Master the Claims Rejection Strategy to Reduce High Medical Claim Denials and Healthcare Revenue Loss

Managing medical claim denial effectively is crucial in the healthcare industry, significantly impacting the financial health of healthcare providers. For every 100 claims processed, 10-15% of claims are in the denial danger zone. Change Healthcare found that, with such an increase in claim denial rates, each denied claim adds, on average, $118 extra cost on reworking, adding up to about $8.6 billion in appeal managerial costs. Addressing this issue is essential to avoid your healthcare revenue loss and maintain operational efficiency. By implementing a solid claims medical claim denial management strategy, your organization can achieve a claim acceptance rate of 97% or more.

Understanding Reasons for Medical Claim Rejection

At its core, medical claim denial management is a strategic process aiming to uncover and address issues leading to medical claim denials. It’s not just about dealing with the immediate problem; it’s also about mitigating the risk of future denials, ensuring faster payments, and maintaining a healthy cash flow.

Source: The Change Healthcare 2022 Revenue Cycle Denials Index (bitpipe.com)

A dedicated medical claim denial management team establishes trends between recurring denial reason codes to identify registration, billing, and medical coding issues. It also analyzes payment patterns from individual payers to detect diversions from the norm, enabling the team to address problems proactively rather than reactively.

Let’s understand these common reasons for claim denials, which can help healthcare providers like you to reduce your medical claim rejection rates and ensure a more steady revenue stream. A dedicated medical denial management team can be crucial in proactively identifying and addressing these issues.

1. Incorrect Patient Information: This is one of the most common reasons for claim denials. Simple errors such as misspelled names, incorrect date of birth, or wrong policy numbers can lead to denial. It’s crucial to double-check all patient information before submitting a claim.
2. Duplicate Claims: Submitting a claim for a service that’s already been billed and is pending or has been paid by the insurer can result in denial. This usually happens due to administrative errors or miscommunication between the billing department and providers.
3. Expired Eligibility: If a patient’s insurance coverage has expired or the service is not covered under their insurance plan, the claim will be denied. It’s essential to verify insurance eligibility before providing services.
4. Lack of Medical Necessity: Insurers often deny claims if they believe the treatment or procedure was unnecessary. Thorough documentation demonstrating the medical necessity of the treatment can help avoid such denials.
5. Incorrect or Missing Codes: Coding errors such as incorrect procedure codes, diagnosis codes, or modifier usage can lead to claim denials. Regular training and updates for coding staff can reduce these kinds of errors.
6. Untimely Filing: Each insurer has a specific time frame within which a claim must be submitted. Please submit the claim within this time frame to avoid denial. It’s essential to be aware of and adhere to each insurer’s filing deadlines.
7. Preauthorization Requirement: Some treatments or procedures require preauthorization from the insurer. It will only be allowed if the claim is submitted after obtaining this preauthorization.
8. Incomplete Claim: If a claim needs to include necessary information, it can be rejected by the insurance company. Ensure all required fields are filled in correctly and entirely before submitting a claim.

10 Point Troubleshooting Strategy to Avoid Medical Claims Rejections

To reduce the financial impact of claim denials, the optimal approach we must take is to prevent these denials from occurring at all. The secret lies in comprehending the typical reasons for medical claim rejections well in advance:

1. Pre-Authorization: Securing prior authorization before providing a service is crucial in preventing claim denials. This process involves obtaining approval from the insurance company for a service or procedure before it is performed. Please do so to avoid denying the claim because the service is unauthorized.
2. Errors or Omissions: Claim denials can often be traced back to errors or omissions in the claim form. These mistakes can be as simple as an empty data field, like a missing Social Security Number (SSN), incorrect demographic details, or more technical, such as an incorrect plan code or missing modifier. These errors highlight the importance of meticulous data entry and review processes in the claim submission. Source: The Change Healthcare 2022 Revenue Cycle Denials Index (bitpipe.com)
   
3. Unmet Medical Necessity: A claim may be denied if a healthcare service, deemed medically unnecessary, isn’t covered by the policy. This can occur when the payer disagrees with the physician about the required services for a patient’s condition. It emphasizes the importance of thorough documentation to demonstrate the medical necessity of a treatment or procedure.
4. Procedure Not Covered by Payer: Reviewing a patient’s insurance plan or contacting their insurer prior to submitting a claim is essential to prevent denials for procedures not covered by the plan.  A comprehensive insight into a patient’s insurance coverage can help prevent such denials.
5. Provider Outside Network: If a provider outside the insurance network renders services, the payer may reject all or part of the claim.  This highlights the need for patients and providers to be aware of network restrictions and choose in-network providers whenever possible.
6. Repeated Claims: Filing two or more claims for a single consultation on the same day by the same provider for the same patient and service item can result in denials. These repeated claims could be seen as an attempt at duplicate billing, so careful tracking and management of claim submissions are crucial.
7. Benefit Coordination: Claims for patients covered by multiple health plans can lead to delays and even denials until the patient’s coordination of benefits is updated. Managing and coordinating benefits effectively is essential to avoid claim denials and ensure timely reimbursement.
8. Bundling: Payers often bundle fees for two distinct services, reducing fees. Awareness of such bundling practices can help providers anticipate potential reductions in reimbursement and plan accordingly.
9. Services Already Included in the Payment of Another Service or Procedure: At times, the compensation for a particular service is modified due to its inclusion in the payment or allowance for a different service or procedure already settled. Understanding these payment structures can help providers avoid unexpected reductions in reimbursement.
10. Timely Filing Limit Exceeded: Claims filed beyond the payer’s required days of service can result in denials. It’s vital to know each payer’s filing deadlines and to ensure claims are submitted within this timeframe. This should also be considered when reworking rejected claims to stay within the filing limit.

