6 Common Reasons for Hospital Claim Denials

Posted by Advent Health Partners on May 15, 2017 8:35:00 AM

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Since 2008, the AMA has taken the lead to bring reform to the medical billing/payment system, according to a 2014 article in Medical Economics. While healthcare organizations may still end up with a running 2 to 5 percent denial rate despite their best efforts, the AMA believes a full 90 percent of denials can be avoided from the outset. While insurers have taken the step to increase claims efficiencies with electronic filing systems, even so, provider errors and claim omissions can't be cured merely with improved communications.

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Because of the complexity of claim requirements from each insurer and Medicare/Medicaid, snatching your revenue from the lion's mouth can best be accomplished through dedicated denial management teams and automated technology solutions. An analytical, data-driven approach to claim management will present new costs, but with an average of 3 percent of your hospital's revenue at stake, the ounce of prevention can return a pound of cure.

The most common reasons for hospital claim denials include:

1. Mistakes at Intake

It could be as simple as misspelling a name or street, transposing numbers or forgetting to fill in other patient demographics that ensure a claim will fail from its inception. Also, insurance coverage verification must happen in the registration process before services commence or the hospital and patient could be in for a disappointing surprise.

With all intake data flowing to a centralized database, possible discrepancies can be checked against known data and for typographical errors. Alerts can draw the registrar's attention and embedded rules can disallow final entry until all fields are populated. Verifications of benefits may also be automated at this stage of creating a claim.

2. Lack of Eligibility

While a patient may have coverage, plan changes may have altered their level of coverage. The same system that verifies the existence of benefits can also verify eligibility for the particular services sought.

3. No Preauthorization

With a confusing array of requirements and contractual obligations from the pool of payer organizations, it's no wonder preauthorization can fall through the cracks in care delivery. However, many a claim gets denied on this basis alone.

With an IT vendor that keeps your payers and their requirements sorted out, automated review of claims in progress can catch services in need of permission first before they create headaches on the back end.

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4. Coding Errors

Incorrect or incomplete coding shuts down claims probably more often than any other error once care begins. With the implementation of ICD-10 and its revisions, old processes of coding and updating are failing the mission and costing healthcare organizations for the trouble.

You may already have staff tasked with managing all the codes for each payer, but updates that happen automatically within the system can free up those employees for more efficient claims processing work. Additionally, natural language processing (NLP) and machine learning (ML) technology can detect when selected codes may not fit the services rendered or the treatment plan. Warnings can then prompt the user to verify and revise the claim as needed.

5. Insufficient Documentation

With the Center for Medicare and Medicaid Services commanding a paradigm shift towards meaningful use and value-based care documentation, provider justifications must be far more specific and precise. Physician-entered codes and notes that don't satisfy CMA requirements can earn a denial much more readily these days.

The solution is much like the one for basic coding. Notes and diagnostic work-ups, otherwise known as "unstructured data," can be scanned by the NLP program and alert physicians at the point of care that current documentation may be insufficient for a successful claim.

6. Lack of Medical Necessity

Rooted in points 3, 4 and 5 above, inability to prove to a carrier the medical necessity of a procedure can tank a claim, leaving the denial management team scrambling after clinicians to provide more or better documentation. However, if the claims management application already solved the problems of coding, pre-authorization and documentation, then medical necessity ought not to present a problem.

Data analysis is the best first step towards repairing your entire claims process so that most claims will meet approval the first time around. By setting your technology to extract the data from denied claims, you can discern where your problems lie. Discovering that certain providers or administrative staff seem to have more hospital claim denials will open your eyes to needed course corrections.

By managing your claims against denials before they even leave the billing office, you can bypass the resource-draining efforts to rework claims up to 90 percent of the time. With more compensation coming in on the first claim, and far less leakage from pursuit of inappropriate hospital claim denials, your improved revenue cycle will likely see a significant ROI from your new IT partner.

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Topics: Claim Denials, Claim Denial Management