Insurance Claim

10 Reasons for Insurance Claim Denials: Role of RCM Services

Healthcare providers grapple with the daunting challenge of insurance claim rejections. The more these rejections occur, the more providers must rely on patient payments instead of insurer reimbursements. However, providers can secure timely reimbursements more efficiently by decreasing denials and enhancing the rate of clean claims.

“State of Claims” Report

“The State of Claims” report highlights a concerning uptick in healthcare claim denial rates. Among the 200 healthcare professionals surveyed, three-fourths reported experiencing claim denials 5%-15% of the time, with nearly one-third facing denials 10%-15%. This frequency of denials translates into billions of dollars in forfeited or postponed reimbursements and the added burden of overhauling and resubmitting claims. Unsurprisingly, diminishing these denials is a top priority for those making revenue cycle decisions.

A survey conducted by Experian Health in June 2022, targeting 200 revenue cycle decision-makers, sought to gauge the present state of claims management. 

Despite the longstanding nature of claims management hurdles, the pandemic has thrown new roadblocks to reimbursement. For 72% of the survey respondents, managing claims has become even more crucial now than pre-pandemic. Six operational issues emerged as the primary contributors to the surge in denials. While there’s a clear understanding of technology’s role in refining denial management, many providers are yet to harness the potential of automation to ease additional burdens fully. Could reassessing existing digital solutions help tackle these hurdles and deliver the ROI providers seek?

Claim denials are growing by 10-15%, and cutting them down is the top priority for many healthcare providers.

Survey respondents who indicated an increase in denials attributed this to six main operational challenges, primarily associated with inadequate technology and staffing problems:

  1. 62% reported their organization lacked the necessary data and analytics technology to pinpoint submission issues.
  2. 61% pointed to an absence of automation in the claims submission and denials prevention process as a significant issue.
  3. 46% identified a shortfall in staff training as a significant challenge.
  4. 44% reported a lack of in-house expertise in managing denials.
  5. 33% of respondents indicated that their organization’s technology was outdated and insufficient for effectively handling insurance denials.
  6. 30% noted that staffing shortages were a crucial factor driving healthcare claim denials.

Here are some more prevalent reasons for insurance claim rejections that providers often encounter. These pitfalls can be avoided by correctly applying resources and tools within an organization.

Lack of Prior Authorization

Many insurance companies have a list of services that require prior approval or authorization before they are administered. This is typically for high-cost or specialist services. The insurer wants to ensure these services are medically necessary before they agree to cover the cost. If the healthcare provider does not obtain this necessary approval, it can lead to the insurance claim being denied. In such cases, the service cost could fall on the patient, creating potential financial stress and reducing patient satisfaction.

Incorrect Medical Billing Codes

Medical billing codes are intricate and continuously evolving, often making them complex to navigate. These codes are used to define a diagnosis or a treatment procedure. If a code is entered incorrectly or is outdated, it can lead to claim rejections. This is why medical coders must stay updated with the latest changes in coding standards, such as the International Classification of Diseases (ICD) or Current Procedural Terminology (CPT).

Improper Timing of Claim Filing

Each insurance company has specific timelines within which claims need to be filed. These can range from a few weeks to a few months from the date of service. The claim can be rejected outright if submitted outside this window. It’s crucial for healthcare providers to understand these time limits for each insurer and to ensure their billing processes align with these timelines.

Provider Out of Network

 Insurance companies maintain a network of providers with whom they have negotiated special rates. If a provider becomes out-of-network, they no longer have a contract with the insurance company. Consequently, services provided by out-of-network providers are often not covered or covered at a much lower rate, leading to claim denials or higher out-of-pocket costs for the patient.

Patient Ineligibility

Insurance policies may have specific conditions or circumstances under which a patient is covered. Changes in these circumstances or in the policy itself can make the patient ineligible for the claimed service. For instance, a patient may switch jobs and insurance policies, or their policy may have been updated to no longer cover a specific service. In such cases, claims for services provided can be rejected. Providers should verify a patient’s eligibility and coverage details before assisting, especially for non-emergency issues.

Insufficient Documentation

 Insurers often require detailed documentation to support the services billed. This can include medical records, lab results, or proof of medical necessity. The insurance claim can be denied if the necessary documentation isn’t provided or is incomplete. Providers can avoid this by maintaining thorough and accurate patient records and including all the required documentation when submitting a claim.

Duplicate Claims 

Duplicate claims occur when a service is billed more than once. This can happen due to an error or when a claim is resubmitted without noting that it’s a resubmission. Insurance companies have systems to detect and reject duplicate claims to avoid overpayment. To avoid this, providers should have billing systems that prevent duplicate billing and carefully track claim status to avoid unnecessary resubmissions.

