Handling medical claim denials

Categorized as Operations Tagged

Your claim could also get denied – either partially or completely.

There are two types of denials: hard and soft. 

Hard denials – there’s not much you or your billing team can do about it. You will have to write this off, accept the lost revenue and make sure that you and your medical billing team doesn’t make this mistake again.

Soft denials – on the other hand are considered temporary. Your medical billing or revenue cycle management team has the potential to get this reversed.

Your team should work with you, the provider,  to correct the claim.

This might require you to provide  additional information / visit note /document to support medical necessity.

Why are medical claims denied?

Denials will happen – we can guarantee it. It happens to every single provider, practice, health system – no matter how good/bad their medical billing team is.

Some of the reasons for claim denial include (but are not limited to):

  • Credentialing Issues – The provider is not at par with the payer.. I.e. the credentialing department never got this provider empanelled but submitted the claim with this provider as the rendering provider.
  • Eligibility issues – The patient is not enrolled in the plan or with the payer in the claim. This can also happen when the patient was out of coverage (either payer or patient might have terminated coverage) on the date of service.
  • Prior authorization issues – As mentioned above, you performed a procedure and your biller submitted the claim with a specific CPT. However, that specific procedure / CPT is not covered by the plan that the patient is participating in. This means that you were required to get precertification / prior authorization for this procedure. However, the prior authorization is not on file. Sometimes it so happens that you did receive the prior authorization but your medical biller forgot to include the authorization number in the submitted claim.
  • Inadequate documentation. These days payers are asking for more and more documentation (consult notes) for claims submitted. Your claim could get rejected due to the lack of adequate supporting information / documentation. You need to have enough documentation via visit/consult notes to support the reason for performing the medical procedure your claim uses.
  • Your claim could also be missing a valid referral number. At times (especially with HMOs), you need to have a referral from a primary care before your payer will pay you for the patient visit.
  • Your billing department entered incorrect demographics information in the claim. The procedure you performed might be age inappropriate according to the demographic information on the claim. Your billing department might have just screwed up and not submitted the correct demographics of the patient.
  • Undercoding claims. This typically doesn’t always belong in your medical biller’s hands. However, you need to know about these. You might have (intentionally) left out a CPT from the superbill. Sometimes providers do so to avoid audits and you might have done the same as well. You might have coded for a less serious procedure. You could have undercoded for various reasons. However, this is illegal/fraudulent.
  • Upcoding – pretty much the opposite of undercoding. This is where the provider or the practice or the biller adds CPTs in the claim that does not belong there. In other words, the patient was never treated for that procedure. There are several practices (although fraudulent and illegal) that do this – to collect more from the payer. 
  • Clinical documentation issues. Again, this is out of the biller’s hands. You, the provider, are supposed to provide adequate documentation for each patient visit/consult. That not only bolsters your claim submission but is also necessary for appropriate patient care continuity. The sad part is that when your claim gets denied, you are asked for supporting documentation. If your documentation is sloppy, the chances of getting paid are quite slim.
  • Payer issues. This is also out of your billing department’s hands. Sometimes a claim is denied without enough explanation (codes) in the EOB document. 

How to reduce medical claim denials?

The more proactive you are in your billing department, the better you will be at reducing claim denials. If you understand the reasons claims are denied (read above), you will be in a better position to reduce those denials.

  1. Continuing education. There are no two ways around this. Codes change and will change (sometimes yearly). New codes are introduced and older codes are phased out. Codes are moving toward more specificity. That means, they are getting more granular. You need to invest in yourself, your career as a medical biller.
  2. Double check you work. We cannot say this enough. Even if this means that you need an extra day to submit claims – do so. We have seen so many simple clerical errors (mostly data entry errors) that derail a claim. Double check your claim before you submit it.
  3. Communicate and collaborate. You are not clinically trained. Revenue cycle management takes a large team with several moving parts and several people involved in the process. Make sure you are talking to others on your team. Questions about the visit notes? Don’t be afraid to ask your providers for further information. Don’t be afraid to kick back a visit note or superbill to the providers either. 
  4. Stay in touch with the payer reps. When you submit the claim, it stays in the no-response bucket. Be in touch with the payer reps so you can be aware of errors they have already identified (if any). Start working on those and proactively so that you can re-submit as soon as your claim has been submitted.

