Keep Claim Denial Rates Below 5% With These 5 Time-Tested Techniques

'Denials' and 'rejections' are the two terms that often get confused. But they aren't the same. Claim denials happen when the insurance company reviews the claim but decides not to pay it. This is due to issues like missing information, lack of coverage, or non-compliance with policies.?

A rejection, on the other hand, takes place even before the claim makes it into the payer's system. This is because there's an error in the claim itself, like a mistake in the patient's details, wrong codes, or bad formatting.?

While denials need follow-up and appeals, rejections only need corrections and resubmission. For example:?

• If the claim was denied because the patient's insurance doesn't cover physical therapy. You must appeal or check if the patient has other coverage.?

• In case the claim was rejected because you entered the wrong insurance policy number. You need to correct it and resend it.?

As per the latest survey conducted by Experian Health, 3 out of 4 providers said that the rate of claim denials has shot up between 2022 and 2024. On the financial front, the Journal of Managed Care & Specialty Pharmacy reported that the burden of denied claims costs U.S. healthcare around $260 billion annually. This financial burden is mainly borne by healthcare entities, leading to increased operational costs, cash flow disruptions, and administrative strain.??

The need of the hour is not just to manage denied claims effectively but to prevent them in the first place. To do so, we need to get to the root cause. Below, we’ve tried identifying the most pressing ones.??

Discovering The Root Cause of Claim Denials??

While it's easy to see why a claim was denied by looking at the Claim Adjustment Reason Codes (CARC) given by insurance companies, figuring out the real problem requires a closer look at the medical records, charges, and the details of the submitted claim.??

?Suppose the payer denies the claim and assigns CARC 16, i.e., the claim/service lacks information.?

?To find its root cause, we need to investigate further and get an answer to the 'why'. Why was the information missing:?

• Was it a data entry error by the billing team??

• Did the EHR system fail to populate the field automatically??

• Was the referring provider’s information not entered into the system when the patient was registered? Or is there anything else??

?To let you avoid similar struggles in the future, we've compiled a list of the most common administrative and coding errors.?

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Administrative Errors?

1. Prior authorization is not obtained?

• Many insurance companies need you to get approval (prior authorization) before certain procedures or treatments. If you don’t, they’ll deny the claim automatically.?

• A 2024 study published by the American Medical Association (AMA) found that 94% of physicians reported care delays due to prior authorization issues.?

• The root causes include miscommunication between the provider and payer, lack of awareness of payer-specific requirements, and inefficient tracking systems for prior authorizations.?

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2. Patient information is inaccurate?

• Something as small as a typo in the patient’s name, an incorrect birthdate, or outdated insurance info can lead to a claim denial.?

• A 2023 survey by the Medical Group Management Association (MGMA) highlights that 24% of denials are attributed to incorrect patient information.?

• The root causes include data entry mistakes during patient registration, failure to verify insurance coverage, and patients providing outdated insurance details.?

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3. Claims are submitted after the payer's deadlines?

• Each payer has strict timelines for claim submission, and missing these deadlines often results in non-payment.?

• The root causes include a lack of an automated system for tracking deadlines, inefficient workflows delaying the claim submission process, and overburdened billing staff.?

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?Coding Errors?

1. The wrong procedure code is assigned?

• If the code used for the service doesn’t match what was actually done, the claim has a higher chance of getting denied.?

• According to the National Health Insurer Report Card (NHIRC), coding errors account for 18% of denied claims.?

• The root causes include an absence of training for coding staff, miscommunication between clinical and billing teams, and failure to update coding guidelines in the EHR system.?

2. Use of non-specific code?

• Sometimes, coders use a general or vague code that doesn’t fully explain why the service was necessary, and that creates a problem for the insurance company.?

• A report by the Healthcare Financial Management Association (HFMA) reveals that payers deny approximately 11% of claims due to non-specific codes.?

• The root causes include clinicians not documenting enough detail for precise coding, coders opting for unspecified codes to save time, and limited access to updated coding resources or tools.?

