Denial Management in Healthcare: 6 Types of Denials and How to Combat Each

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Independent physicians are constantly striving to optimize their revenue cycle management (RCM). This process encompasses everything from patient registration to the final payment of a balance. It plays a pivotal role in the financial health of a practice. Denial management in healthcare is a critical part of effective RCM.

Yet, denials are a formidable challenge that often disrupts the revenue cycle. The key to navigating these challenges lies in understanding critical revenue cycle management (RCM) metrics that can pinpoint vulnerabilities in the system. Then, utilize effective denial management solutions to address the root causes, which will enhance revenue streams and provide a seamless patient experience.

What Is a Denial?

A claim denial occurs when a health insurance company refuses to pay for a service or procedure, leaving the medical practice to bear the cost or pass it on to the patient. These denials can have a cascading effect on independent practices, leading to increased operational costs, delayed payments, and even loss of revenue. 

Understanding their nuances is the first step in addressing them. Consider six specific metrics and strategies that can empower you to mitigate these challenges effectively.

1. Missing or Incorrect Patient Information

One of the most fundamental yet often overlooked aspects of medical billing is the accuracy of patient information. A simple typo or omission can lead to various complications, from denied claims to delayed payments. 

Entering missing or incorrect patient data is a common pitfall in the billing process. For instance, the insurance company may flag a claim due to an incorrect digit in a date of birth or date of care. These mistakes may seem minor, but they can lead to significant revenue loss over time.

To mitigate these challenges, you should invest in robust denial management solutions that can automatically flag inconsistencies and provide real-time feedback. Regular internal audits can also help identify patterns in data entry errors, allowing you to address the root causes proactively.

2. Billing and Coding Errors

Billing and coding errors can have a profound impact on a practice's bottom line and reputation. These mistakes lead to claim denials and lost revenue. They also raise red flags during internal audits. 

One classic example of a billing error is the mismatch between the patient's profile and the procedure billed. If, for example, you bill for a neonatal intensive care unit (NICU) procedure for an adult patient, the insurance company would immediately flag this inconsistency, leading to claim denials and potential audits.

Coding a procedure with an outdated or incorrect code can also cause a denial. For instance, using an ICD-10 code when the industry has transitioned to ICD-11 can be a clear indicator of outdated billing practices.

Another common error is overcoding or undercoding of services. Overcoding is where a more severe diagnosis or procedure is billed than what was provided. On the other hand, undercoding is when a less severe diagnosis or procedure is billed.

Leveraging billing and coding software or outsourcing medical billing to a trusted third party can help in real-time error detection so you can immediately rectify them before submitting claims.

3. Non-Timely Filing

Non-timely filing — failing to submit a claim within a payer's specified deadline — can have severe repercussions for a practice's revenue stream. 

Each insurance payer has a specific window within which claims must be submitted. Missing these deadlines can result in claim denials, leaving you to absorb the costs of the services provided. For example, if an insurance company has a 90-day window for claim submission and you submit on the 91st day, that claim is likely to be denied even if it is valid.

To avoid this pitfall, take measures to ensure you never miss a payer's deadline, even by one day. To do so, you must prioritize efficient workflow management. Gain a clear understanding of each payer's deadlines and set internal deadlines ahead of those to account for any unforeseen delays. 

Implementing automated reminders and leveraging denial management technology can also help you submit claims properly.

4. Lack of Prior Authorization 

Prior authorization — often referred to as pre-certification or pre-authorization — is a process wherein a healthcare provider seeks approval from a patient's health insurance company before delivering services. This approval verifies that the proposed service is medically necessary and will be covered by the insurance plan.

A lack of prior authorization is a common reason for a claim denial. When you skip or overlook pre-approval, the insurance company can refuse to cover the costs even if the service was medically necessary. 

Furthermore, obtaining prior authorization isn't just a one-time task. Insurance policies and coverage criteria can change, so a service that didn't require pre-approval the previous year may need it now. Staying updated on these changes and getting all necessary authorizations in place is crucial.

5. Duplicate Claims

Duplicate claims occur when you submit two or more identical claims for a single service or procedure provided to a patient. They can happen due to various reasons, such as:

  • Clerical errors
  • Miscommunication between departments
  • Issues with electronic billing systems

Payers have systems in place to detect and flag multiple claims for the same service. When detected, the payer automatically denies the claim, leading to slower processing times. So it's imperative to have robust billing systems and checks in place to prevent such errors from occurring. 

6. Dual Coverage Issues

Dual coverage is when a patient is insured under two different policies. This can occur in various scenarios, such as when an individual has a primary health insurance plan but is also eligible for worker's compensation due to a work-related injury. Another common scenario is when a patient is covered under their personal insurance and is also listed as a dependent on a spouse's or parent's plan.

In these cases, complications and denials happen when both insurances are billed simultaneously without a clear delineation of primary and secondary roles. Both insurances deny the claim because they assume the other should cover the costs. 

Such situations delay reimbursements and increase administrative work. Therefore, you should always determine which insurance is primary and which is secondary before delivering services.

How To Stop Denials Before They Start

Denial management in healthcare is critical to the financial health and success of independent practices. Denials can affect your practice's revenue, operational efficiency, and relationships with patients and payers. The key to managing and reducing them is taking proactive measures, streamlining and optimizing claim submission processes, and leveraging the right tools.

PUREDI offers innovative, comprehensive denial management solutions to stop denials before they become issues. Book a demo to see how our wide variety of customized solutions can revolutionize your RCM processes.

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