Appealing medical claim denials

One point to note here. If your billing team strongly believes that you should not have been denied a particular claim (or claims), you can always appeal the denial. 

Do keep in mind that Medicare/Medicaid are a bit harder and arduous to deal with (they take longer). We find that many practices don’t bother with them. In our opinion, you still should try to appeal the denial. We can show you how to.

Calling the payer

If you do not understand the claim denial code in the EOB/ERA, call the insurance company.

When you call your payer line, make sure that you record the date/time of call, the customer service rep you spoke to and the reference number of the conversation (ticket). Put that information on file (usually, we put it as a note on the pt record itself).

You are going to have to call the payer rep again and having the reference number speeds up the process. When you do understand the issue and are re-submitting the claim to get paid, make sure you are also using the reference number there. This allows the claim to be processed as a corrected claim and not as a duplicate claim.

Prioritize your denials

You are not going to have enough time to appeal every denial. 

Handling denials is a labor intensive process and labor = costs. Make sure that you prioritize which denials you are going to work on first. 

Typically, our advice is to go after the high dollar value denials first. Clear those out, then go to the next bucket of denials.

Denial buckets – understand them, create them, use them

Understand the denials – very, very well. A few common denial reason codes (that you get in an ERA) are:

  • Provider is considered out of network.
  • No prior authorization or precertification.
  • Incomplete claim information entered.
  • Medical necessity – not sufficiently supported documentation provided.
  • Lower level CPT was deemed appropriate but your provider did a higher level, more costly service.
  • Procedure or CPT is not covered in a patient’s benefits.
  • Ineligible patient – i.e. patient no longer covered
  • Pre-existing conditions – not covered by the policy.
  • CPT and ICD mapping/linking issue.
  • Bundled service was unbundled – i.e. you submitted multiple codes for a set that is included in a bundled service

Some of these denials are preventable and some are not preventable.

Your practice management system will show you a report on what is preventable and what is not. 

Note these. Preventable denials should be brought down to zero. They are simpler to fix and you just needed to be more diligent about your billing process and integrity checking.

Each payer has specific requirements as well. Make sure you are aware of those. 

Research has shown that it is always more efficient and productive to have individual team members specialize on specific payers. This way, they learn the ins and outs of those payers, thereby reducing the denials.

A generic approach does not work.

Sending appeals letter(s) to the payer(s)

Sometimes you really do not have any other way than sending an appeals letter.

Most payers (if not all) have standard appeal letters on their websites. Yes, you might have to hunt them down, but we recommend that you use those denials letters. 

When you send the standard appeals letter, make sure that you include ALL the required information (e.g. member name, ID, date of service, claim number etc).

Denials related to medical necessity are a bit tougher to handle. For this, you need to create a customized letter, have the necessary medical documentation attached to the letter as well.

Do not rely on the knowledge of the payer’s claims department. 

You obviously have proof or a strong reason to believe why your claim should be paid. 

Note down the CPT or CMS or even payer guidelines that you have researched – include those information in your appeals letter.

Include just enough information needed to process your appeal. Never assume that it is better to overwhelm the processor with more information. This will most certainly slow down the appeals process/timeline.

If you are not confident about your ability (or want to save time), just go ahead and recruit a professional reviewer. You can also find (inhouse or external) physicians with experience in billing, coding, HIM or utilization review. 

Claim denials workflow

Most practices I work with do not have a workflow / process around revenue cycle management. 

Do not make that mistake. If you need to, contact me for a Revenue Cycle Analytics and Revenue Cycle workflow product (it’s free to use).

Payer contact list

You always, always need to maintain a list of appropriate contact personnel for EACH payer. 

Make sure you and your team maintains a list of denials coordinators (not the accounts receivables) at each payer.

Establish a relationship with them. Make sure they also understand that you and your practice know what you are doing.

Denials workflow spreadsheet or use software

Unless you work for a small practice that barely has 100 claims per month to work on, you cannot possibly manage denials in your head or on paper.

At the very minimum, use a spreadsheet to manage your denials.

Spreadsheets have their own limitations but they are better than managing your denials workflow on paper.