3. Entry of incorrect or missing modifiers?

• Modifiers are little extra details that describe the service, like where it happened or if it was repeated. If the modifier is missing or incorrect, the insurance company might choose to deny the claim.?

• A 2023 report by AHIMA (American Health Information Management Association) found that modifier-related errors cause 14% of coding denials.?

• The root causes include misunderstanding of modifier usage rules, manual entry errors in claim forms, and the absence of regular coder audits to catch mistakes.?

But as it is said, every problem has a solution, it just needs another perspective. In the following section, we’ve discussed the top 5 strategies that are time-tested to keep the claim denials rate under 5%.?

Think A Little Smarter, Be Proactive??

Industry insights reveal that 85% of claim denials are preventable. But, surprisingly, 65% of them are never reworked due to lack of time or knowledge of how to resolve the issue. To keep claim denials below 5%, you need a proactive and structured approach that begins well before a claim is submitted. Each step builds on the previous one to minimize errors. Here are five time-tested techniques explained in the order they should occur to pump up the cash flow.??

Ensure accurate patient information?

This is the first and foremost step that you need to follow. It may seem basic, but even small mistakes like the incorrect spelling of a name or mismatched insurance details can lead to denials. Verify the patient’s name, date of birth, address, and insurance coverage thoroughly at the time of registration. Double-check that the insurance plan is active, covers the service provided, and that the patient has the necessary authorization or referral.??

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Focus on coding accuracy?

After the patient’s visit, assigning the correct codes for the procedures performed and the diagnosis is crucial. Train your team regularly on the latest coding standards and consider using software that flags potential errors.??

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Conduct internal coding review?

Once the claim is prepared, conduct a thorough internal review before submission. This step involves carefully checking all details, including patient information, coding, and documentation. Use claim scrubbing tools or manual audits to catch errors before the claim reaches the insurance company. This extra layer of review helps you identify and correct any inconsistencies or missing information.?

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Monitor the claim closely??

After submission, monitor the claims closely. This means keeping track of claims that have been sent to insurers to ensure they are processed on time. If an insurer requests additional information or denies a claim, respond promptly. Keep a dedicated staff or use automated tools to track claim status and prioritize those that need attention.?

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Analyze denial trends?

Finally, denial trends should be analyzed, and corrective actions should be implemented regularly. Even with all the preventive measures, some claims may still be denied. Review the reasons for these denials and identify patterns. Once you know the underlying issue, train your team to avoid repeating the mistakes.??

?Thus, the key takeaway is don’t delay. Respond immediately. Review, correct, re-submit, and keep monitoring. But, staying on top of the claim denials requires time and effort. In case you are looking for an easier option, then we recommend outsourcing.?

?Here are a few FAQs that address some of the most common queries that you might also have on how medical billing companies can turn the tide.???

1. How do medical billing companies reduce claim denials??

Medical billing companies use advanced tools to detect real-time coding errors, automate critical tasks, and stay updated with ever-changing regulations.??

2. Can medical billing services increase collections for my practice??

Yes, medical billing services can increase collections within the first few months. By managing tasks like claims creation, submission, denial management, and payment posting, they ensure faster turnaround and higher accuracy.?

3. Are medical billing services HIPAA-compliant??

Yes. Medical billing companies follow HIPAA standards to guarantee patient data security and confidentiality. They regularly update their systems to meet the latest compliance requirements.?

4. What tasks can be automated by medical billing services??

Medical billing services automate tasks such as eligibility verification, prior authorizations, credentialing tracking, claim follow-ups, and denial management.??

5. How do medical billing companies handle complex billing scenarios??

With tools like natural language processing (NLP) and machine learning, medical billing companies auto-suggest codes, identify patterns in denials, and integrate seamlessly with EHRs and RCM systems, ensuring accurate and efficient billing processes for complex cases.?

6. What additional benefits do medical billing services offer??

Medical billing services simplify workflows with intuitive interfaces, provide transparent financial analysis, enhance patient care with smart scheduling, and ensure 24/7 support for uninterrupted operations.??

To know more, get in touch with us now.??https://omnimd.com/