Top 6 Claims Denial Reasons in 2021 and Lessons to Avoid a Repeat in 2022

Hospital claim denial rates have hit a new high in 2020-21. In the last two years alone claims denial has gone up by more than 20 percent, with the pandemic accelerating the trend. As this trend is expected to go from bad to worse in the days to come, healthcare providers need to constantly improve on the ways to avoid claims denial management. This is particularly true at a time when the virus is manifesting itself in diverse ways and is likely to keep the industry on the brink for some time to come. In this blog we discuss, these trends in details and ways to counter them.

In 2020 hospital claims denials saw a 23 percent rise. Claims denials on first time submission rose from 9% in 2016 and 10% in first half of 2020 to 11 percent by 3rd quarter of 2020.

Top Denial Reasons in 2021 and Ways to Have Them in Control

Errors in Front-End Processes

As per a recent stat, 89% of hospital have experienced an increase in claim denials over the past three years. The same stat says 51 percent have experienced a significant increase. One commonality about claims denial is issues caused at the front-end of revenue cycle management. So, experts believe, a good way to get control over denial management is managing the front-end more efficiently. This can primarily be done by:

• Identifying mistakes such as missing or invalid claim data early. It is established that “scrubbing” claims-required data at the front end can eliminate denials by 50%.
• Educating new customers and an easy onboarding process also helps in eliminating front-end errors. Easy on-boarding means an easy-to-follow billing manual that consists of all necessary fields.
• Establishing metrics to identify customers/departments/employees with the highest rate of errors (incorrect or missing demographics, coding, insurance etc.) on claims.

The success rate for claim denial appeals with private payers has dropped from a median of 56 percent to 45 percent over the past two years.

Denials that Could be Avoided in the First Place

The hardest part about claims denial is that most of them are avoidable. As per a recent stat nearly forty-six percent of denials are potentially avoidable. As a provider your first step should be towards eliminating what is avoidable.  The best way to do this is by

• Having innovative solutions in place to automate front-end processes of the revenue cycle, such as registration, eligibility and verification.
• Develop a denial prevention strategy based on analytics. This will help you exactly figure out where denials are occurring and devise a robust mitigation strategy.
• Have experienced staff to oversee medical necessity, eligibility and registration, verification, pre-authorizations, medical coding, missing claims and services that are not covered.

The most common reason for a denial of a prior authorization request is that the requested medical service or medication as not being evidence-based

Denial Write-Offs

Denial write-offs due to medical necessity are increasing consistently over the last few years. In this case, an organization ultimately “writes off” the revenue as not collectable after unsuccessful attempts and appeals and to recover the claim.

• Having a well-defined process to eligibility verification and pre-authorization. Automating the initial round of the process can speed up results and even improve accuracy.
• In case of manual handling, it always pays to have 2 different teams to handle the two different processes.
• Having a well-developed payment posting process to assist the patient follow-up teams to do timely follow ups on recovering money from patients.

Losing Out On Denial Appeals

In the last few years, the success rate for claim denial appeals from private payers has fallen drastically. Claim denial appeals are appeals made by hospitals to reconsider rejected claims on basis of correct evidence. The most effective way to avoid becoming a part of the trend is:

• Have a special appeal staff by payer. This helps to have a deeper knowledge of unique payer requirements, and help you cite specific contract terms.
• Submit requests in writing with the help of payer-specific appeal templates; include all necessary components and take them through the lens of experts.
• Involve all concerned departments in the appeals process. Teams beyond the back-end, such as pre-authorization, clinical documentation, clinicians etc. can chip in for a successful appeal.

Providers were more successful in appealing for denials from Medicare and Medicare Advantage. The figure increased from 50 percent to 64 percent.

Denials Due to Coding Errors

Like in the past, a lot of denials kept happening because of improper coding. In fact, coding was a top concern for 32 percent of survey respondents. This is one side of the revenue cycle where lot of things needs to be done constantly to catch improper coding issues no sooner than they happen.

• Having a healthy mix of both experienced and less experienced but certified coders; putting experienced coders in charge of the show.
• Training coders routinely with both software and online resources to ensure they are always on top of the changes introduced every year
• Having a multi-level quality control mechanism to investigate every bill for coding issues and keeping a perfect record all identified mistakes

Denial Due to Untimely Filings

One major problem healthcare providers encounter is when claims are denied for timely filing. This happens because each insurance carrier has its own guideline, and it can always get confusing. Also, resubmissions after analyzing a claim can take some time leading to missing of the stipulated time. A good way to avoid untimely claims filings are:

• Having different team of billers each dedicated to specific payers. This ensures specific attention to each payer and staying up-to-date with specific payer requirements.
• Prioritizing claims or claims resubmissions based on criticality, value, etc. and having a proper tracking mechanism can help streamline timely submissions.
• Modern day built-in tools such as Power BI can help manage denials better and allow practices to drill down for root cause analysis

A Flexible Strategy Can Make a Huge Difference

Managing denials will continue to be a tricky affair in the upcoming year and beyond. Therefore, it’s of primary importance to have a proper strategy to deal with it in the days to come. The strategy must be devised to minimize denial in the first place with proactive steps and make overall denial management successful by identifying and correcting reasons for denial, analyzing the reasons for denial and ensuring effective payer contract management.

Ideally, every provider should follow a three-prong strategy. First to nip claims that can be stopped from getting denied in the bud. Second, audit and analyze the denial data to find out exactly where the errors are happening. Examining and bucketing them as per payer, the type of denial, and reason along with the count of errors that occur per type can help providers have a clear picture at any point of time. Based on this everchanging picture, providers need to draw and redraw their improvement targets, such as shifting focus from process to employees to department and training.

Who Are We and What Makes Us an Expert?

This article is brought to you by Medbilling Experts a BPO service provider specializing in denial management, among a host of back-office support services. We have dedicated staff for medical denial management who stay up to date on payer rules and keep fine tuning their checklist to ensure correct and timely claims submission. Over the years we have assisted our clients with timely review of denial and audit data and establish ongoing communication with payers to ensure there is no delay in reimbursements. Get in touch with our experts to know more about our services.