There are several (paid) denial management software in the market. Use them. If you want to use our free denial management software, contact us.

You need to track information about each and every appeal – date appeal submitted, payer, filing requirements.

Set up reminders to follow up – ideally per month. Do not let any appeals fall through the cracks.

Here are the steps of appealing claims

  1. Call payer to find out more information about the denial
  2. Request a review of the claim on the phone. If they deny this request, you can call the dept of insurance or the Ombudsman office. If nothing works, consider legal action (and let the coordinator know as well)
  3. Once you learn more, resubmit the claim. Make sure that you prevent this from being considered a duplicate claim (as mentioned above). You need to file the resubmission with updated clam copy + the original claim copy. You need to submit the remittance advice (RA) and any further documentation your payer rep has asked for. Make sure you mark it as “RESUBMISSION”. This will avoid the claim being rejected as a duplicate claim.

What’s an average denials rate?

According to MGMA, the average denial rate for most practices ranges from 5% to 10%. 

Imagine – even if you are a small practice of two providers, you probably see 50 patients per day. That’s about 1000 claims per month.

If you have a denial rate of even 8%, you are looking at 80 denials per month. 

Even at a charge of $100 per claim you are (potentially) losing $8,000 a month in denied charges.

On top of this, reworking claims typically costs $25/claim reworked. So, you are spending an average of $2,000/month to rework denied claims. You will never really recover all of the $8,000. Let’s say that you are recovering $7,000/- out of those $8,000 denied charges.

At the end of the month, you have lost $3,000 and have only recovered $7,000. 

In other words, you need a strong strategy to reduce denials as months progress.

Otherwise you will always be playing catch-up and will always be “busy” but not making enough.

Strategy needed to reduce claim denials

If you have created a workflow and are using buckets to do root cause analysis of denials, you will also very easily understand how to reduce denials.

Denials due to eligibility

This immediately tells you that you need to have better training at the front desk. Maybe the front desk does not have a good grasp of how important their job is. It also tells you that you need to train your front desk and scheduling team to do a better job at rescheduling appointments that failed eligibility checks.

You would even have cases where the provider is considered out of network (based on the work that your credentialing team has done). When that’s the case, you can change the provider for that appointment to one that is considered in-network for this particular patient’s plan. Or, you can communicate the issue with the patient. 

When you find out that there are eligibility related issues, put these patient appointments in an “appointments at risk” bucket.

Your frontdesk or scheduling team should call these patients before the appointment and apprise the patient of their options. The patient can either cancel the appointment, reschedule the appointment until the insurance issues are resolved or they can choose to pay from their own pockets.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the front desk to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to coverage issues

For recalled patients, you already know the procedure that your provider wants to perform (vs a new patient appointment). This is clearly mentioned in the visit note and when your front desk made the appointment, they chose this visit type as well.

This tells your eligibility team that they need to ensure that not only is the patient covered on the date of service, but that the procedure/ service requested by the provider is also covered by the patient’s plan.

In other words, simply having coverage on the date of service is not enough. Your eligibility team needs to find out whether the service is covered by the patient’s benefits as well.

When you find out that there are coverage related issues, you need to do the same as above – put them in an “appointments at risk” bucket.

Your frontdesk or scheduling team should call these patients before the appointment and apprise the patient of their options. The patient can either cancel the appointment, reschedule the appointment until the insurance issues are resolved or they can choose to pay from their own pockets.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the front desk to make corrections upstream. This strategy allows you to reduce such denials moving forward.

When your eligibility team is checking for a patient’s eligibility for the specific procedure proposed by the provider, they will also find out whether this service/procedure requires prior authorization or not.

Give yourself adequate time to get the prior authorizations done. Prior authorization does take time and the payers do not always respond on your schedule. If you find out that a procedure requires prior authorization by the patient’s plan, immediately move the appointment to a “appointments at risk” bucket.

As described above, you need to call those patients and give them the options discussed above. In all probability you are going to get the prior authorization if you do your job properly so the patient would just need to reschedule their appointment to after you obtain the prior authorization / precertification.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the front desk to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to medical necessity documentation

Monitor these closely. Usually you get denials for “Medical necessity” due to mismatched or missing diagnosis. Your payor might consider a particular CPT as medically necessary diagnosis for another related CPT.

