Practices must identify reasons for non-payment and find ways to capture revenue.
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 percent 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 percent 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.”
Claim Denial Trends
On a broader scale, research by the AMA indicates that claim denials dropped by 47 percent in 2013 after a sharp increase in 2012 among most commercial health insurers. Overall, the denial rate for commercialhealth insurers decreased from 3.48 percent in 2012 to 1.82 percent in 2013. Among all insurers last year, Medicare had the highest denial rate, at 4.92 percent, while Cigna had the lowest denial rate, at .54 percent.
“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 health care 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 result 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 health care dollars and free physicians from needless administrative tasks that take time away from patient care,” she adds.
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 percent, according to a recent MGMA 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 CMS, claim denial rates could skyrocket by 100 to 200 percent 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,” says Redmond.
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 health care administration to reduce paperwork, improve efficiency, and bring down costs.”
15 Common Reasons for Claim Denials
- A duplicate claim was submitted when a practice hadn’t received reimbursement.
- The patient isn’t eligible for services because his or her health plan coverage has ended, and the patient hasn’t shown proof of new insurance.
- A patient hasn’t met the deductible for the calendar year.
- Some services are bundled. For example, laboratory profiles with multiple tests don’t qualify for separate reimbursements, or an all-encompassing rate covers the minor procedure and the preand post-procedure visits. The provider receives one combined payment.
- The benefit has been exceeded, such as the maximum allowed number of physical therapy visits covered by the health plan within a calendar year.
- The claim form is missing one or more modifiers, or the modifier(s) are invalid for the procedure code (as in the case of bilateral codes billed on both sides).
- An inconsistent place of service is marked on the claim form, such as an inpatient procedure billed in an outpatient setting.
- A particular service isn’t covered under the plan’s benefits, or there appears to be a lack of medical necessity. In another example, there could be a mismatch between the actual diagnosis and the service performed.
- The claim is deficient in certain information. It may be missing prior authorization or the effective period of time within which the preapproved service must be provided for reimbursement to occur.
- When the physician isn’t an innetwork provider, the insurer may pay a lesser amount if the patient has out-of-network benefits.
- There is a coding or data error with mismatched totals or mutually exclusive codes.
- It may be necessary to coordinate benefits when dual coverage issues arise, such as with secondary insurance or worker’s compensation.
- The filing deadline has passed. If a claim isn’t submitted to the insurer within the permitted time frame, it is likely to be rejected. The limit to file can be as short as 90 days from the date of service.
- Errors or typos were made while collecting pertinent information from the patient or during the data entry process for a claim.
- The claim includes outdated current procedural terminology (CPT) codes, or it lists deleted or truncated diagnosis codes.
By Susan Kreimer
Adapted, displayed, and reprinted with permission from Medical Economics, May 10, 2014. Medical Economics is a copyrighted publication of Advanstar Communications, Inc. All rights reserved.