Top Healthcare Billing Issues Resulting in Claim Denials

7 min read

Top Healthcare Billing Issues Resulting in Claim Denials

Healthcare is a necessity for the "customers'' and though it functions as a business, many of the practitioners never entered the field with an eye on business first. For the new practice owner, the established owner and the office manager, patient care takes precedence. However, a successful healthcare practice requires resources dedicated to administrative and business tasks or both the practice and patient care suffers. Despite this need, many practices still struggle with healthcare billing and claim denials.

Unfortunately, the administrative and business side of a healthcare practice dictates its success as much as patient care and experience. Thankfully, the two aren't mutually exclusive and attention to billing issues can boost patient satisfaction and practice success.

Quick Links:

• Why Healthcare Billing Issues and Claim Denials are a Concern
• The Real Cost of Healthcare Billing Issues and Claim Denials
• Top Healthcare Billing Issues Resulting in Claim Denials
• How to Resolve Healthcare Billing Issues to Improve Practice Revenue

Why Healthcare Billing Issues and Claim Denials are a Concern

Healthcare billing issues and claim denials impact both providers and patients and are, therefore, a significant concern.

To start, for healthcare practices, both billing challenges, such as accounts sitting in AR, and claim denials translate to revenue loss. Ideally, keeping items in AR at 35 days or less should be a goal, with anything over 90 days a rarity. Days in AR is an invaluable metric when it comes to evaluating RCM.

Similarly, claim denials mean delayed payment as well and can significantly impact your bottom line. Further, they also increase administrative costs. Managing and rectifying denied claims is a time-consuming process requiring additional resources to investigate and correct errors, appeal denials, and resubmit claims.

Not only do these tasks divert staff from other important duties, but it comes with a significant operational cost as well. In fact, it's estimated that healthcare providers spend nearly 20 million dollars a year on addressing claim denials.

As one might suspect, this resource diversion impacts on operational efficiency. Frequent billing issues and claim denials can disrupt the healthcare workflow within organizations and practices. Staff must spend considerable time addressing these problems, often with a lot of phone calls, which not only reduce overall efficiency and productivity, but also impacts patient care and relationships. This diversion of resources can also affect the quality of patient care and the smooth operation of the practice.

And, when it comes to patient care, billing issues can lead to delays in needed procedures or treatment. In some cases, patients may forego care altogether if they cannot afford to pay out-of-pocket costs while waiting for claim resolutions. And, for providers, that can mean an over 8 point reduction in patient satisfaction, which comes with additional consequences.

Beyond the impact on your practice and patient experience, delays can also add to financial stress on patients. Claim denials may result in unexpected bills or out-of-pocket expenses for patients.

Finally, incorrect billing practices and high rates of claim denials can attract scrutiny from regulatory bodies. Providers must adhere to strict healthcare billing regulationsand guidelines. Failure to do so can result in audits, fines, and legal action, further exacerbating financial and operational challenges.

The Real Cost of Healthcare Billing Issues and Claim Denials

We hinted at some of the bigger concerns with healthcare billing issues and claim denials and noted the very real truth: they come with substantial financial costs, impacting both providers and patients. The burden extends beyond immediate financial losses, influencing operational efficiency and patient care quality and the numbers reveal just how big that impact is.

1. Revenue Losses- According to the American Medical Association(AMA), healthcare providers face an average claim denial rate of 5-10%. For a mid-sized healthcare practice with annual revenues of $10 million, a 5% denial rate could result in $500,000 in lost revenue. If the denial rate reaches 10%, the potential loss could escalate to $1 million annually. Further, a full 65% of those are never resubmittedmeaning that revenue is forfeited.
2. Administrative Costs-Handling denied claims is resource-intensive. The Healthcare Financial Management Association(HFMA) estimates that it costs healthcare providers an average of $25 to rework a denied claim. With some practices handling hundreds of denied claims monthly, the administrative burden can add up quickly. For example, a practice managing 300 denied claims per month would incur $90,000 annually in rework costs.
3. Delayed Accounts Receivable- The longer a claim remains unpaid, the greater the financial strain on the provider. According to the Medical Group Management Association(MGMA), the average time to rework a denied claim is 14-30 days. During this period, cash flow is disrupted, affecting your ability to cover operational expenses. Extended delays can lead to accounts receivable (AR) issues, with some practices experiencing AR days extending beyond 60 or 90 days, further straining financial resources.
4. Patients Receive Unexpected Medical Bills-Claim denials often shift financial responsibility to patients, leading to unexpected medical bills. A study by the Kaiser Family Foundation(KFF) found that 1 in 5 insured adultsreported having a medical bill they could not pay.
5. Delayed or Avoided Care-High out-of-pocket costs due to claim denials can deter patients from seeking necessary medical care. According to a survey by the Commonwealth Fund, 41% of working-age adults reported avoiding medical care due to costconcerns. This avoidance can lead to worsened health outcomes and higher costs in the long term when untreated conditions become more severe.
6. Impact on Workflow- Frequent billing issues and claim denials disrupt the workflow within healthcare organizations, leading to inefficiencies. Staff time dedicated to managing denials reduces the time available for patient care and other essential tasks. MGMA reports that practices with higher denial rates often experience lower overall productivity and morale.
7. Compliance and Legal Risks-Incorrect billing and high denial rates can result in compliance issues, leading to audits and potential fines. The Office of Inspector General (OIG) has increased scrutiny on billing practices, with providers facing significant penalties for non-compliance. In 2022, the OIG reported recouping over $1.1 billion in healthcare fraud settlements, highlighting the substantial financial risks associated with non-compliance.

