According to the U.S. Centers for Medicare & Medicaid Services, private and government health insurance payers process over 5 billion medical claims annually. A complaint submitted to the U.S. Department of Justice stated that nearly 95% of these medical claims are transferred electronically via EDI clearinghouses.
Since the rise of electronic medical claim filing, clearinghouses like Change Healthcare have been the bridge between healthcare providers and insurance payers. They oversee the seamless exchange of electronic medical data while scrubbing, standardizing, and screening the claims for submission to payers.
Continue reading as we discuss the role of clearinghouses in clean claim submissions, understand what clearinghouse rejections mean, and familiarize ourselves with the common clearinghouse rejection codes to rework claims more efficiently.
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What are Clearinghouses in Healthcare?
Think of clearinghouses as middlemen that stand between healthcare providers and insurance payers. Their primary purpose is to collect and screen medical claims for errors and missing information before forwarding them to the insurance payers for processing.
They act as an extra layer of quality control, ensuring that each claim forwarded to the insurance payer is valid, accurate, complete, and compliant, thereby expediting reimbursement collections. However, clearinghouse rejections occur when the claim submitted by the healthcare provider is erroneous and requires reworking.
In the USA, healthcare clearinghouses can be any private or public entity that exchanges electronic data (e.g., medical claims) in compliance with the Health Insurance Portability and Accountability Act (HIPAA). Hence, clearinghouses must ensure data security and protect patients’ privacy.
What Does a Clearinghouse Do During Claims?
Healthcare providers submit electronic medical claims to a clearinghouse for screening and claim scrubbing. Clearinghouses review these claims for accuracy, validity, and completeness. They examine the details, section by section, to identify mistakes like inaccurate or missing information. For example, they use claim scrubbing software to spot and highlight incorrect or incomplete patient and provider data or medical codes and modifiers.
Moreover, most clearinghouses receive medical claims in a format that is unacceptable to the insurance payers. Here, the team reviews the payer’s submission guidelines and reformats the medical claims accordingly.
Claims not requiring rework are transmitted electronically to the correct insurance payer through a secure connection for processing and reimbursement collection. Whereas a clearinghouse rejection is triggered for claims that need rectification. The erroneous claims are reversed to the healthcare provider with clearinghouse rejection codes and their blurbs. Providers must fix the issues and resend claims for clean claim submission.
10 Common Clearinghouse Rejection Codes
Before we demystify the 10 most frequently encountered clearinghouse rejection codes in the medical billing world, let us clear one misconception. A clearinghouse rejection does not equate to a claim denial. Clearinghouses screen your claims first to ensure that properly formatted, accurate, and complete claims are sent to the insurance payers, giving them little to no room for denying claims.
Clearinghouse rejection means you have time and the exact instructions you need to fix the errors in your medical claim and resend it for first-pass claim submission. But for that to happen, you must be familiar with the common clearinghouse rejection codes and know what each indicates. With an in-depth understanding of the root causes of your claim rejection, you can quickly rectify the errors and avoid the same pitfalls in the future.
So, let’s get down to it.
Provider’s Name is Missing or Invalid
Healthcare providers often encounter clearinghouse rejection in medical billing when they or their staff either forget to enter the billing provider’s name or mention the one that is not in the insurance payer’s record.
The billing provider’s name must correspond with the National Provider Identifier (NPI) and Tax ID number the payer maintains in its database of in-network providers to avoid a clearinghouse rejection. Any missing information or discrepancy between the three will result in a clearinghouse rejection. Hence, you must double-check the claim form against the insurance company’s records before sending it to a clearinghouse.
Provider’s NPI or Tax ID is Missing or Incorrect
Sometimes, simple typing errors can trigger clearinghouse rejections. Even if the staff mentions the correct name of the billing provider (physician’s and the practice’s name) on the claim form, typing mistakes in the NPI and Tax ID number flag a rejection code, and the clearinghouse is forced to reverse the claim in the hope that correct information will be entered this time. The same situation arises if the biller leaves the box for NPI or Tax ID number blank.
Postal Zone or Zip is Missing or Invalid
At any given time, there could be hundreds of physicians and medical practices with the same name. So, how will insurance payers differentiate between them? Sure, the NPI and Tax IDs help, but the location makes the distinction clearer. This is why insurance payers demand that providers enter their complete addresses, including the city, state, and postal zones/zip codes.
However, a clearinghouse rejection occurs if the submitted claim form does not include the provider’s postal zone or zip code or if the entered information is incorrect. Clearinghouses advise that providers refer to the United States Postal Service (USPS) website to check their postal zones and zip codes. Remember, your zip code, city, and state must align with one another for accurate claim routing and timely processing.
Diagnosis or Supplemental Code is Missing, Incorrect, or a Duplicate
Standardized ICD-10 diagnosis codes help insurance payers understand the patient’s condition and decide if the medical procedure or service was medically necessary. So, if the diagnosis code and its supplemental code are missing, inaccurate, or reported twice for the same patient, a clearinghouse rejection code will be issued.
Clearinghouses recommend that the healthcare providers double-check the ICD-10 diagnosis code and their supporting supplemental codes (codes that offer more insight into a patient’s condition) and ensure that they justify the procedural codes (CPT codes) used for the rendered services.
Missing, invalid, or duplicate diagnosis or supplemental codes on the claim form are a clear pathway to claim denials since payers cannot tell why the patient needed medical attention and whether or not the service was medically necessary.
Procedure Code or Modifier is Missing or Incorrect
In the world of medical insurance billing, every healthcare procedure or service must be translated into standardized Current Procedural Terminology (CPT codes) to speed up claims processing. The problem is that there are over 11,163 CPT codes, and each year, the American Medical Association (AMA) revises these code sets to reflect the additions and deletions of medical procedures and services.
