Best Practices for Medical Claim Recovery: A Guide for Healthcare Providers

Wage inflation, rising costs, lagging patient and service volume, and pandemic-driven uncertainty continue to put enormous pressure on healthcare organizations’ bottom lines, exacerbated by unresolved claims denials that cost hospitals $5 million per year, or 5 percent of net patient revenue.

Over the past five years, hospital claims denial rates have increased by more than 20%, reaching 10 percent or more. Sept. 20, 2022, MGMA Stat poll confirms that staffing (58%) remains the greatest challenge for medical practices heading into 2023, ahead of Expenses (20 percent), Revenue (17 percent), Technology (2 percent), and Other (2 percent). Nearly 20 percent of claims are denied, and 60 percent of returned claims are never resubmitted, according to industry averages. Reworking or appealing denials costs practices $25 per claim and hospitals $181 per claim.

Denial does not automatically write off claims. Two-thirds of rejected claims are recoverable. Success—and lower recovery costs—requires a strategic approach to meet payer requirements.

Medical Claim Recovery Obstacles

Healthcare providers face medical claim recovery challenges despite technology and process improvements. These issues can hurt healthcare organizations’ revenue and finances. These issues must be addressed to maximize claim recovery and revenue.

Coding errors often cause claim denials or payment discrepancies. Inaccurate coding delays reimbursement and risks regulatory non-compliance. Denials and delayed reimbursements also affect cash flow and revenue cycles. Claims recovery strategies begin with identifying and understanding these challenges.

Medical Claim Recovery:

Unpaid or underpaid medical claims are recovered from insurance companies and other payers. Claim submission, adjudication, denial management, and follow-up are involved. Healthcare providers must understand this process to succeed.

Medical documentation is essential for claim recovery. Documentation ensures services are coded and justified. This supports the claim and reduces denials and reimbursement delays. Effective strategies start with understanding claim recovery basics.

Claims Denials: Step-by-Step Resolution

Problem Identification

Preventing denied claims is the best way to minimize financial losses. The MGMA recommends understanding the main reasons claims are rejected:

1. Prior authorization – Claims may be denied without prior authorization.
2. Missing or incorrect information can include a blank field (e.g., Social Security number or demographic information), an incorrect plan code, or a missing modifier.
3. Medical necessity requirements not met – The policy does not cover medically unnecessary healthcare services, and the payer disagrees with the doctor about what services you need.
4. Procedure not covered by payer – Reviewing a patient’s plan or calling their insurer before submitting a claim can usually avoid this.
5. If the provider is out of network, the payer may deny the claim.
6. Duplicate claims – Claims submitted for the same patient, provider, and service item on the same day.
7. Coordination of benefits – Patients with multiple health plans may experience delays or denials until their coordination of benefits is updated.
8. Bundling – The payer groups two services and pays one lower fee.
9. Services already included in the payment of another service or procedure – Payment is adjusted because the benefit for the service is included in the payment or allowance for another service or procedure that has been adjudicated.
10. Exceeded timely filing limit – Claims filed outside the payer’s required days of service should be factored into reworking rejected claims.
11. Understanding why claims are denied and how to resolve them is crucial to preventing or minimizing the financial impact of claims denials. Contractual obligations (CO), other adjustments (OA), payer-initiated reductions (PI), and patient responsibility (PR) are denial codes.

CO-4 is used when the procedure code does not match the modifier or the adjudication modifier is missing. Using the procedure-specific modifier prevents this. PI-204 is used when the patient’s current benefit plan does not cover the service, equipment, or drug, and PR-1 is used when the patient’s deductible has not been met, and the bill should be sent to the secondary insurance or patient.

Avoiding Denial

Claimants want payment. Sending clean claims the first time is the easiest way. The right people in the right positions with the right training and operating procedures are needed to ensure coding and billing departments run smoothly and efficiently.

Even with everything in place, denials happen. When they do, the goal is to correct the error, get paid, and determine how to prevent future mistakes. Again, people and processes enable that goal.

Denials should generate corrective actions to reduce and reoccur and improve failure mode detection. This process assigns responsibility for completing each action by a payer-mandated deadline. It also involves reassessing and rescoring the severity, probability of occurrence, and likelihood of detection for the top failure modes and post-resolution evaluation to determine the efficacy of corrective actions.

