Claim denials may be a significant financial hardship for healthcare practices and providers of all sizes. They are difficult to avoid and costly when they occur, which is why having a comprehensive plan in place to handle them is vital.
This tutorial will help you comprehend three major subjects:
• How to claim denials may harm your healthcare provider company
• What types of rejections exist and how to prevent them?
•Why adopting a denial management solution is critical to boosting your bottom line.
By the end, you’ll understand not only how to prevent denied claims. But also how to deal with them when they occur. But first, let’s define a claim denial and how it’s handled.
What are Claim Denials and Claim Denial Management?
When healthcare recipients’ patient-consumers purchase healthcare services or goods, other third parties, known as payors, cover some or all of the expenses. These payors are typically insurance companies or government programs.
In the medical billing process, the healthcare provider sends a claim to the payor, who will either accept and pay the claim or deny or reject it and not pay it.
Rejections often occur when a mistake is discover prior to or during the processing step. Denials, on the other hand, occur after a claim is processed. As a result, they are particularly tough to control, which is where claim denial management comes in.
The Major Effects of Denied Claims on Healthcare Providers
Denied insurance claims are the most visible and direct financial consequences for physicians, hospitals, and other healthcare billing companies.
A claim denial, for example, causes a payment delay that might last forever, implying that a specific service or treatment is never paid for. Depending on the severity of the rejection and the breadth of the payment, a single claim denial may not have a significant influence on the medical billing process.
However, making a pattern of ignoring these rejections might result in significant long-term expenditures that a healthcare provider may never be able to recoup.
Beyond the Immediate Costs: Long-Term Consequences of Claim Denials
The immediate payment delay caused by a denied claim is far from the only effect it might have on your practice. The payor may provide the majority of claim denials payment. All it may take is rewriting the claim, double-checking its accuracy, and resubmitting it.
However, this is not always the case.
In some cases, the job of rectifying a claim can be difficult and time-consuming in and of itself. The labor of re-submitting a corrected claim costs roughly $120 on average, however this varies based on the fees, research, manpower, and resources needed for each particular claim.
For claims that cost significantly more than the average, it may be cheaper to let the claim go unchecked and bear the loss. In other circumstances, invoicing or engaging the patient may damage your payor-provider relationship, resulting in further PR and opportunity costs down the line.
Claim Denial Types Affecting Healthcare Providers
The consequence of a denied claim is frequently related to the cause for the rejection, which might affect the next actions for the patient, provider, payor, and any other parties involved. To that end, there are three broad categories that include the majority of causes for claim denials:
Administrative denials, often involve one or more coding mistakes upon submission.
Clinical denials, typically involve more technical evidence specifics in a given instance.
Coverage rejections, frequently involve specifics about the offered health insurance policy.
Although there is some overlap, these are the most prevalent. Let’s take a closer look at each of them, what causes them, and how to cope with them.
How to Deal with Administrative Claim Denials
The most typical cause for a payor to deny a healthcare claim is administrative or technical in nature. Mistakes in the medical coding that the provider provides to the payor are directly tied to administrative errors. Denial codes are generated as a result of the mistakes, and they reflect what went wrong with the medical claim.
A rejection tagged with CO, for example, is tied to a Contractual Obligation. But one classified with PR is related to Patient Responsibility. These codes also indicate what should to do with denials. E.g, a CO denial should be addressed internally, but a PR denial may need to be billed to the patient.
More Adjustment (OA) and Payor Initiated Reduction (PIR) are two other prevalent codes (PI). These are varied and connect to a mix of clinical and policy concerns.
How to Handle Clinical Claim Denials
Another typical reason why a claim you submit to a payor may be refused is for “clinical” grounds. These often concern whether or not the therapy obtained by the specific patient or client is deemed “medically essential” or “acceptable” by the payor.
The criteria used to establish need or appropriateness will differ based on the payor, the patient, and the policy. They usually concern the type or extent of service(s) or product(s) supplied, the length or duration of therapy, and how they interact with the patient’s health condition(s) or illness (s).
Dealing with these is also very varied and requires thorough communication with the patient, payor, and all other parties engaged in therapy.
How to Handle Policy Claim Denials
Finally, the fourth sort of typical claim denial is connected to specific policy coverage specifics that would (or would not) cover the payment in the issue. These are the most varied, since they may entail a combination of coding mistakes and medical necessity. Appropriateness issues outside of the typical realm of administrative or clinical denials.
Your patient, for example, may have a special insurance plan that excludes reimbursement for specific treatments or types of drugs, such as more experimental possibilities. To reduce expenses associated with payor rejections in cases like these. It’s critical to broaden the area of communication and collaborate closely with both the payor and the patient before, during, and after the issue develops.
Improving the Management of Claim Denials
Given the effects of claim denials and the varied causes for them. It’s critical to take an active role in managing denials with your insurance provider.
Three critical steps comprise prevention and navigation:
Active comprehension: To better plan for future billing cycles, gather information on your patients and payors, their rules, and previous denials.
Processing Integrity: Optimizing the timeliness and accuracy of initial claim submission and any necessary reparative work, including resource allocation for denials
Establishing Relationships: Despite rejections, communicating honestly with all stakeholders and providing openness to develop good, long-term partnerships
Read more tutorials about denials management.