In short, we're able to calculate the costs, to providers and patients, when it comes to healthcare billing concerns and claim denials. Of course, we need to be able to identify where the problems are so we can reduce or eliminate them.

Top Healthcare Billing Issues Resulting in Claim Denials

Claim denials in healthcare billing can be traced to various issues, ranging from administrative errors to more complex billing complianceproblems. Understanding these common issues can help providers take proactive steps to minimize denials and streamline their billing processes.

Common Healthcare Billing Errors

• Incorrect Patient Information- Errors in patient information, such as misspelled names, incorrect birth dates, or insurance details, can lead to immediate claim denials.
• Incomplete Documentation- Missing or incomplete documentation, such as lack of necessary medical records or insufficient information to support the services billed, can cause denials.
• Coding Errors- Incorrect or outdated medical coding (CDT, ICD-10, CPT, HCPCS) is a frequent cause of claim denials. Using the wrong codes, mismatched codes, or codes that do not accurately reflect the services rendered can lead to rejections.
• Duplicate Billing- Submitting multiple claims for the same service or procedure can result in denials. Providers must ensure that each claim is unique and avoid accidental duplicate submissions.
• Missing Prior Authorization- Certain procedures and treatments require prior authorization from the insurance provider. Failing to obtain the necessary approvals before rendering services often leads to denials.
• Untimely Filing- Insurance companies have strict deadlines for submitting claims. Late submissions, even by a day, can result in denied claims. It is vital to track submission timelines and adhere to them meticulously.

Other Issues Leading to Claim Denials

• Lack of Medical Necessity- Claims may be denied if the insurer deems the services provided as not medically necessary. Detailed and thorough documentation supporting the medical necessity of services can help mitigate this issue.
• Non-Covered Services- Insurance policies have specific exclusions and limitations. Claims for services not covered under the patient's policy will be denied. Providers should verify coverage details before delivering services.
• Coordination of Benefits Issues- When a patient has multiple insurance policies, coordination of benefits (COB) determines the primary and secondary payers. Incorrect handling of COB can result in claim denials. Accurate coordination is essential to ensure proper claim processing.
• Invalid or Expired Codes- Using expired or invalid diagnosis or procedure codes can lead to denials. Providers must stay current with coding updates and ensure that their billing systems reflect the latest code sets.
• Inaccurate Provider Information- Claims may be denied if there are discrepancies in provider information, such as incorrect NPI (National Provider Identifier) numbers or mismatched provider details. Ensuring accuracy in provider credentials and information is critical.
• Coverage Termination- If a patient's insurance coverage has lapsed or been terminated, claims will be denied. Verifying patient eligibility at each visit can help prevent this issue.

The list may seem daunting and a bit overwhelming, but, as we've established, the cost of not addressing these issues can be even more significant. And, thankful, a few of the right tools can help you mitigate these risks to successful and efficient healthcare billing and claims.

How to Resolve Healthcare Billing Issues to Improve Practice Revenue

Resolving healthcare billing issues is crucial for enhancing practice revenue and maintaining financial stability. Thankfully, your tech stack quite literally holds the keys to alleviating many of these concerns.

Automated Insurance Verification

One effective approach is implementing automated insurance verification software. Not only does this reduce claim denials due to coverage issues but it also enhances the patient experience by streamlining the check-in process.

Real-Time Eligibility Checks: Implementing automated insurance verificationtools allows practices to verify patient coverage in real-time. This ensures that services provided are covered under the patient's insurance plan, reducing the risk of claim denials due to coverage issues.

Improved Patient Experience: Automated insurance verification streamlines the check-in process, minimizing delays and enhancing patient satisfaction. Patients are more likely to return to practices where administrative tasks are handled efficiently.

Reduced Administrative Burden: Implementing this solution allows administrative staff to focus on patient experience and care as well as other critical tasks. As a result, practices see increased overall productivity and reduced human error in eligibility checks.

Medical and Dental Coding Assistance

Coding assistance tools help provide rapid coding assistanceusing predictive text and allowing you to easily and quickly select the code you're looking for based on coding standards and guidelines.

Enhanced Accuracy: Medical and dental coding supporthelps leverage both AI and machine learning to accurately code procedures and diagnoses, significantly reducing the risk of errors that lead to claim denials.

Compliance Assurance: These tools are regularly updated with the latest coding standards, ensuring compliance with payer requirements and reducing the likelihood of denials due to outdated or incorrect codes.

Increased Efficiency: Not only does coding assistance reduce errors, but it also frees up staff time, allowing them to focus on patient care and other essential administrative tasks. This efficiency translates to faster claim submissions and improved revenue cycles.

Healthcare Billing and Claims Support

Outsourcing billing and claims to specialized third-party providers can also be highly beneficial. These providers bring expertise and experience in managing the complexities of healthcare billing and coding, leading to higher success rates in claim submissions and appeals. This translates to quicker reimbursements and improved cash flow.

Access to Expertise: Outsourcing healthcare billing and claims to specialized third-party providers gives practices access to experienced professionals who are well-versed in the complexities of medical billing and coding.

Improved Cash Flow: Professional billing companies often have higher success rates in claim submissions and appeals, leading to quicker reimbursements and improved cash flow for practices.

Reduced Overhead Costs: Outsourcing enables practices to reduce the costs associated with in-house billing departments. This cost-effectiveness can positively impact the practice's bottom line.

Healthcare billing challenges and claim denials shouldn't impede your practice's ability to grow, especially when the tools to overcome them are available. If you're ready to see how these workflow solutionscan revolutionize both the administrative and patient care sides of your healthcare practice, book a demowith the iCoreConnect teamtoday.