There is no universal rule per se (unless you are dealing with Medicare/Medicaid that has NCDs). 

You need to understand AND have a “ready to go” checklist per payer.

This checklist should have this intelligence to show you the medically necessary (deemed) CPT for the related CPT that you are submitting in the claim. You might even need to consult with your provider to get further information on this as well (since clinicals are out of your area of expertise).

Review the documentation, make sure that the documentation supports the diagnosis, then resubmit the claim.

Most importantly, keep building this internal database of yours.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the coders to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to bundling

You will have situations where you need to be careful with modifiers. 

There are services (per payer) that are considered integral to another service that’s reimbursed. This is called bundling. Most payers will have some technology based logic that disallows separate payments for each line item. These CPTs will be reimbursed as a bundle.

Make sure you are up to speed on all the bundled services and reimbursement policies. Use NCCI for guidance on the same. 

You need to be careful of what you report “together” on the same date. You cannot also unbundle and submit the claim with multiple provider names from the same practice. 

Make sure you review the documentation properly. You will see the denied claim line item that’s related to the bundled service/line item. You cannot just blindly resubmit the claim with a modifier. You need to have supporting documentation to be able to appeal that claim or resubmit that claim.

You need to understand AND have a “ready to go” checklist per payer.

This checklist should have this intelligence to show you whether a CPT is bundled in payments by that payer.

Most importantly, keep building this internal database of yours.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the coders to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to Incorrect data entry

These data entry issues could be related to demographic information, procedural or diagnosis codes. Usually, the practice management system will do part of the work but it is NEVER 100% correct and your charge posting team and the medical coding team will have to provide their inputs as well.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the coders and billers to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to coordination of benefits

Coordination of benefits is an arduous process. It also needs your scheduling team/front desk and your billers to coordinate / collaborate a LOT more than usually occurs in practices.

Several denials are due to coordination of benefits. 

Coordination of benefits usually comes into picture when your patient is covered by multiple insurances / health plans. By law (COB provision and regulations), all health plans are supposed to coordinate amongst themselves to reduce any chances of duplicate payments for the same procedure(s). It is also built in this way to maximize the benefits and coverage that a patient obtains.

According to regulations, the primary payer is supposed to pay first.

The secondary payor is supposed to pay next.

The tertiary payor is supposed to pick up the rest.

It is YOUR job to know all the insurances that the patient is covered by. This is a crucial task for the scheduling team or your front desk. Each patient registration needs to have ALL the insurances that a patient has.

Get the insurance details at each visit

Our recommendation (based on research and our own experience) is that your scheduling team needs to get in touch with the patient a few days before the appointment to ensure that they truly do know the insurance details of the patient.

Keep in mind that patients flow in and out of insurances many times and the primary/secondary/tertiary coverages will change over time.

This also means that you need to have a concerted effort to keep your patient coverage information up to date as much as possible.

It does not hurt to ask the patient one more time when they are checking in for their appointment at your front desk. Ask the patient about their spouse and dependents as well.

Ensure that you have a policy about this,

Make sure you submit the primary payer’s EOB each time

Each payer has their own rules. But every payer does require you to submit the EOB of the primary payer along with the claim you submit to them.

Make sure that you have a checklist created per payer and share it with your billing team.

When your medical billing team is doing their due diligence before submitting the claim, it has to pass this “checklist”.

Make sure you understand primary and secondary payer determination

Sometimes you can get this info when your eligibility verification team is doing their job. Sometimes you do not.

As a general rule of thumb, if the patient themselves is a subscriber, then the payer of that patent is going to be the primary payer.

Know about the birthday rule – this comes into the picture if the patient is a dependent. When a dependent child is covered by both parents’ benefit plan, then you need to find the parent whose birthday (date) falls first in the year. The person whose birthday falls first in a calendar year is considered as the primary. The payer of that parent will be considered as the primary payer.

What percentage of denials are traced back to the front end?

As you can see quite a few of your denials can be traced back to the front end.

In other words, if you fix these errors upstream, you reduce the chances of denials.

As per a Change Healthcare report, front end revenue cycle teams (registration and eligibility) contribute to 23.9 percent of claim denials.