Introduction
It has been perfectly said that revenue is not revenue until it’s fully collected. Millions of healthcare claims are annually denied that cost billions of revenues lost to healthcare facilities. According to a survey conducted in 2024, around 15% of all claims submitted to Medicare Advantage, Medicaid, and private payers are initially denied. The stakes are worryingly alarming for individuals both for healthcare providers and hospitals.
That’s why denial management in Medical Billing has become such an important topic of debate in the Medical Billing industry. A well-organized, regulated, and thought-out strategy is essential to effectively manage medical denial and to collect all of the revenue you have earned.
If you are looking for an explanation of why healthcare providers are denied payment. Here we will extensively guide you by sharing different scenarios, perspectives, and circumstances that lead to the denial of a Medical Bill. Medical Billing denials refer to when a healthcare provider is denied reimbursement from an insurance company for the healthcare services or products it had agreed to cover.
When an insurance company denies the medical claims of a healthcare provider, it can cause a huge revenue loss to healthcare providers which proves a huge financial setback to his practice.
Major Reasons Behind Claim Denials
There are multiple reasons behind claim denials in Medical Billing such as healthcare provider giving services may not be medically appropriate. Denial Management services in the Medical Billing field extend beyond medical care services. Apart from medical care services, other possible reasons could be a situation such as insurance providers would not pay for certain things like diagnostic tests, devices, and other services that are not covered by the insurance policy. If a healthcare provider is not properly licensed or is not licensed by an accredited entity, claims may be denied. In this article, we’ll explain what a denial in Medical Billing is, why it occurs, and what providers can do when they face a denial.
Most Common Denial Issues in Medical Billing?
Denial in Medical Billing definition refers to a situation when an insurance company refuses to pay for healthcare services they have agreed to cover. The possible underlying reason could be that the services or products might not meet the policy or guidelines of the insurance policy or the healthcare provider overcharging the insurance company. Claim denials in Medical Billing are categorized into two denial types soft and hard; some can be re-sent while others can’t.
This blog will share different types of claim denials and demonstrate how to avoid those claim denials through our time-proven tips and industry-best strategies.
Common Categories of Claim Denials
One of the major causes of constant annoyance for healthcare providers and hospitals is claim denials which leads to reduced cash flow and operational inefficiency, causing a huge revenue loss to the practice.
Hold on! It is not uncontrollable. Many denied claims can be avoided through the right process and expertise. At the same time, it is not possible to completely avoid denials. You can significantly reduce the chances of claim denials occurring in the first place and impact your bottom line by improving your understanding, and expertise, and enhancing your experience. Here we discuss the industry-best strategies you can use to avoid claim denials.
Eligibility Denials
Eligibility-related denial is the mostly used denial in Medical Billing that often results from the patient’s information that was not properly obtained during preregistration. The best way to avoid such denials is to make sure to collect all the necessary information related to a patient ahead of time. By doing so you can significantly reduce denials but not all eligibility denials. Another option before billing the claim is to rerun eligibility checks. It will serve as a coverage discovery tool to search for active coverage on a patient.
It is also worthwhile to employ all options available to search for active coverage on patients to reduce eligibility-related denials.
Missing Data-Related Denials
This is the type of claim denial that occurs due to invalid or missing data. Such type of denial is typically considered soft denial which can be usually fixed and resent for reimbursement. These denials occur when submitted data does not fulfill the required guidelines and criteria of the payer, indicating that vital data is missing. In most cases, you can easily avoid such denials by integrating a full edits collection into your denial management software, which prevents your claims from being submitted with incorrect or missing data.
Authorization Related Denials
Most of the authorization-related denials result in hard denials. They are beyond the repairing process, and no patient payment can be recovered. There could be two possibilities behind this denial, either the required authorization was not obtained before the service provided or the authorization number included on the claim is invalid. Medical billers often obtain prior authorization, but insurance companies still deny the claim due to an eligibility issue such as the patient’s coverage was changed or expired after receiving the authorization. Payers frequently assign expiration dates or time limits to authorization numbers which required to be used within the given timeframe, if not used within that particular time, resulting in claim denials.
