10 Most Common Issues Driving Payer Denials for Hospital Systems

Navigating payer denials is a major challenge within the complex ecosystem of healthcare, particularly as hospital systems strive to manage revenue effectively.

The issue is pervasive and growing, with recent data revealing that up to 15% of claims face rejection on their initial submission.

This significant rate of denial not only disrupts cash flow but also places considerable strain on the financial stability of healthcare institutions.

What specific hurdles are causing these setbacks? In this article, I'll dive into the 10 most common pitfalls that lead to these financial setbacks, offering you clear, actionable strategies to tighten up your billing processes and safeguard your bottom line.

1. Lack of Documentation Supporting Medical Necessity

Insurers frequently reject claims when the documentation doesn't adequately justify the medical necessity of the services provided. This occurs because each insurer requires specific evidence that a particular treatment or service was essential for the patient's condition according to established medical guidelines.

Without clear, comprehensive documentation that aligns with these guidelines, insurers may not recognize the legitimacy of the treatments rendered, leading to claim denials. These denials can delay payments, disrupt cash flow for healthcare facilities, and complicate ongoing patient care management.

→ Actionable Tip: To prevent such denials, make it standard practice to comprehensively document every patient interaction. Ensure that treatment plans and procedures are not only recorded in detail but also include explicit justifications that align with payer standards for medical necessity.

2. Incomplete or Incorrect Coding

Errors in medical coding can occur due to a variety of reasons, such as misinterpretation of medical procedures, outdated coding knowledge, or simple human oversight. These mistakes lead to automatic denials of insurance claims because the codes do not match the services provided or fail to meet the specific billing criteria set by insurers.

→ Actionable Tip: To minimize coding errors, it's crucial to provide ongoing training for coding staff, ensuring they are up-to-date with the latest coding protocols and guidelines, such as ICD-10 and CPT code changes. Additionally, implementing regular audits can help identify and correct discrepancies in the coding process before claims are submitted.

3. Failure to Obtain Prior Authorization

Many medical services, especially those that are expensive or specialized, require prior authorization from health insurance providers. Without this pre-approval, claims submitted for these services are often rejected. This results in delayed payments and increased administrative work, as staff must resubmit claims or navigate appeals, which can be time-consuming and costly.

→ Actionable Tip: Set up a strong system to verify if services require prior authorization from the insurer. Make sure to obtain this approval before starting any treatments. This system should include training staff to regularly check insurance coverage details and using software that alerts the team to authorization requirements for specific procedures.

4. Timeliness of Claim Submission

Late claim submissions are a common problem in healthcare billing, often resulting in claim denials. Each insurer has a specific timeframe within which claims must be submitted to be considered for payment. If claims are submitted after these deadlines, they are typically denied, meaning the healthcare provider may not be reimbursed for services rendered. This not only delays revenue but also increases administrative costs as additional resources must be dedicated to addressing and resubmitting denied claims.

→ Actionable Tip: To avoid these issues, it's important to keep a tight schedule on claim submissions. Here’s how you can manage it more effectively:

• Automated Reminders: Use scheduling software that sends automatic reminders to your billing team about upcoming deadlines for each insurer.
• Clear Scheduling: Implement a calendar system that clearly shows when each claim needs to be submitted, considering the different deadlines set by various insurers.

5. Insufficient or Inaccurate Patient Insurance Information

Claims with outdated or incorrect patient insurance details frequently get denied. If the insurance information on file is not current, such as a change in provider or policy number, the claim may not be accepted by the insurance company, leading to unnecessary delays and additional work to correct and resubmit the claim.

→ Actionable Tip: Implement a mandatory protocol to verify and update patient insurance information at every visit to ensure accuracy and prevent claim denials.

6. Mismatched Procedure and Diagnosis Codes

When there's a mismatch between the diagnosis given to a patient and the procedures performed, insurance companies often deny the claims. This happens because the insurance company sees the treatment as not medically necessary based on the diagnosis code provided. For example, a procedure that seems too advanced for a mild diagnosis can trigger a denial.

→ Actionable Tip: Strengthen collaboration between clinical and coding teams by setting up regular meetings, providing joint training, and establishing direct communication channels to ensure diagnosis and procedural codes are accurately aligned, reducing claim denials.

7. Services Exceeding Coverage Limits

Sometimes, the treatments provided to a patient exceed the maximum coverage limits set by their insurance policy, which means the insurance won't pay for these excess services. This can lead to unexpected costs for patients and reimbursement issues for healthcare providers.

→ Actionable Tip: Implement a patient management system that tracks each patient's service usage against their insurance coverage limits. Set the system to alert healthcare providers when a patient is nearing their coverage cap. Ensure the system is regularly updated to reflect any changes in insurance policies or coverage limits.

