Medical Billing Denials

Denial is one of the most daunting words for healthcare providers. The practice's entire revenue cycle and cash flow rely on timely clean claim submission. When a claim is denied, it severely impacts cash flow. Medical billing denials occur when the payer refuses to reimburse healthcare providers for the services rendered to the patients. Given the complexity of the medical billing process within RCM, errors can lead to claim rejections, resulting in substantial revenue loss for healthcare providers.

What is denial in medical billing?

Denial in medical billing is when an insurance company refuses to reimburse the individual (or their provider) for services obtained from a healthcare provider. Medical billing denials are persistent challenges for healthcare providers, impacting the practices’ cash flow, operational efficiency, and overall revenue. While medical billing denials can be avoided, they can never be completely eliminated. Healthcare providers that reduce denials in medical billing–even by a small margin–see a substantial impact on their bottom line. Practices that understand denials can manage them better.  

Denial management in medical billing

Denial management in medical billing is the process of minimizing claims rejected by payers. It involves preventing, investigating, analyzing, and resolving denied claims for services provided by healthcare providers. Denial management experts submit medical claims to the payers for payment of medical services, procedures, or supplies. Payers adjudicate the claims, and if they are error-free, payments are released. However, if errors are found, insurance companies reject or deny the claims.

A key aspect of denial management in medical billing is performing a denial trend analysis and creating a strategy based on the findings. An effective management strategy involves addressing common issues like documentation or coding errors. It may also involve less specific problems like fostering strong bonds and understanding between healthcare providers and payers.

Denial code in medical billing

Denial codes in medical billing are standard alphanumeric codes assigned by payers to indicate the reasons for claim denials. These codes help healthcare providers understand the specific issues causing denials, allowing them to rework and resubmit claims effectively.

Fabric of denial codes

CO (Contractual Obligation) - Denotes the contractual agreement between payers and providers. It indicates if the claim is included in another process or service already adjudicated.

PR (Patient Responsibility) - Indicates that the amount is due from the patient. It includes payments like deductibles or copays.

CR (Correction and Reversals) - Represents medical billing errors. These codes handle claim reversals and necessary corrections.

List of denial codes in medical billing

The list of denial codes in medical billing is comprehensive. Below are some of the most common and essential codes used by payers.

How to handle denials in medical billing

Denial management in medical billing can be handled in two phases: claims can either be prevented from happening, or they can be appealed, reworked, and submitted. Simply adding more people to the denial management team won’t effectively prevent or reduce rejections unless the entire process is streamlined. Here are the most effective denial management practices healthcare providers should follow.

Understand denials

Proper denial reporting is essential for healthcare providers to manage denials appropriately. Practices need solid analytics to understand the denials. Providers must understand the root cause, types of denials, and their volume’s impact on the bottom line. Additionally, practices must analyze the report sent by payers, which includes denial codes, types, age, remark codes, and financial amounts.

Adopt a holistic approach

A large number of similar types of denials can be addressed in one go. Practices should appoint experts to detect these issues, work on solutions, and create a future prevention plan. Healthcare providers should involve a managed care department for large, complex denials. Instead of sending the same appeal multiple times, seek a solution from the managed care department that can offer a comprehensive approach for claim treatment with a particular payer.

Appropriately route denials

Healthcare providers must have an efficient EHR system to route denials effectively. It becomes convenient if all claims are in one place, allowing the denial management team to seamlessly filter or focus on them. Centralizing all denials helps healthcare providers prioritize claims and direct them to the appropriate people. Here’s how healthcare providers can group their claims.

• High-dollar claims
• Time-sensitive claims
• Denial types
• Personnel specializing in handling specific types of denials

Separating denials by type can enhance the effectiveness of the process. Denial types may include eligibility denials, missing documentation requests, etc. Routing denials to the right place and person helps manage them better. The most urgent claims and the best denial management strategy depend on payers' and organizations' issues. Create a priority list and work on what is the most important.

Get the right people

Denial management is one of the most complex and time-consuming processes in the RCM cycle. It requires subject matter expertise to avoid future complications. Having the right people in the right roles is the most effective strategy in any process, and medical billing denial management is no exception. Some denials require industry expertise due to their complexity, making it essential for healthcare providers to have the right individuals handling these cases.    

Denial trends identification

Healthcare providers must track the reasons for denials to identify areas for communication and resolution. Below are some of the most common reasons for initial payer denials.

• Missing documentation to support the necessity of a treatment
• Failure to obtain prior authorization or missing patient eligibility
• Incorrect or missing patient information
• Issues with physician documentation
• Medical coding errors
• Duplicate claims
• Untimely billing

Involve patients

When there are coverage or coordination of benefits issues, healthcare providers must communicate this with patients. Looping in patients and supporting them expedites the appeal process and helps build stronger patient relationships. Providers must share information they know about the claims, reasons for rejection, and future steps. They can also engage with patients directly, involving payers in the conversation to resolve issues on the spot.

Track and update missing details

Denials can occur when healthcare providers lose track of details or fail to update the required information on time. There are chances that practices have new providers whose information is missing due to deadlines. Keeping track of missing information helps providers update records proactively instead of addressing faults only when they get critical.  

Automate the process

In the past, technologies like RPA were not very effective in denial management. However, healthcare providers can now see meaningful impacts with advancements in technologies like LLM and AI. There are two types of denials: complex denials, that require experienced billers to handle, and simple denials, which can be managed using technology. While automating the entire denial management process is impossible, healthcare providers can automate tasks like prior authorization, eligibility verification, etc., allowing the staff to focus on complex, high-dollar tasks. Healthcare providers can also hire experts who are well-versed with technology and can incorporate automation in their solutions.

