Claim denials pose a significant challenge to healthcare facilities, slow down the reimbursement process, and increase the risk of financial loss to healthcare providers. Understanding the common reasons for claim denial and the causes behind them is vital to optimizing the revenue cycle. In this blog, you will understand claim denials and the common billing mistakes that lead to denials.
Understanding Claim Denials
Understanding claim denials in medical billing and coding is essential to avoiding them firsthand. Claim denial occurs when the provider submits a claim to an insurance company.The company refuses to provide coverage on reasonable grounds. Mistakes include missing and inaccurate data, a lack of prior authorization, changes in payer requirements, inadequate claim submission, code inaccuracies, and many others. The provider must have the expertise to handle these denials in order to avoid financial loss.
AKASA Survey on Claim Denials
According to a recent survey conducted by AKASA on October 17, 2023, prior authorization is the number one cause of claim denials by any insurance company. The survey is based on 350 CFOs and financial leaders at healthcare systems in the USA. The top five reasons include prior authorization, insufficient documents, incorrect patient data, the provider’s eligibility, and utilization management.
Common Reasons of Claim Denial( 1 being the most common)
| Error in Patient Registration( lack of Prior Authorization) | 3.7 |
| Lack of Documentation | 3.8 |
| Incorrect Patient Data | 4.2 |
| Provider’s Eligibility Issue | 4.2 |
| Utilization Management | 4.5 |
| Coding Errors | 4.6 |
| Duplicate Claims | 5.2 |
| Untimely Filing | 5.3 |
Experian Health Report
The health IT firm conducted a survey of 200 healthcare professionals who deal with claims. The report from Experian Health shows the top 3 reasons for claim denials.This includes authorizations, provider eligibility, and code inaccuracies.
The following table shows the percentage of each error responsible for claim denial.
| Reason | Percentage |
| Authorizations | 48% |
| Provider Eligibility | 42% |
| Code Inaccuracies | 42% |
| Incorrect Modifiers | 37% |
| Failure to Meet Submission Deadlines | 35% |
| Patient Information Inaccuracy | 34% |
| Missing or Inaccurate Claim Data | 33% |
| Not Enough Staff to keep up | 33% |
| Formulary Changes | 27% |
| Changing Policies | 27% |
| Procedure Changes | 26% |
| Improperly Bundled Services | 22% |
| Service not Covered | 19% |
Some Common Reasons behind Claim Denials
Following are some of the few reasons behind Claim Denials by an Insurance Company.
Missing and Inaccurate Data
Missing or inaccurate patient information is one of the basic reasons for claim denial. 20-30% of the total claims are denied due to the lack of patient information. The claim is submitted with any blank field such as member ID, patient DOB, the date of the accident, missing modifier, date of the medical emergency etc. Make sure that your coder has double checked every information on the claim form before submission.
Provider Eligibility
Ensuring the provider’s eligibility before rendering services to the patients helps to avoid denials in the medical billing and coding processes. The verification process involves confirming the provider’s eligibility to provide services. It also includes whether the provider is a participant in the insurance network. Verification is crucial to avoid claim denials, as patients might seek treatment from a provider who is not covered by any insurance company.
Prior Authorizations
Prior authorization is necessary to make sure that the procedures and treatments are covered under the company’s policy. Without prior authorization, patients as well as healthcare providers can face serious financial repercussions. Different payers have different pre-authorizations, and the healthcare provider must differentiate them and act accordingly. Failure to cope with this directly leads to claim denials or delayed reimbursement.
Inadequate Claim Submission
Inadequate claim submission is one of the significant reasons for claim denials by insurance companies. It occurs due to a number of factors, such as errors during data entry, lack of updated knowledge of insurance companies, or any issue with the software. This results in delays in payments and increases the work of the staff to deal with the denials.
Manual Processes and Disparate Systems
Relying on manual processes to enter patients’ information and the use of disparate systems can lead to errors. This results in claim denials from insurance companies. Inaccurate data is fetched into the system, which is difficult to manage, leading to inaccuracies. Due to the disparate software systems, the data sharing across the platforms raises security concerns as well. Automation and integrated software are easy solutions to enhance accuracy, efficiency, and secure error-free data sharing.
Changes in Payer Requirements
Constantly changing payer policies and guidelines demand a higher level of adaptability, which is, in most cases, not possible. The healthcare facility is unable to cope with the shifts in billing and coding rules, changes in reimbursement policies, and modifications to documentation. A strong relationship with the insurance company can help the healthcare provider stay informed about the changes.
Lack of Documentation
Incomplete documentation is also one of the most common reasons for claim denial. Insufficient paperwork makes the claim prone to errors which lead to denials by the payers. This is because it is difficult for healthcare providers to assign the right codes for the service. Inaccurate codes make it challenging for the insurance company to understand the medical necessity and accuracy of the services rendered. It is important for the healthcare provider to provide complete documentation that supports the medical necessity and accuracy of the services.
Slow Response and Follow-Through
Effective communication with the insurance company is the key to successful revenue cycle management. Slow response and follow-through directly impact the whole revenue process and timely reimbursement. Smooth relations between healthcare providers and insurance companies are also compromised. On the other hand, prompt communication and swift follow-ups maintain a healthy revenue cycle and strong provider-payer relationships.
Wrap Up
Understanding the common reasons for claim denials is essential to managing the accuracy of the revenue cycle. The factors discussed in this blog pose a real-time challenge for the billing process as well as the financial stability of the healthcare facility. Addressing these issues leads to a streamlined billing process as well as timely reimbursement.
Avoiding claim denials is not an easy task for healthcare internal staff. It demands a team of professionals who handle each step of the billing process effectively. Outsourcing to a medical billing company is the most reasonable approach for any medical facility. Medheave provides you with the specialized services of handling billing and coding processes, revenue cycle management, and lowering the administrative burden of the healthcare facility. Contact us today for error-free claim submission.