The Impact of Medical Claim Denials on Healthcare Revenue Cycle

The financial strain caused by medical claim denials is significant, with billions of dollars in revenue lost annually. Moreover, dealing with denials requires considerable administrative resources, pulling time and manpower away from patient care. However, by implementing a robust medical claim denial management strategy, your organization can recoup lost revenue and streamline administrative processes.

Source:   [Fresh Research] • Gitnux

Exacerbating this issue, recent benchmark analyses within the healthcare industry highlight the escalating challenge of claim denials. These studies reveal that the financial repercussions of medical claim denials have surged by 67% over the last year. On average, a healthcare system grapples with approximately 110,000 denials annually. The rejection rate of claims has climbed from 8% to almost 11%, with some regions witnessing rates as steep as 17%. Alarmingly, only 35% of these denied claims undergo correction and resubmission, underscoring the critical need for an efficient denial management strategy to mitigate these challenges.

Impact on Healthcare Providers: Frequent medical claim denials imply a significant loss of revenue and poorly reflect the healthcare provider’s administrative efficiency. Such scenarios may result in diminished trust and credibility with insurance companies, complicating the provider’s ability to negotiate payment rates and contest claim denials effectively. Moreover, repeated medical claim denials consume substantial administrative resources, leaving less time and energy for patient care and other crucial tasks.

Impact on Patients: Medical claim denials can also adversely impact patients. When a medical claim is denied, the financial responsibility often falls on the patient, leading to unexpected out-of-pocket expenses. This financial burden can cause stress and dissatisfaction among patients, potentially losing patients to other healthcare providers. Moreover, medical claim denials can delay receiving necessary treatments, potentially impacting patient health.

Impact on Insurers: Insurers are also affected by frequent medical claim denials. Processing appeals for denied claims requires time and resources. Also, if a particular healthcare provider continually submits erroneous claims, it might lead insurers to view them as unprofessional. This could harm the professional relationship between the healthcare provider and the insurer, making future interactions and negotiations challenging.

Overcoming Medical Billing Errors

Medical billing errors are often the root cause of claim denials, creating unnecessary healthcare revenue loss. By implementing an efficient medical claim denial management process, such as the IMMP (Identity, Manage, Monitor, and Prevent) system, healthcare organizations can identify and correct these errors. This systematic approach ensures all claims are thoroughly reviewed and corrected before submission, reducing the chances of denial significantly.

Cost of Denials: Impact on Healthcare Revenue and Patient Experience

Source: Avoidable-claim-denials.pdf (optum.com)

Denied medical claims affect the financial health of your organization and the patient’s experience. The average cost of resubmission of rejected claims is $14.70 for Medicaid, $10.29 for Medicare, and $17.18 for Commercial Insurers. Not only does it cost you more to appeal against the medical claim rejection, but denied claims can lead to delays in receiving necessary treatments, unexpected financial burdens for the patient, and overall dissatisfaction with your services. By reducing denial rates through accurate documentation, staff training, technology integration, and a robust appeals process, healthcare organizations can enhance their revenue streams while delivering a more satisfying experience to their patients.

OutsourceRCM: Your Partner in Medical Claim Denial Management

At OutsourceRCM, our expertise lies in managing medical claim denials, enabling healthcare entities to reclaim as much as two-thirds of their refused claims, thereby enhancing their financial results. With over 15 years of experience, our data-driven approach can help you navigate the challenging terrain of medical claim denial management.

Avoid Medical Billing Errors and Ensure Revenue Consistency with OutsourceRCM Services:

• Medical Billing
• Medical Coding
• Claims Management
• Denial Management
• Patient Billing and Collections
• Insurance Verification
• Financial Reporting and Reconciliation
• AR Management
• Payment Posting

By partnering with us, you can increase revenue, streamline operations, reduce administrative burden, improve cash flow, ensure compliance, and get expert support. Our dedicated team of medical claim denial management experts and industry professionals are committed to optimizing your revenue and financial outcomes.

Healthcare institutions are increasingly burdened by the issue of unaddressed claim denials, leading to an average yearly financial shortfall of $5 million for hospitals. Engaging with a dependable ally such as OutsourceRCM for medical claim denial management services can significantly decrease claim rejections by 30% and boost your total income by an average of 20% annually.

In conclusion, by mastering medical claim denial management, healthcare providers can stop high claim denial rates and healthcare revenue loss. This mastery and avoiding medical billing errors will ensure revenue consistency, enhance patient experience, and ultimately lead to a healthier financial future for your organization.