8. Lack of Clear Admission Criteria

When patients are admitted to the hospital as inpatients without a clear, medically justifiable reason, insurance companies often deny these claims. This happens because insurers may determine that the care could have been adequately handled in an outpatient setting, which is less expensive.

→ Actionable Tip: Develop detailed admission criteria based on medical evidence and insurance provider conditions to determine when inpatient care is necessary. Train both medical and administrative staff on these guidelines to ensure they are correctly applied during patient assessments.

9. Failure to Appeal Initial Denials

Many healthcare facilities don't challenge insurance denials, simply accepting them as final. This approach can result in significant financial losses because some of these denials could be overturned on appeal, leading to reimbursement for services already provided.

→ Actionable Tips:

• Form a dedicated team trained in insurance guidelines and appeal procedures to handle denials and manage appeals.
• Develop clear, step-by-step guidelines for reviewing, responding to, and tracking denials, ensuring compliance with appeal timelines.
• Regularly analyze appeal outcomes to identify trends and refine billing practices, thereby preventing future denials.

8- Daunted by the Start:

Problem: The prospect of starting a business from scratch can seem insurmountable, making the starting line seem impossibly far away. This overwhelming sense of inadequacy keeps them from taking the first crucial steps, despite knowing that the Kingdom of God favors those who step out in faith.

Cost of inaction: If fear prevents them from launching their business, they will never generate potential income from their ideas, potentially leading to lifelong regret and financial strain. This could result in having to remain in an unfulfilling job to make ends meet, suppressing their entrepreneurial spirit and contributing to a sense of personal failure.

Solutions:

• Take Faith-Filled Actions: Don’t wait for everything to be perfect. Just as the Kingdom principles suggest, take small steps forward in faith. Whether it's registering your business, setting up your online store, or sketching out your initial business plan, each action you take is a seed planted for future growth.
• Seize Opportunities: Like the stories shared in "We Got It And You Can Too!", be ready to act swiftly when opportunities come your way. The first step might be the hardest, but it sets the foundation for all the steps that follow.
• Lean on Your Community: Connect with your church, spiritual groups, or business networks. These communities offer not only moral support but also practical resources and networking opportunities that are invaluable when you’re just starting out.
• Pray for Guidance: When overwhelmed by the fear of starting, take time to seek divine guidance. Prayer can provide you with wisdom, courage, and peace, helping you make clear and confident decisions.
• Learn from Every Experience: Embrace both successes and setbacks as part of your growth journey. Each challenge is an opportunity to learn and improve, preparing you for the next steps in your business.

10. Coordination of Benefits Issues

When a patient is covered by more than one insurance plan, confusion can arise over which insurer should be billed first (primary) and which should be billed second (secondary). If this isn't sorted out correctly, claims can be denied because each insurer may wait for the other to pay first.

→ Actionable Tip: Implement a specialized software system that automatically identifies and prioritizes the order of insurers for billing based on coordination of benefits rules. This will ensure accurate submissions and reduce claim denials related to multiple insurers.

I also encourage you to revisit my interview with Dr. Keith Stokes, CEO of DocuCompu LLC. In our conversation, we delved into the critical role of Clinical Documentation Improvement (CDI) Specialists in enhancing healthcare revenue, offering valuable perspectives for anyone focused on optimizing clinical and financial outcomes in healthcare.

Dealing with insurance denials can be a real headache for any healthcare provider, especially when it starts affecting your bottom line.

In this article, we've walked through ten common reasons why claims get denied and shared some straightforward steps you can take to avoid these issues.

Now, I invite you think about how these problems might be showing up in your organization:

• Which denial reasons are you seeing most often?
• What's one action you can take right now to start fixing these issues?
• Do your teams have the tools and training they need to handle these challenges effectively?

Set some goals for tackling these problems. Make a plan, decide who's going to do what, and keep track of how things improve.

If you're finding it tough to get started or you need some expert advice, I'm here to help.

For personalized support in managing healthcare denials and improving your billing systems, feel free to book a call with me. We can figure out the best way to smooth out your billing issues and make sure you're getting the reimbursements you deserve. Let's work together to keep your practice running smoothly and profitably.

To explore these topics further or if you have any questions, feel free to reach out to Dr. Stokes at [email protected].

Visit his website at www.docucompllc.com for more detailed information and resources.

About Herman Williams

Over the last 25+ years as an MD with an MBA and MPH, I have worked with 3 Multi-Million dollar Hospital organizations serving as VPMA and CMO saving millions of dollars and improving quality. I went on to serve as Chief Physician Executive for BDO USA, the fifth-largest professional services firm in the United States.

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Today, I run my own organization helping hospital executives solve their “Burning Issues”.