage, an ABN wasn't signed, or the practice chooses not to bill patients directly.
Track each of the actions taken once a denial occurs. Does the practice correct and resubmit bills most of the time? If so, perhaps additional education is necessary for coding staff members who may be submitting incorrect or non-specific codes. Or perhaps physicians require education about payer documentation preferences. Does the practice initiate appeals frequently? If so, the practice manager might need to request a formal conversation with payers. If write-offs occur frequently, the practice may want to determine whether it is feasible to continue to render certain services for which payment isn't obtained.
6. Prioritize Denials for the Greatest Impact.
Give priority to denials that are either high-dollar or that require quick turnaround time according to payer guidelines. It's helpful to create a grid or cheat sheet with payer contact information, a schedule for filing deadlines, appeal guidelines, and appeal time frames.
7. Consider Denial Management and Decision Support Tools.
These tools analyze remittance advice and identify the root causes of denials, allowing practices to make informed and data-based decisions. These tools also help practitioners' benchmark performance against specialty-specific analytics.
Denials are an ugly reality that every physician practice must address. So much so that it's not a question of whether or not carriers will deny or reject claims. It is a question of when and why the denial or rejection will occur.
Preventing claim denials is the easiest way to increase cash flow as well as profitability in your medical office. Training, attention to detail, and a timely billing process keep you from losing payment on your claims. RevenueXL has myriad solutions for medical practices that seek to improve their coding, billing, and appeal practices.
For information about how an outsourced medical claims billing process can improve your top line and bottom line, contact Revenue XL today.
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