Tips on Processing Denied Medical Claims

Tips on Processing Denied Medical Claims

Even in the most efficient medical billing department there are claim denials. While top performing practices enjoy denial rates of less than 5 percent, some practices experience denied claim rates of 10 to 30 percent.

The first step in improving your financial performance is to understand exactly why claims are imagesdenied. Once that information is obtained, you can determine what needs to be done to dramatically reduce claim denials and increase the number of claims that are paid with first-time medical billing.

If your medical practice is losing funds due to denied medical claims, it could affect the overall functionality of the facility. Payers have developed more barriers for payments during the last decade, which involves contractual obligations such as claims data, referrals, and other stipulations. The computer systems of payers are quite sophisticated these days, so it is easy for them to determine payment algorithms that resemble contract requirements.

Much of the claims approval process is done by the computer software, and for some payers, the algorithm appears to be “deny when in doubt.” Also, payers anticipate that only a few medical practices will actually follow up with denied claims, resubmit them in corrected format, and/or file an appeal. Therefore, denial of medical claims saves the payer money.

The Basics of Processing Denied Claims

  • Determine the number of claims being denied.
  • Identify the main reasons for these denials.
  • Develop a tracking and reporting process to allow your practice to determine the overall performance.

Tracking and Reporting

When tracking and reporting denied claims, the medical billing manager must have knowledge of the billing practice system. This requires entering the denials so that they can be evaluated. If the billing personnel posts the payments electronically, then the data is readily available.

However, if you do not have electronic payments, or the payers do not offer this option, then the denied claims must be entered manually as zero payment remittances in the system. Once the data is entered, measure for:

  1. The number and dollar value of denied line items.
  2. Total claims filed to a payer, with total charge amount.
  3. Percentage of those denied (1 divided by 2).
  4. Percentages for the entire medical practice.
  5. Percentages by payer, provider, reason, specialty, and location.

Main Reasons for Denial

To count the number of denials by reason, you should identify the categories needed to use to track these denied claims. The most frequent reasons claims are denied are:

  • Registration – Such as incorrect payer, insurance verification, or unidentified patient.
  • Charge entry – Such as diagnosis codes or invalid procedures.
  • Referrals and pre-authorizations
  • Medical necessity – Such as CPT mapping and ICD-9.
  • Documentation
  • Duplicates – Second CPT on same date.
  • Information from the patient
  • Bundled and non-covered – Such as modifiers.
  • Credentialing

This is not a comprehensive list, and as you familiarize yourself with the denials, new categories may arise.

Denial Reporting

The medical billing department should have a system in place for denial reporting. If you do not have denial reporting, consider if you have actionable data to allow for making necessary changes and to track improvement over time.

To focus on the most common reason for denials, you need to identify comprehensive details. This way, you will know if the reason is related to the provider, location, specialty, or location. This knowledge will allow you to reduce the claim denials and increase your collection performance.

A Roadmap for Change

To understand the basics of denial management, consider denial data as a “roadmap for change” in the medical facility. Each time you lower the denial rate you bring more revenue in to the practice. This way, you get the claim paid correctly and eliminate all the work required for processing the denied claim.

Most patients become confused and frustrated when dealing with insurance and payments. They need adequate representation to resolved claim issues. Physician offices should only appeal once. If the claim is denied, the patient should accept responsibility for this problem.


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