Claim Denial Triggers Healthcare Organizations Should Not Ignore  

It is no secret that the constantly increasing volume of claim denials is one of the most pressing challenges for providers already grappling with staff burnout and rising operational costs. Most of these denials are recurring and systemic in nature, affecting the entire revenue cycle, and therefore, demand a thorough root cause analysis and a robust feedback mechanism for their prevention. Moreover, denial prioritization is essential while working accounts receivable (AR) to prevent revenue loss, which is a pain point for providers. 

A recent study by the Healthcare Financial Management Association (HFMA) revealed that unresolved denials can cost providers up to 5% of their net patient revenue, underscoring the need for robust claim denial management. 

Another report by the American Hospital Association (AHA) that surveyed 1,300 health systems and hospitals highlighted a staggering surge of 56% in Medicare Advantage denials and a 20% spike in commercial denials between January 2022 and July 2023, indicating the depleting cash reserves of providers and the urgency for them to address claim denials to maintain their financial stability. 

Interestingly, about 90% of the claim denials can be prevented with effective front-end, mid-cycle, and backend improvements. Since most of them emanate from workflow design challenges, claim denial management can be taxing if providers do not have the right resources at their disposal to make workflow improvements.  

Cash flow disruptions calling for effective denial management 

Claim denials not only disrupt the cash flow for providers but also significantly affect the financial health of their practice. By taking a proactive approach toward claim management, providers can improve their clean claim rate, enhance collections, and focus on high-quality patient care. 

Navigating claim management complexities while keeping up with changing payer trends and industry regulations can be challenging without efficient revenue cycle management (RCM) support in place. Thus, there is a need for providers to understand the reasons behind recurring denials and reconsider their RCM strategy to minimize them.  

Decoding claim denials and the reasons behind them 

Claim denials occur when the insurance company refuses to reimburse the provider for the services rendered to the patient. These denials mostly happen due to coding errors, incomplete or inaccurate patient information, and lack of proper prior authorization. Changes in payer requirements and delays in claim submissions may further complicate the AR process, resulting in denials and delayed or reduced payments. Read on to learn more about common denial causes and why understanding them is critical to effective claim denial management. 

Inefficient eligibility checks and incomplete documentation

Errors during patient eligibility checks and incomplete or incorrect patient documentation are common triggers for claim denials. These can be easily avoided with the implementation of advanced technologies like artificial intelligence (AI), business intelligence (BI), and robotic process automation (RPA), along with human intervention with subject-matter expertise, ensuring accurate and quick validation of information to minimize potential denials. 

a) Coverage limitations and insufficient benefit verification: Payer policies specify certain limitations and exclusions in the coverage for various patient procedures. Many payers also impose restrictions on the number of visits or permissible treatment frequency in a calendar year or similar treatment, if rendered. That’s why it’s important to know the fine print and have a complete understanding of the coverage provided by the payer, while duly informing the patients of their financial responsibility as well before rendering any services to them to avoid denials at a later stage. It also includes checking for benefits from out-of-network providers. 

b) Coordination of benefits (COB):  COB denials occur due to unclear patient insurance policies, especially when the patient owns multiple policies, and it is difficult to determine which one is the primary and which one is the secondary policy to coordinate benefits correctly. Avoiding COB denials is important for improving the cash flow and, most importantly, ensuring the patient gets the appropriate coverage. 

Pre-authorization issues

Most clinically complex and high-cost patient treatments require pre-approval from the insurer. Failing to secure this approval prior to any procedure often invites an outright denial, causing unnecessary financial burden on the patients and providers alike, especially in high-cost treatments. RCM experts can minimize the rate of such denials, as they are well-versed with changing payer requirements to ensure providers have necessary authorizations before they render any services. Besides, they can also help mitigate episodes of insufficient provider utilization due to last-minute cancellations. 

Coding errors

Medical coding and billing are intricate processes, demanding the highest level of precision, timeliness, and adherence to payer and regulatory guidelines to avoid ambiguities, reduce denials, and facilitate speedy reimbursements. Even minor CPT and ICD-10 coding or modifier-related errors can result in revenue loss due to denials, which can otherwise be prevented. Outsourcing denial management to companies with certified and trained medical coders and billers can reduce payment delays by ensuring meticulous claim filing and timely submission. 

Medical necessity

Payers may deny claims deeming the treatment as medically unnecessary based on the patient documentation. This often calls for expert intervention that can not only ensure accuracy in documentation but also review and work the claim in such a way that substantiates the medical necessity of the treatment while ensuring the submitted documentation aligns with the payer guidelines, thus not only reducing the chances of denial but also enhancing the chances of getting paid on the initial submission itself. 

Claim duplicity and late submissions

Resubmitting claims without proper corrections can further lead to denials, increasing the administrative burden for the providers and straining their relationship with the payer. Besides, failure to submit the claims within the payers’ timeframe can also result in denials. Outsourcing claim and denial management can prove a game changer in such scenarios for providers lacking the time and resources, ensuring accurate charge capture and timely claim submission.   

Mismatch in POS and procedure

It is important to ensure the place of service (POS) matches the setting where the treatment is rendered to the patient. Besides, it’s equally important to ensure that the service being done should also be payable at that POS. Any mismatch or service-related limitations can result in a claim denial. Thus, correct POS coding is vital before claim submission.

Incorrect provider credentialing

Payers can deny claims when services are rendered by out-of-network providers. This could either mean that the provider is not credentialed with the insurer, or that the payer has processed the claim incorrectly. Verifying the in-network status of providers beforehand is crucial to avoid such denials. 

While inaccuracies in prior authorization, eligibility verification, and coding constitute the majority of claim denials, other factors also play a significant role in affecting the cash flow due to denials. Thus, establishing a robust claim denial management practice is crucial for ensuring precision at all levels. 

By actively monitoring common denial reasons, providers can devise strategies to streamline their process and reduce denials. These strategies may include imparting regular training to staff for compliance assurance and implementing advanced technologies to automate repetitive tasks for reduced errors. Additionally, establishing clear internal communication within the system and external communication with the payers can improve claim management.