What is authorization denial in medical billing

Authorization denial in medical billing occurs when the insurance company denies prior permission to perform a particular procedure or offer treatment to patients. This denial often happens if the payer believes that the proposed process or treatment is not medically necessary. The primary aim of prior authorization is to ensure patients receive the most cost-effective treatment. Here are the most common reasons for prior authorization denials:

• Incorrect codes, misspelled names, and other clerical errors
• Lack of information on alternate treatments already tried on the patients
• Unclear information on why the proposed treatment is important
• Absence of proof based on the clinical data provided in the papers

Prior authorization denials in medical billing are not complex and can be avoided. Here are the best practices to manage authorization denials:

• Promptly check the billing codes
• Spell the names correctly
• Offer complete details for the suggested treatments
• Outline all the treatments given to the patients
• Attach evidence-based clinical guidelines to back the claims

How can we prevent denials?

Preventing denials is more cost-effective and convenient than appealing to them after the claim comes from the payer. Healthcare providers must thus create a strategy to identify and detect the causes of medical claim denials. Practices must also implement preventive measures and inculcate regular reporting. Here are the methods to prevent denials.

Form a denial management team

Healthcare providers should form a team of experienced people solely responsible for managing denials. It helps them detect and resolve denials more effectively. Denial management experts immediately process the denied claims, detect issues, offer resolution, and submit the appeal. They are responsible for collecting payments from the payers if claims get rejected. The denial management team’s primary goal is to study each denial systematically, identify the root cause, and create a process to minimize denials in the future.

Detect the causes of denials

The causes and types of denials can be detected and resolved in groups. Causes of denials could be incorrect billing, non-covered services, missing information, etc. The reason for denials is usually mentioned by the payer when sending the denied claims. Causes of denials should be communicated to the right department along with the necessary education to correct it. Training sessions should be conducted on how to prevent denials.

Promptly attend the denied claims

The process of denial appeals is complex and should be attended immediately. If the claim denials are not attended immediately, the healthcare provider could miss the resubmission deadline or it might get missed entirely. Denials affect the reimbursements that impact the revenue of the organization. Thus, they must be immediately addressed.

Set up a checklist

Missing information is the most significant cause of medical billing denials. Healthcare providers must have a denial prevention checklist that needs to be marked off before the claims are submitted. A checklist should be a mandatory step as it would significantly increase reimbursements.

Monitor all denials

Healthcare providers must have a record of denials received, claims submitted, reason, and status. This helps to detect the root cause of denials and measure the performance of the denial management team. It also helps to provide the necessary education the department needs to prevent denials.

Other measures to prevent denials

• Appropriate medical billing and coding training for the staff
• Collect proper patient information and medical records
• Submit calms on time
• Stay updated with the regulatory changes and compliance
• Implement a robust insurance eligibility and benefits verification system
• Analyze denial generation and revenue generation regularly

What to do after receiving a claim denial?

All the denied claims must be immediately addressed to avoid the complete loss of revenue. If the healthcare provider receives a claim denial, they must follow the following steps:

Review the denial notice

Reviewing the denial notice sounds very obvious, but it's the most important step in denial management. The notice consists of the reason the payer mentioned while rejecting the claim. Practices must cross-check the denial reasons with the policy coverage and detail the insurance company provided. Knowing the reason for denial helps to rectify them quickly and avoid it in the future.

Verify information

Healthcare providers must verify the information offered while submitting the claim, including spelling, codes, and dates mentioned. Minor mistakes or lack of documentation may also lead to claim denials.

Understand the policy

Practices must thoroughly go through the patient’s policy and understand the terms of coverage. A list of treatments or those that require authorization must be listed. Understanding the denials helps healthcare providers to understand denials based on the patient's policy.

Don’t delay in contacting payer

Submitting and resubmitting claims timely is vital to collect payments. If healthcare providers fail to do so, the chances of getting paid accurately are reduced. Payers can also reject the appeals or reconsideration if they are not submitted on time.

Collect supporting documents

Healthcare providers need to collect all the necessary information before submitting the claims. Missing documents would lead to further denials. The list of documents includes medical records, billing statements, and correspondence.  

How to avoid denials in medical billing?

While medical coding denials can not be eliminated, they can be avoided. Avoiding denials would help healthcare providers control their revenue cycle and cash flow better. Here’s how healthcare providers can prevent denials in medical billing:

• Promptly verify the insurance and eligibility of the patients before starting the treatment. Producers not covered under patients' policy must be informed beforehand.
• Collect complete and accurate information from patients.
• Take prior authorization for the particular services necessary, verify the referrals, and check the medical necessity of treatments.
• Appropriately code and bill the process.
• Stay updated with medical billing and coding guidelines
• Understand the payers and their policies
• Submit clean claims on time
• Use automation and technology wherever possible
• Ensure accurate documentation and data entry
• Regularly monitor, analyze, and audit claims

PCH Health's approach to managing denials

PCH Health offers end-to-end denial management services to healthcare providers across the US. Our medical billing denial management services are backed by skilled staff support and automation. We collect patient information accurately, eliminate errors, and submit clean claims. Our denial management

• Denial trend analysis
• Denial appeals
• Denial sorting and classification
• Denial prevention
• Denial assessment

We also educate our clients on denial management strategies and help them prevent rejections. We correct invalid or improper medical codes, work on prior authorization, offer correct documents, and detect the causes of denials. Do you want to learn more about our denial management solutions? Connect with our experts today.