5 Common Reasons for Claim Denials

When a patient's insurance claim is denied, not only can your cash flow be affected, the relationship with your patient can be damaged as well. Some claim denials can be successfully appealed, but even when appeals succeed, they can temporarily leave claim status up in the air - something both your practice and your patient would like to avoid.

Understanding common reasons for claim denials is key to preventing them. The insurers your practice works with may offer software tools to help you prevent claim rejections (which are claims that aren't processed due to clerical errors) and claim denials (where claims are considered, but payment is denied) so it's important that you are aware of these tools and utilize them. Here are the top 5 reasons why claims are denied, and how you can avoid these situations.

1. Pre-certification or Authorization Was Required, but Not Obtained

Neglecting to get pre-certification (or pre-authorization, or whatever term the particular insurer uses) can cost your practice and your patients' money and can seriously decrease patient satisfaction. Knowing which insurers require pre-authorization and for what is essential.

In some cases, your medical billing software can assist by flagging certain procedures and insurers so you'll know what to do. Additionally, it's better to get pre-authorization for a procedure that isn't ultimately done, rather than to do a procedure and try to get retroactive authorization for it.

2. Claim Form Errors: Patient Data or Diagnosis / Procedure Codes

Claim rejections (which don't usually involve the denial of payment) are often due to simple clerical errors, such as a patient's name being misspelled, or digits in an ID number being transposed. These are quick fixes, but they do prolong the revenue cycle, so you want to avoid them at all costs. Incorrect diagnosis and/or procedure codes can result in claim denials. While these situations can often be successfully appealed, again prevention is better. There's no substitute for well-trained coders and the use of powerful medical billing software.

3. Claim Was Filed After Insurer's Deadline

Different insurers impose different deadlines for claims submissions, and they have different policies about what you can do when you miss a deadline. In some cases, you can clear things up with a phone call, but in others, you may have to fill out more paperwork.

You may be able to use your medical billing software to notify you of claims submission deadlines and procedures to follow when you miss one. In general, however, it's best to submit claims as soon as possible after services are rendered so your revenue cycle doesn't slow down.

4. Insufficient Medical Necessity

Sometimes an insurer won't pay for a procedure it believes to be medically unnecessary. These can be difficult situations for all parties, but you may be able to avoid them. In any case, where medical necessity isn't clear-cut, good communications among clinicians, medical billing staff, insurers, and patients is essential so everyone makes informed decisions.

When a claim is denied due to medical necessity, your practice could be forced to either absorb the cost of the services or attempt to collect the entire payment from the patient, neither of which are good options.

5. Use of Out-of-Network Provider

Insurer networks can change from year to year, and patients may not realize this, or that changing insurance companies may change which medical providers they can see and receive full benefits.

Ascertaining patient insurer information at the first opportunity (during appointment booking or registration) can allow your billing staff to determine whether your practice belongs to a patient's insurer network, and if not, what sort of benefits (if any) the patient can expect. Again, your medical billing software can assist with this by keeping you apprised of which networks your practice belongs to.

Conclusion

Nobody likes having to work through claims that are denied and it increases the time it takes for you to get paid for services. Fortunately, there are many steps you can take to minimize the risk of this happening. Great communication with patients and with insurers, well-trained coding professionals and front desk staff as well as exceptional medical billing processes can all help you prevent claim denials and the headaches that go along with them.