Unbundling of Services 

Unbundling refers to billing each step of a procedure as if it were a separate procedure. Insurance companies often have set rates for procedures that include various components. If these components are billed separately, the claim may be denied. Providers should be aware of bundling rules and bill accordingly.

Services Not Covered by Plan

 Each insurance plan has specific services that are covered and those that aren’t. The claim will likely be denied if a provider bill for a service not covered under the patient’s current insurance plan. Providers can avoid this by verifying the patient’s coverage before providing non-emergency services.

Exceeded Claim Limit 

Many insurance policies limit the number of certain procedures or services they’ll cover within a specific period. The claim may be denied if a provider submits a claim for a service that exceeds this limit. Regularly updating patient records and verifying insurance coverage can help avoid this issue.

By understanding and addressing these common reasons for insurance claim denials, providers can significantly reduce their number of rejected claims and improve their overall revenue cycle management.

The Role of an RCM Vendor in Reducing Claim Rejections

Engaging a proficient Revenue Cycle Management (RCM) services vendor is the most effective strategy to avoid the common pitfalls leading to insurance claim rejections. An RCM partner can boost your clean claim rate to 99%, reducing rejections and maximizing insurer reimbursements. Here are a few ways an RCM vendor can support your organization in minimizing claim rejections.

Expert Billing Team

 A reputable RCM vendor has a skilled billing team that stays abreast of all modifications to medical billing codes, ensuring your claims are always accurately coded. They are also knowledgeable about payer billing cycles, which means they can optimize your claim process to align with the optimal submission times, maximizing your reimbursements.

Claim Scrubbing and Monitoring 

An effective RCM vendor employs claim scrubbing to meticulously examine each claim, ensuring it is correctly filed every time. This process involves double-checking your team’s work, leaving no detail overlooked, and guaranteeing that each claim is submitted correctly the first time. Once the claim is filed, the RCM vendor follows it through to reimbursement, ensuring your practice optimizes payments. If a claim is rejected, the RCM vendor promptly corrects and resubmits any errors.

Automated Eligibility Verification

A good RCM vendor provides your practice with advanced technology that prevents any pre-authorization errors or patient eligibility issues. Automated insurance verification from your RCM vendor ensures your patients have valid coverage before receiving services, thus safeguarding your practice.

Advanced Analytics and Reporting 

A quality RCM vendor provides comprehensive analytics and reporting that can help identify patterns in claim rejections. By examining the data, you can pinpoint common issues that lead to rejections and address them proactively. This can include tracking specific, often rejected codes, identifying providers with higher-than-average rejection rates, or highlighting specific insurance companies that frequently reject claims.

Continuous Training and Education 

An exceptional RCM vendor possesses an expert billing team and invests in their continuous training and education. Given the dynamic nature of healthcare regulations and insurance policies, ongoing training is crucial to keep up with the changes. This ensures the billing team is always up-to-date with the latest coding changes, payer requirements, and industry best practices.

Patient Communication and Education 

RCM vendors can also assist in communicating with patients about their insurance coverage, out-of-pocket costs, and the billing process. This can include explaining the complexities of insurance coverage, educating patients about their financial responsibilities, and answering any billing questions. This proactive approach can help prevent rejections due to patient ineligibility or coverage issues.

Efficient Denial Management

 Despite best efforts, some claims will inevitably be rejected. An effective RCM vendor has an efficient denial management system to handle these rejections. This includes thoroughly reviewing each denied claim, identifying the reason for rejection, correcting the issues, and promptly resubmitting the claim. They also track the outcomes of resubmitted claims to ensure they are paid.

End-to-End Revenue Cycle Management

 Lastly, a top-tier RCM vendor offers an end-to-end solution that encompasses every aspect of the revenue cycle. This includes patient registration, insurance verification, charge capture, claim submission, payment posting, and accounts receivable follow-up. By managing the entire revenue cycle, the RCM vendor ensures a smooth, efficient process that reduces claim rejections and improves cash flow.

Wrap Up

The journey towards efficiency in claims handling and achieving a 95% clean claims rate is not a sprint but a marathon. It involves learning from past mistakes, improving existing processes, and taking proactive measures to ensure a smoother operation in the future. Patients will be more satisfied, your staff less stressed, and your practice’s bottom line will reflect the improvements.

Continual learning and adapting to the ever-changing landscape of independent practices and billing companies is key. That’s why we highly recommend to contact us for additional information about BellMedEx services. It will provide you with the insights and strategies you need to navigate your way to success. Don’t miss this opportunity to elevate your practice and move towards a more efficient, compelling future.

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