Understanding and Overcoming Claim Denials
Getting reimbursed for the services you provide should be fairly straightforward: provide a service, submit a claim, and receive payment. It sounds simple enough, but a lot can go wrong in this process, from coding and data entry errors made by your practice to complex coding edits made by your payers. The American Medical Association’s most recent National Health Insurer Report Card found that the major payers return up to 29 percent of claims lines with $0 for payment - most commonly because the patient is responsible for the balance but also because of claim edits (up to 7 percent) or other denials (up to 5 percent). Denied claims can be reworked and resubmitted, but there is a cost to your practice. A study by the MGMA found the cost to rework a denied claim is approximately $25, and more than 50% of denied claims are never reworked.
Potential Financial Impact of Denials
Denied claims per physician per month - 99
Rework cost per claim - $25
Rework cost per month - $2,475
Annual rework cost - $29,700
*Example assumes 370 visits per month, one claim line per claim, and a denial rate of 27%.
According to Change Healthcare’s 2020 Revenue Cycle Denials Index, the average denial rate has risen 23% since 2016. “What we found is that at nearly 27%, registration and eligibility remains the top reason for denials and continues to shine a spotlight on the need for innovative solutions that drive greater intelligence and automation into the front end of the revenue cycle.” In fact, the Change Healthcare survey found that three of the top four causes occur at the front end of the revenue cycle, with authorization/pre-certification (11.6%) and service not covered (10.6%) also figuring prominently. In total, half of denials are caused by front end issues.
6 common reasons for denied claims
Timely filing. Each payer defines its own time frame during which a claim must be submitted to be considered for payment. Filing deadlines often range from 90 days to one year from the date of service but may be as short as 15 to 30 days. Failing to submit a claim within the required period results in your practice having to write off those charges; patients generally cannot be billed when a practice has missed the deadline to submit a claim to a payer. Corrected claims may be denied for exceeding filing periods even if the original submission was timely. Before writing off charges for a claim that is denied because filing deadlines were missed, the provider should review the account to determine if a claim was submitted in a timely manner and, if so, provide the payer with proof. Supporting evidence may include the practice management system’s report showing the claim submission date, the clearinghouse’s acknowledgment of receipt and submission to the payer, or the payer’s own acknowledgment of receipt of the original claim.
Invalid subscriber identification. Errors in the insurance ID number submitted on a claim may be the result of inaccurate data collection or entry. Subscriber ID number can at times can change. Staff members must collect and verify the patients’ current information at each visit. Manual entry of information can create errors if letters or numbers are transposed. It is always a good idea to double check the information entered into the billing system. You billing staff should get familiar with particular insurance ID’s. Such as Blue Cross usually has a three letter prefix for their ID numbers. Certain insurances have a set amount of digits for their ID numbers such as Medicare and Medicaid. This will help your billing staff to easily identify incorrect ID numbers.
Non-covered services. Denials for non-covered services may be the result of numerous underlying causes. A service may not be considered medically necessary according to payer policy because of the diagnosis submitted on the claim for for that service. The patient may in fact have received a covered service based on the provider’s documentation, but the proper diagnosis was not communicated to coding a billing staff on the charge ticket. Coders and billers should become familiar with the services their providers render and the common diagnoses associated with those services. To manage non-covered services under Medicare, a practice’s staff must anticipate the need for an Advance Beneficiary Notice (ABN), which explains the practice’s expectation that Medicare will deny payment and informs the patient of his or her potential financial responsibility. In addition, billing staff must know when an ABN form has been issued and communicated this fact on the claim form through the use of an appropriate modifier, such as GA for required ABN or GX for voluntary ABN.
Bundled services. In certain instances, a service should not be separately reported because the work has already been captured as part of another service being billed. E/M service performed on the same day as a procedure will likely be denied and bundled into the procedure code unless an appropriate modifier (i.e. modifier 25) has been added to the E/M service to indicate that the service is significant enough to warrant separate payment. Billing staff should be familiar with these bundling policies. Correct coding initiative edits are another common source of bundling denials. Each quarter, Medicare publishes files of pairs of codes that generally should not be billed together because they are mutually exclusive or one is more comprehensive than the other.
Incorrect use of modifiers. Two of the most common modifiers are 25 and 59. Modifier 25, representing a significant, separately identifiable E/M service provided on the same day as another procedure or service, can only be attached to codes found within the E/M section of the CPT book. Modifier 59 indicates that a procedure or service is distinct from another procedure or service because it occurred during a separate encounter, was performed on a separate organ/structure, was performed by a different provider, or does not overlap usual components of the main service. When modifiers are used incorrectly, the services to which these modifiers are appended will be denied. Practices can help prevent these denials by making sure coding and billing staff are educated on the appropriate and inappropriate uses of common modifiers.
Data discrepancies. Inconsistency in data submitted on a claim will result in denial of services. Examples include a diagnosis specific to female conditions used on a male patient, a flu vaccine billed with a diagnosis describing a pneumococcal vaccine, and a procedure code for neonates billed for an adult patient. Frequently, these denials are the result of transposed numbers or inadvertent data entry errors.
Properly appealing a denial may require some research by coding professionals and sometimes queries to the providers, but the extra work is worth it to ensure the coding is correct, documentation is adequate, and medical decision-making is appropriate before proceeding.