What Are The Reasons Of Claim Denials?

Reasons Of Claim Denials

Reasons Of Claim Denials

Several factors can increase the claim denials ratio and impact revenue cycle management negatively. It is the primary responsibility of medical billing and coding specialists to file and submit claims accurately and promptly. If their revenue cycle management is prone to errors or inefficient to meet the timeline of insurance payers. Then these medical claims end up in denial and rejections.

Do you know what the average claim denial rate in the US healthcare industry is? According to a recent study by AAFP (American Academy of Family Physicians). The average claim denial in the US healthcare industry alone ranges from 5 to 10%. Now, you have got the idea of ample room for slip-ups that occur while medical billing and coding procedures. Therefore, medical practitioners should adopt innovative medical billing solutions to smartly deal with claim denials. But before learning the preventive measures, let’s probe into the introduction of claim denials.

Claim denials:

When an insurance carrier refuses to honor a request by a person (or his or her provider) to pay for healthcare services. Then the billable claim for such services is considered as a claim denial. These denied medical claims impact the overall efficiency of healthcare revenue cycle management negatively. It also brings up the added financial burden to providers and patients alike.

An insurance company can also deny a claim partially. It happens when your primary medical provider seeks the assistance of out of network providers during a medical procedure. In this way, an insurance company will deny a specific part of your medical claim. It mostly happens when a patient requires immediate healthcare services.

Types of Denied Claims:

Here are the following two types of claim denials;

1. Hard Denials:

These claims are irreversible and completely written off. It is essential to appeal to hard denials. For this purpose, medical billers should resubmit the entire medical claim to insurance payers. Hard claim denials occur due to incorrect claims bundling, missing out on pre-authorization requests, and late submission of claims.

2. Soft Denials:

The factors that cause soft denials include; inaccurate information, coding issues, pending issuance of EOBs, or missing itemized medical bills. In any form, medical billers should pursue the denied claim aggressively. Having said that, they should examine the claims closely for missing or incorrect information. They should contact insurance payers on time to appeal disputed claims. It will help medical providers to reduce denial rates. Hence, this overall claim recovery procedure would help providers to positively impact healthcare revenue cycle management.

Why Do Insurance Payers Deny Medical Claims?

Insurance payers have authentic reasons to deny a medical claim. Generally, insurers deny a medical claim due to the following reasons;

  • Missing patient, treatment or diagnostic information.
  • Medical unnecessary treatments.
  • Out-of-network and non-coverage services.

If a medical claim consists of these errors then it ends up in the form of denial. Therefore, insurance companies send these medical claims back to healthcare providers for payment processing. However, identifying, analyzing and resubmitting these claims takes a lot of time and money. Submitting concise claims as duplicate claims can cause aggravation of insurance payers. For concise claim submission, it is useful to use original claim forms. Since, labeling the claims i.e.  “refilled claim or ‘second request, using upper cases or punctuations may not deliver clear information.

Insurance payers also provide an Explanation of Benefits (EOB) to declare the status of claim whether it is paid, denied, rejected or suspended. Medical billers should constantly stay connected to the insurer’s representatives through calls, emails and faxes. It would help them to stay abreast of the current status of medical claims in real-time. It is quite difficult to deal with claim denials due to the following factors;

  • Involvement of third-party.
  • Inability to extract denial data.
  • Constant change in healthcare information and regulations.
  • Complications involved in the appealing process.

The primary component that contributes to reducing claim denial rate is “early denial intervention management”.  Make sure to request a copy of fee schedules of insurance payers when analyzing claim denials. Also, it is the primary responsibility of medical coding staff to use the right set of CPT codes while preparing medical claims.

Factors That Cause Claim Denials:

Claim denials can occur due to the following reasons.

  • If administrative staff doesn’t verify insurance eligibility and ensure prior authorization.
  • The patients have deliberately or unintentionally mentioned incorrect insurance information and uncovered medical services.

Therefore, medical providers should prevent these information silos from the initial steps of charge capture. They should adopt the right strategies to ensure that there are no claim submission pitfalls that can lead to claim denials.

How To Appeal For Denied Claims?

The Affordable Care Act has codified a specific set of protocols for appealing process of denials for different health plans. When an insurance company denies a claim or pre-authorization request. Then they also provide the complete outline of the appealing process subsequently. Therefore, medical billers should follow an appealing process for individual health plans carefully.

For this purpose, they should keep good records of each step taken during the prior claim submission process. They should capture every piece of information i.e. dates, times, name of insurance company representative and call records with payers. Streamlined medical billing and coding practices reduce the claim denial rate significantly.

If you’re still not able to resolve the claim dispute even after working within your health plan. Then you should request for an external review of the claim denials. In that case, a government agency or other impartial third-party will review the issues with your medical claim. It will help you determine if the medical claim needs to be written off or sent to the patient for medical billing purposes. It will also help you to analyze the claims that require resubmission.

Medical billing and coding specialists should establish clear goals and aggressively follow-up with insurance payers for claim denials. It is necessary to continuously  follow-up on appealing processes with insurance payers. Since, most of the insurance companies don’t approve what they are liable to pay.

Investigate the cause of errors:

Whenever an insurance payer denies medical claims, it also provides a list of reasons for claim denials. Medical billing and coding specialists should find out the cause of errors and rectify medical claims. They should be able to understand the diversity of every health plan of individual payers. It is extremely important to identify the key problems in a denied claim.

An insurance payer can deny a claim based on contractual clauses between the payer and the patient. The most integral part of the claim submission process are;

  • The date of claim denial
  • Claim status.

After analyzing these factors, medical billing specialists should restructure medical claims with accurate information. They should strictly follow the timeline of insurance payers to resubmit medical claims.

How To Reduce Claim Denial Rate?

If a health insurance company denies your claims or a pre-authorization request_ both cause damage to your medical practice financially.  Medical practitioners should adopt preventive measures in advance to avoid claim denials.

You can learn a detailed information about how to avoid claim denials from the following given link;


Stay on top of the medical billing and coding challenges with the right guidelines. Medical Billing Benefits is an insightful healthcare newswire that provides the latest information and updates. Subscribe our newsfeed to get notified about the latest healthcare news.

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