Zero-tolerance for preventable denials, most of which are caused by revenue cycle action or inaction, is the first step. An adequate audit system to verify the claim is clean before it leaves the building can prevent many denials. Missing authorization numbers, plan codes, or truncated codes can cause avoidable denials.

Despite careful pre-submission review, some claims will be denied. “Not medically necessary” denials are the worst. To appeal medical necessity denials, stay on top of them.

Properly appealing a denial may require coding professionals to research and query providers, but the extra work is worth it to ensure correct coding, adequate documentation, and appropriate medical decision-making before proceeding. Provide medical records and, if needed, articles, images, or a provider letter to justify the service.

Finally, evaluate internal workflows and train staff to stay current. Run reports to identify denial patterns so preventive actions can be taken within the payer’s required time frame—which can be as short as 90 days—and analyze denial data to identify trends, patterns, and opportunities to prevent future denials.

Resolve a Claim Denial

By outsourcing medical claim recovery, healthcare organizations can benefit from the expertise and resources of these dedicated professionals, who have in-depth knowledge of billing regulations, coding guidelines, and payer requirements. They utilize advanced technologies, data analytics, and proven strategies to identify and resolve claim discrepancies, appeal denials, and expedite reimbursement.

Review the denial reason

Understand why an insurance claim was denied to resolve it. Examine the insurance company’s denial notice to find out why. Diagnoses, treatment plans, and documentation may be problematic. Practice Solutions billers can advise you on claim denials based on their years of experience.

Appeal the denial

Appeal the insurance company’s decision if you disagree. This may involve writing to the insurance company to justify the claim. An independent review board may hear your case. Practice Solutions billers handle appeals. Your biller will need your help with supporting documentation and understanding the situation to build a case, but they will follow each insurance company’s filing method to maximize appeal chances.

Insurance company negotiations

Negotiate with the insurance company if the appeal fails. This could involve lowering treatment costs in exchange for insurance company reimbursement. Follow these steps to resolve denied insurance claims and ensure your patients receive care. It takes time and effort, but your patients deserve the best care.

The Right Technology Solutions

Fighting denials requires technology. Claim editor or “claim scrubber” software processes professional and institutional claims for payers. The medical necessity database identifies all codes and captures significant complications that are often missed in extensive, complex records. These solutions edit diagnosis, medical necessity, procedure, claim-level technical, OPPS, and file format codes.

The medical claim scrubber solution automatically matches ICD-10 diagnosis codes with CPT/HCPCS codes and ensures that the claim meets all national coding standards. One-click code validation saves time and money.

Mitigating Losses

Denials cannot be eliminated, but a strategic approach based on best practices, data analysis, automation, and other technology tools can reduce their impact on the bottom line. Successful denial management requires time and monitoring. However, reducing write-offs to near zero is worth the effort to protect a healthcare organization’s revenues and bottom line.

References:

1. Harrop, C., & The people who make medical practices run are at the heart of successful operations — take even a few of them away and things can get messy. Case in point: The effects of the Great Resignation were already the biggest challenge facing medical groups in an. (n.d.). Healthcare in 2023: Staffing is still the biggest challenge for practices as financial worries grow. https://www.mgma.com/data/data-stories/healthcare-in-2023-staffing-is-still-the-biggest-c
2. Angus WhyteAngus is a writer from Atlanta. (2020, March 12). Topics in recovery: Obstacles to treatment. Evolve Treatment Centers. https://evolvetreatment.com/blog/obstacles-to-treatment/
3. WriterBookmark, S. N. (2014, December 3). 3 things you must know about overpayment recovery. American Medical Association. https://www.ama-assn.org/practice-management/claims-processing/3-things-you-must-know-about-overpayment-recovery
4. Meyer, S., & More than 3 out of 4 (76%) healthcare leaders say denials are their greatest challenge. (n.d.). 4 keys to driving down denials. https://www.mgma.com/resources/revenue-cycle/4-keys-to-driving-down-denials
5. (2020, March 10). 6 steps to prevent denials • Advantum Health. Advantum Health. https://www.advantumhealth.com/6-steps-to-prevent-denials/
6. License for use of “physicians’ current procedural terminology”, (CPT) Fourth edition. Claim Denial Resolution Tool. (n.d.). https://cgsmedicare.com/medicare_dynamic/jc/claim_denial_resolution_tool.asp