According to recent data released by the Kaiser Family Foundation, a non-profit focused on national health issues, 18% of in-network claims were denied by payers in 2017. Denial rates for specific issuers varied around that average from less than 1% to more than 40%. Similar denial rated were reported in 2015 and 2016.
Some sources estimate that $262 Billion in claims are initially denied each year. Sixty-three percent of those claims were recoverable by correcting billing errors. But those recoveries come at a cost of roughly $118 per claim, amounting to roughly $8.6 Billion in administrative costs.
It’s easy to see how denials amount to millions in lost revenue for each large hospital system and tens of thousands for a physician practice. This represents a considerable disruption to any healthcare organization’s revenue cycle. The good news is, much of that doesn’t have to be written off and can be recovered, or better yet, avoided in the first place.
Here are the 7 most common reasons that claims are denied:
- Coding is incomplete or does not follow ICD-10
Each diagnosis must follow the ICD-10-CM standard and include the maximum number of digits for the code being used. There are significant differences between ICD-9 and ICD-10, including expanded injury codes, the addition of sixth and seventh characters, new combination diagnosis/symptom codes to reduce the number of codes, and greater specificity in code assignment.
- Missing information
A denial may be issued for any instance of missing information but it usually is the result of a missing date of an accident, medical emergency or onset.
- Claim not filed within the allotted time
Your denied claim may be otherwise perfect, but if you missed the claim window, it will be kicked back to you. Medicare claims must be received by the appropriate Medicare claims processor within 12 months from the end date of treatment. Commercial carriers have different windows for reimbursement.
- Inaccurate patient information
Is the patient’s name spelled correctly? Is their date of birth correct? Is the gender correct? You’ll also want to verify that the insurance payer is correct, the policy is valid, the policy number is correct, whether the claim requires a group number, verify if the service is covered (exclusions), and the diagnosis code matches the procedure performed (see #1).
- Did you receive preauthorization?
An AMA survey reported that nearly 64% of physicians had difficulty determining which tests and procedures required preauthorization by insurers. Many specialists have claims denied by not following the preauthorization guidelines for insurers.
- Did you upcode or unbundle?
The use of billing codes to get reimbursement for a higher-paying service than what was actually performed is upcoding. Billing services separately that should appear together is called unbundling. Using either of these results in a denial.
- Is the claim a duplicate?
It happens, but it shouldn’t. Duplicate claim submissions for the same treatment for the same patient from the same provider will be denied. This is usually due to a problem with your workflow.
To reduce your percentage of denials, your staff should be trained in best practices from the person who first greets the patient through case management and coding. An error made at any point in the patient’s intake, treatment or coding can result in a denial.
To reduce your percentage of denials, you should review them on a quarterly basis, determine where the problems are, how they can be avoided and train staff or make changes to your workflow to improve your reimbursements.