With claim denial rates expected to rise in coming years, here are some of the most common reasons for non-payment and suggestions for ways to capture revenue for your practice.
Claim denials can be a major source of frustration for physicians and their practice managers, and can have a real impact on cash flow and the financial performance of a practice. “Depending on the office doing the billing, we have seen as many as 35% or more of the claims denied for various reasons,” says Michele Redmond, vice president of Solutions Medical Billing in Rome, New York.
"If office procedures are good in gathering correct information and submitting clean claims, you can still expect to see at least 5% of denials for claims,” Redmond says.
Redmond and Alice Scott, president of Solutions Medical Billing, who have co-authored 15 books on medical billing, are also noticing more errors by insurance carriers than in the past. “Claims can be denied incorrectly,” Redmond explains. “If the person responsible for reading the explanation of benefits (EOBs) doesn’t understand or recognize the error, the provider may lose out on that money.”
On a broader scale, research by the American Medical Association (AMA) indicates that claim denials dropped by 47% in 2013 after a sharp increase in 2012 among most commercial health insurers.
Overall, the denial rate for commercial health insurers decreased from 3.48% in 2012 to 1.82% in 2013. Among all insurers last year, Medicare had the highest denial rate at 4.92%, while Cigna had the lowest denial rate at .54%.
“The National Health Insurer Report Card is the cornerstone of an AMA campaign launched in June 2008 to lead the charge against administrative waste by improving the healthcare billing and payment system,” Ardis Dee Hoven, MD, president of the AMA, told Medical Economics. “The campaign has produced noticeable progress by health insurers in response to the AMA’s call to improve the accuracy, efficiency and transparency of their claims processing.”
Hoven says that the health insurance industry’s efforts to address claims efficiency have a long way to go, and that the AMA report card has consistently demonstrated the inconsistency and confusion that results from each health insurer using different rules for processing and paying medical claims.
“This variability requires physicians to maintain a costly claims management system for each health insurer. The high administrative costs associated with the burdens of processing medical claims should not be accepted as the price of doing business with individual health insurers,” Hoven says. “Although the AMA has advocated for a standardized system, “insurers continue to hold on to their complex proprietary rules that create a variety of paperwork bottlenecks.
“We must move toward an automated approach for processing medical claims that will save precious healthcare dollars and free physicians from needless administrative tasks that take time away from patient care,” she adds.
Next: 15 common reasons for claim denials
Next: Denials expected to surge
Relatively comparable to the AMA’s findings are recent figures from the Medical Group Management Association (MGMA). The percentage of claims denied on first submission is 3.8%, according to MGMA’s most recent study, “Cost Survey Report: 2013 Report Based on 2012 Data.”
Laura Palmer, a senior industry analyst with the MGMA, predicts that more claim denials are looming on the horizon.
“I would expect to see a multitude of denied charges for coding and billing errors when the industry changes to ICD-10 (International Classification of Diseases-10th revision),” she says. “When diagnosis codes change to more specific coding, there may be mismatches with medical necessity and provider payment guidelines. Payers have not changed or may not have released their payment determinations for the new codes.”
According to an estimate by the Centers for Medicare and Medicaid Services, claim denial rates could skyrocket by 100% to 200% in the early stages of coding with ICD-10.
To increase the likelihood of problem-free reimbursement, good office staff training becomes paramount. Staff members should be well-versed in submitting clean claims, and even more important, in understanding why claims are denied.
It takes specific expertise to address a claims adjustment with various carriers as well as to respond appropriately to each denial. Writing an effective appeal for a denied claim is essential to receiving a thorough claims review, Redmond says.
Sometimes staff may be “overworked to the point that they do not have time to work on claim denials, which often seem like the least important job during a busy day,” she adds. “Ignored claim denials are extremely costly to a physician. This is actually one of the reasons that many providers decide to outsource to a professional billing service.
“A lot of money can be lost if the denials are not handled correctly and in a timely fashion.”
The rate of denials has declined steadily as more claims are filed electronically, according to America’s Health Insurance Plans (AHIP), the association representing commercial payers.
Health plans and providers are studying processes to ensure accurate and complete claims submission. Most denials are due to inaccurate or incomplete data, duplicate claims, and services provided before coverage started or after termination.
“Health plans and providers share the responsibility of improving the accuracy and efficiency of claims payment,” says AHIP spokeswoman Clare Krusing. “Health plans are doing their part to streamline healthcare administration to reduce paperwork, improve efficiency, and bring down costs.”