Non-Covered Service Denials
Denial of non-covered services is always hard, so you have the least chance to recover any money from these claims. When such denials occur, it is most often due to the payer’s plan that does not cover the provided services. It could also occur due to the patient staying at the hospital days longer than the number of days allowed as per the insurance policy. Other possible reasons could be noncompliance with managed care plan restrictions etc.
Inadequate Documentation Denials
Adequate and detailed documentation is essential before providing healthcare services. If the required detail of the patient is not documented, it typically leads to soft claim denials. In this type of denial, greater chances are you may correct any error and resubmit the claim. These documentation-related denials are due to a lack of gathering patient information; either the documents requested can not be provided at all, or they can be provided but not received. But in such circumstances, documents always arrive late, not meeting the specified time frame of the payer. In other cases, insufficient or inadequate information cannot be received, and the claims are not denied. However, you can easily appeal these claims, possibly by completing and submitting extra details as per the payer’s requirements.
Why is Denial Management Important?
Traditional denial management strategy focuses on resolving denials after they are denied. But the reality is entirely different. Healthcare providers need to devise proactive strategies that help find out the reasons behind claim denials in the first place to prevent future denials.
Medical Necessity Factor
Another reason possibly leading to claim denials is the payer’s assessment of whether the treatment provided to the patient was medically necessary or not. If the service provided is not considered by the payor as medically necessary, the payer denies covering it. Sometimes denial is caused because of providers’ negligence as they avoid time-consuming and costly rework to ensure that claims are compliant, accurate, and complete from the start. As denials become more costly and the most common denials in Medical Billing, it is essential to streamline denial management on a priority basis.
The Provider-Payer Relationship
One of the major challenges that healthcare providers face is the provider-payer relationship. According to a survey by the American Hospital Association (AHA), 78% of healthcare facilities say that relations with commercial payers are getting worse, with 84% saying the cost of compliance with insurer policies is rising. Healthcare providers report that they spend much of their time on prior authorizations, yet a growing pile of denials includes pre-authorized services.
AI VS Traditional Denial Management Method
Healthcare providers who employ traditional denial management methods are starting to fall behind. Insurance payers have been increasingly adopting AI-based technology that is far more fast, accurate, and transparent, allowing them to process and deny claims at an unprecedented rate.
Apart from being more time-consuming, laborious, and error-prone, traditional methods also cause revenue loss for a healthcare facility. The most viable option with healthcare facilities is to deploy the latest AI technology to avoid denial in your Medical Billing services. Additionally, denial management software could also prove largely useful to improve the standard of your Medical Billing definition.
FAQs
What are the two types of claim denial appeals?
The two types of claim denial appeals are first-level appeals and second-level appeals. First-level appeals involve resubmitting the claim to the insurer for reconsideration, while second-level appeals escalate the issue to a higher authority for further review.
What does denial stand for?
In healthcare, denial refers to the rejection of a claim by an insurance company for reasons such as incorrect information, lack of coverage, or non-compliance with policy terms. It prevents reimbursement for the provided medical services.
What are the common reasons for claim denials in Medical Billing?
Denials meaning refers to the rejection of a claim due to issues like incorrect patient information, coding errors, lack of medical necessity, or failure to meet insurance requirements.
What steps are involved in denial management in Medical Billing?
Denial management involves identifying the reason for denial, correcting errors, resubmitting claims, and following up with insurance companies to ensure timely reimbursement.
How can denial rates be reduced in Medical Billing?
Reducing denial rates requires accurate coding, proper documentation, verifying patient eligibility, and ensuring claims comply with payer guidelines.
Why is timely follow-up important in denial management?
Timely follow-up ensures that denied claims are addressed quickly, increasing the chances of successful appeals and minimizing delayed reimbursements.
How does Pro Medical Billing Solutions effectively handle denied claims?
Pro Medical Billing Solutions leverages expert knowledge, precise coding, and proactive follow-ups to quickly identify and resolve denied claims, ensuring higher reimbursement rates and minimal delays for clients.