The vast pool of CPT codes, their annual updates, and the decision to include or omit a modifier (and if included, then which one) drastically complicates medical coding and accurate claim submission. Unfortunately, missing or inaccurate CPT codes and their supporting modifiers are the main reasons for clearinghouse rejections.
To avoid this clearinghouse rejection code, providers and their billing staff must assign CPT codes and modifiers to the highest degree of specificity. Moreover, they must prevent typing mistakes during code entry to ensure that digits appear in the correct order and without omissions. Take note that the correct CPT codes and modifiers will decide the reimbursement rate.
The Codes Are Correct, But the Services Are Not Covered
According to a KFF report published in 2021, around 13.5% of medical claims are denied because of coverage issues. Healthcare providers do not verify the patient’s insurance eligibility and benefits before rendering services. As a result, they file claims for uncovered or excluded services. The insurance payer refuses to reimburse services and procedures that are not covered under the patient’s plan. This results in a denial.
A clearinghouse detects this issue first and notifies the provider through a rejection code. The automated claim scrubbing process tallies the procedural codes against the insurance payer’s list of covered services and immediately flags an uncovered service code. A clearinghouse rejection code is issued, and the blurb tells the provider that he is billing the payer for an uncovered service under the patient’s insurance plan.
Claim Data is Invalid
Claim data includes information like the patient’s details, the service date, and the service description. The Becker’s Hospital Review quoted the results of a survey performed by Experian Health, which stated that 33% of medical claims are denied because of missing or inaccurate claim data.
But before this happens, clearinghouses catch the issue. A clearinghouse rejection code is triggered to notify providers that the claim submitted for reimbursement has incorrect or missing patient information or there are discrepancies in the service date and description. For example, a clearinghouse rejection can occur if the patient’s name is not spelled correctly or there is a typing mistake in their date of birth. The claim is also rejected if the provider entered an inaccurate service date or did not provide adequate details for the procedure.
To undo this clearinghouse rejection in medical billing, the providers must verify patient details against their medical records or directly communicate with the patients for updated information. They must also be careful when entering service dates and descriptions and proofread the claim before submission.
Place of Service Code is Missing or Incorrect
A place of service code (POS) is a unique code assigned to each medical facility, such as hospitals, outpatient clinics, rehabilitation centers, patients’ homes, etc. It helps the insurance payer understand where the medical service was rendered. Hence, their appropriate inclusion in the medical claims forms is a must.
However, a clearinghouse rejection code is triggered when healthcare providers use an invalid POS code or forget to enter it in the electronic claims form. This clearinghouse rejection is resolved when the provider or the billing staff double-checks the POS code and reports the one where the service was performed, e.g., at an assisted living facility. We advise providers to use this ‘CMS Place of Service Code Set’ sheet (updated for 2024) for clarity and accuracy.
Payer’s ID is Missing or Invalid
Imagine sending a medical claim to a payer that has nothing to do with it. Neither is the patient their beneficiary nor is the provider in their network. How embarrassing would that be? Unfortunately, in the real world, such things happen. Providers often send medical claims to the wrong insurance payer. The main reason for this is entering an incorrect payer ID, which routes the claim to the unconcerned payer.
The algorithms that clearinghouses use for claim screening and scrubbing can detect missing or invalid payer IDs. Even if the ID is correct but outdated, a clearinghouse rejection will denote this. Providers can address this clearinghouse rejection code by reviewing the payer details, verifying the payer’s valid ID from their insurance records, and changing or adding it as per the need.
Duplicate Claim Submission
A clearinghouse rejection code for duplicate claim submission indicates that more than one medical claim was submitted for the same service provided to the same patient on the same day by the same healthcare practitioner. Now, one might wonder why a provider would submit the same claim twice. Sadly, the answer is not as simple as the question.
Claim duplication can occur due to several factors. For example, a physician performs surgery, but he has to repeat a certain procedure due to medical complications. He reports the accurate CPT code for the surgery but forgets to add modifier 76 to tell the payer that the procedure was repeated on the same patient, the same day, by the same provider. The absence of a ‘repeat procedure/service’ modifier will give the payer the impression that the provider is claiming reimbursement for the same service twice without taking into account the provider’s additional effort during the procedure.
So, a clearinghouse rejection is issued to prevent a denial due to claim duplication. The provider is told to check whether the same claim was submitted twice, and if not then address the reasons why a duplication was flagged, e.g., incorrect date of service, missing modifiers, inaccurate codes, etc.
Resolve Clearinghouse Rejections Before They Turn Into Claim Denials
Sending your medical claims to an intermediary, like established clearinghouses around the country, is not mandatory. However, it can be the first step towards denial prevention and management. Clearinghouses are the first line of defense against erroneous claim filing. They catch, flag, and sometimes even fix the errors in the medical claims before they are routed to the insurance payer for processing.
Promptly addressing clearinghouse rejections will save you from denials. You must thoroughly study the clearinghouse rejection codes and their blurbs to understand why the claim was rejected and what you can do to rectify the error. Fixing the mistakes right when the claims get caught in the safety net laid out by the clearinghouses will save you from spending dollars and hours on denial management. That’s right! It can cost up to $118 to rework and resubmit one medical claim.
At MediBill MD, we offer comprehensive denial management services. Our proactive approach includes close liaison with electronic data interchange (EDI) clearinghouses, understanding the reasoning behind their rejections, and reworking the claims to prevent denials. Partner up for effective denial prevention and management!
