Exploring Preventable Medical Billing Denials: Strategies to Reduce the 85% of Claims that Can Be Addressed

There are two primary types of medical billing denials: hard denials and soft denials.

• Hard Denials: These happen when a claim is denied outright by the insurance provider. Common reasons include the service not being covered under the patient’s insurance plan. Hard denials usually mean that further appeals won’t recover the denied claim.
• Soft Denials: These denials are more reversible and often arise due to missing data or incorrect information. These claims can be revised and resubmitted for potential payment, allowing for a chance at recovery.

Understanding the differences between these two types is important for developing effective denial management strategies in healthcare practices.

The Severity of Denials

The current state of medical billing shows concerning trends. Since 2016, the average denial rate has increased by 23%, reaching 11.1% of claims denied upon initial submission by the third quarter of 2020. The COVID-19 pandemic has worsened this issue, causing an 11% rise in denials nationwide. Certain regions were disproportionately affected, especially those hit hard by the first wave of COVID-19.

Research indicates that about 50% of denials stem from front-end revenue cycle problems, mainly tied to patient registration and eligibility verification. Registration and eligibility problems account for 27% of all denials, highlighting the importance of accurate patient intake processes.

One major issue is that up to 57.7% of denials arise from “service not covered” issues. This indicates a failure in verifying insurance benefits or a misunderstanding of the services needed by the provider. Furthermore, nearly 17.2% of denials come from missing or invalid claims information, while coding errors also play a significant role in the financial losses seen by practices. Duplicate claims contribute significantly as well, responsible for as much as 32% of Medicare Part B claim denials.

Key Causes of Denials

• Registration and Eligibility Issues: Problems in registration and eligibility verification are major causes of denial. This often results from incorrect or outdated demographic data that complicates the insurance benefits verification process.
• Medical Coding Errors: Incorrect coding practices can lead to a lack of reimbursement for the services provided. Errors may involve using incorrect codes or outdated coding systems, leading to delays or outright denials.
• Service Not Covered Denials: It is essential for practices to confirm that the services offered align with what the insurance covers. Failure to do this results in high denial rates, particularly when procedures are mistakenly assumed to be covered by the patient’s plan.
• Authorization Failures: Many services need pre-authorization from the insurer. Denials occur when this step is not completed, requiring resubmission based on updated requirements from the payer.
• Expired Filing Time Limits: Insurers enforce strict timelines for claim submissions. Missing these deadlines, often due to submission errors or delays, results in automatic claim denial.
• Poor Coordination of Benefits: Denials can also happen when claims are submitted without proper coordination with a primary insurer or when patients provide outdated insurance information.

Strategies to Mitigate Claim Denials

With an understanding of the main sources of preventable denials, healthcare administrators can employ several strategies to effectively tackle these issues:

1. Comprehensive Front-End Training

Training helps staff understand the importance of accurate registration and eligibility verification. Regular workshops and updates on insurance requirements can improve data collection and lessen claim denials.

2. Enhancing Data Accuracy

Implementing processes to verify and cross-check patient demographic information can significantly cut down on denials tied to incomplete or incorrect claims. Using software solutions that integrate with existing electronic health records can streamline this process and improve claim accuracy.

3. Coding Education and Compliance

Regular education for coding staff is important. Accurate medical coding is a key part of billing, and ongoing training on the latest coding requirements can help reduce errors.

4. Utilizing Advanced Analytics

Advanced analytics can help identify trends and common reasons for denials. By using tools that analyze denial reasons, administrative teams can create targeted strategies for increasing success in claims resubmission.

5. Implementing Insurance Verification Protocols

Confirming insurance coverage before providing services is essential in reducing denials. Establishing procedures to verify benefits in advance ensures that services align with the patient’s plan, decreasing the chances of service not covered claims.

6. Outsourcing Medical Billing

Many practices find that outsourcing billing to specialized services can significantly lower denial rates. External billing partners offer expertise, keeping up to date on payer requirements, coding changes, and best practices. This allows healthcare teams to focus more on patient care while ensuring expert management of revenue cycles.

Analyzing the Role of AI and Workflow Automation in Reducing Denials

Maximize Efficiency through AI Integration

Artificial Intelligence (AI) and workflow automation can provide healthcare practices with effective tools for preventing medical billing denials. AI can enhance various stages of the billing process— from patient registration to claims processing.

• Automated Verification: AI solutions can quickly cross-reference patient data against insurance databases, ensuring accurate eligibility checks before services are provided. This reduces human error and enhances efficiency.
• Smart Claims Management: AI technologies can analyze historical claim data to identify patterns in denials. With this information, practices can take measures to rectify potential issues before claims submission.
• Real-time Coding Assistance: Using AI algorithms that help with medical coding ensures that claims submitted for billing match required codes and payer guidance, improving the chances of approval.
• Streamlined Communication: Automated systems can enhance communication between administrative staff and payers. Automated notifications about pending authorizations can keep providers informed about what they need to avoid denial.
• Efficiency in Appeals Management: In denial cases, AI can help prioritize appeals. By clarifying the issues that led to denials, healthcare practices can quickly address and resubmit claims, minimizing delays.
• Data-Driven Decisions: AI solutions can aid in data analysis, helping healthcare administrators identify denial trends and implement specific interventions. Leveraging advanced analytics can tailor strategies to meet particular practice needs.

Integrating AI and workflow automation into the billing process helps medical practices reduce administrative burdens and enhance accuracy. This ultimately leads to better patient experiences and improved financial results.

The Importance of Continuous Monitoring and Education

It is clear that focusing on reducing denials is not a one-time effort but an ongoing process. Regularly reviewing denial trends, success rates in claims processing, and staff training can support a culture of efficiency within the practice.

Data indicates that about 85% of denials are preventable, yet 24% of these denials cannot be recovered. Medical practices must build a strong framework to identify issues, apply corrective actions, and continuously educate employees on new trends in billing and coding.

By proactively addressing potential issues before they escalate to denials, practices can safeguard their revenues and maintain the quality of care for their patients. A comprehensive approach that mixes educational resources with advanced technology will contribute to an effective medical billing process and lead to better operational success.

Where healthcare administrators, owners, and IT managers succeed in reducing denials, they can improve their financial performance and enhance patient trust and satisfaction in their practice.