Medical billing is a daunting task that requires time, effort, and attention to detail. On the other hand, claims adjudication is nothing short of a nightmare for most healthcare providers. Why? You will get the answer in this guide. So, continue reading!
After you submit a patient’s claim to their insurance provider, the provider reviews it and reimburses you. Seems SIMPLE, right?
That remark about the claim submission procedure is technically accurate, but it’s NOT A PIECE OF CAKE. Every seasoned medical biller will tell you that each of the three processes we just outlined is complex and that the details in each step are what counts.
On average, insurance companies deny 1 in 5 claims. Moreover, each year, some payers deny more than 1 in 3 claims.
KFF
All the received claims go through the same process, ‘claims adjudication’ – regardless of the reason behind the denial.
While your healthcare facility does not have complete control over the claims adjudication process, there are workflows you can use immediately to increase your chances of receiving payment.
This guide is your ticket to pass that pending claims adjudication process, keeping you awake at night. So without further ado, let’s get started!
What Is Medical Claims Adjudication?
An insurance payer company uses a drawn-out and intricate process called claims adjudication to assess a medical claim. They utilize it to calculate the payment they need to reimburse a healthcare provider for rendered care services.
The payer checks the claim for accuracy and completeness, ensuring the patient’s personal information is accurate and not missing any important details. Next, they examine for proper and accurate medical codes using Current Procedural Terminology (CPT) and the Healthcare Common Procedure Coding System (HCPCS). Medical examiners occasionally review claims to ensure the rendered care services are legitimate and required.
After assessing the claim, they can make either of the three choices:
- Deny the claim
- Reduce the amount paid out
- Pay the claim in full
In case of rejection, the provider can file an appeal by resubmitting the claim for evaluation after fixing the mistakes. This causes a delay in the reimbursement process and increases the claim processing time.
Medical Claims Adjudication Process
A series of workflows are used in the medical claims adjudication process to determine the eligibility of a submitted claim. Typically, it begins when the form is sent from the physician’s office and concludes with the insurer’s decision.
Initial Processing
The first step in the claims adjudication is a processing review. Here, the patient’s medical provider submits their claims to the appropriate insurance company.
After receiving the claim, the payer then verifies the patient’s information, including name, status, and diagnosis.
Validation
The insurance company further examines the patient’s coverage and payment policies after verifying the patient’s details. The patient’s coverage date, the ailments that fall under the plan’s coverage, and the promptness of the claim submission are all included in this.
The payer may use claims adjudication software or perform a manual review for validation.
Decision
After the final review and validation of a claim, the insurance company chooses whether to pay, decrease, or deny the claim. They will either continue processing payments or provide a reason for the claim’s denial.
Payment Processing
Finally, the insurance provider uses the preferred method specified by the client to complete payment. It contains a summary of the patient’s financial obligations, the adjudication date, and the approved payment coverage.
The insurance company optimizes its claims adjudication process by implementing an efficient adjudication workflow, leading to a more effective claims management procedure.
Reasons for Denying Medical Claims
Dealing with claim denial is perhaps the most annoying ‘payment decision status’ a healthcare provider may encounter during a payer’s adjudication procedure.
To reiterate what we mentioned in this guide’s introduction; insurance companies sometimes deny 1 in 3 claims on average. If dealing with payers wasn’t one of the challenges for healthcare organizations, we wouldn’t have included that figure in the intro.
You see, a claim is returned to the original submitting organization with a “denied” status if it fails any or all of the checks in the payer’s adjudication procedure.
Insurance companies reject or deny medical claims for various reasons. These reasons can vary from being straightforward to intricate.
Some of the major explanations for claim denials are discussed below:
Billing and Coding Errors
Payers may find misspellings, incorrectly written figures, and other coding problems leading to an initial refusal. Once you rectify billing and coding errors, you can resubmit the claim to the insurance provider.
Pre-Authorization Denial
Occasionally, insurance companies will notify you in advance that they will not cover a particular service; this is referred to as a “prior authorization denial.”
But the good news is that you can also appeal a pre-authorization denial to the insurance payer to have it lifted.
Medical Necessity
Insurance companies only cover medical services necessary to treat an existing sickness or maintain a patient’s health. It’s known as a medical necessity.
Patients in this situation must provide evidence that their medical procedure is required to improve their overall health and quality of life.
Duplicate Claims
One of the most frequent reasons for claim denials is duplicate filings. This can happen when you file duplicate medical claims due to system or human error.
Generally speaking, insurers can either reject the most recent application or replace it with the one containing more recent data.
How to Optimize the Claims Adjudication Process?
It is essential for providers to consistently file “clean” claims because of the financial ramifications. The claim must contain all accurate information, including diagnosis codes, patient data, file types, and submission dates.
Discussed below are five key strategies healthcare facilities can implement to reduce the administrative load and expedite the claims adjudication process:
Invest In Automation
Automation has the potential to save healthcare providers a significant amount of money and time.
Compared to manual claim submission, the healthcare industry could save $1.7 billion annually with electronic claim submission, and automation could save 22 minutes for each claim status inquiry.
Council for Affordable Quality Healthcare (CAQH)
Automation-based solutions can expedite the claims adjudication process for both providers and insurance companies.
Payers can use interoperable data to minimize paperwork, expedite adjudication, and improve decision-making. Software-led workflows help clinicians avoid data duplication and errors, confirm patient identities, monitor changes to payer policies, and assign jobs to the appropriate specialist.
Front-End Edits and Coding Checks
Payers will cross-reference claims data with payer modifications during the claims adjudication process to ensure that billable services are coded accurately.
Therefore, providers must stay updated with the latest coding rules and any applicable payer-specific, local, and universal modifications. Besides, providers should automate claim revisions since payers use software tools to execute automated checks.
Inaccurate claims will not pass the payer’s first automatic check, and they may be rejected or placed in a queue for a claims examiner’s manual review, which will inevitably cause delays. Additionally, front-end editing tools can find errors, like missing prior authorization or mismatched benefit codes, that could limit reimbursement.
Efficient Data Management
Inaccurate or missing patient data is a common reason for claim rejections. For example, if the name on the attached hospital discharge form differs slightly from the payer’s record, they will turn down the claim. Compared to a manual system, the likelihood of this occurring is far lower in electronic medical records linked by a universal patient identifier (UPI).
It also facilitates timely visibility and insights into claims adjudication procedures. As a result, staff members stay informed on each claim’s status throughout the adjudication process through automated claims workflows and trackers. This helps prioritize, monitor, and review denials without missing a beat.
Enhance Patient Communication
Yes, providers should take precautions to verify patient information. However, patients can also help avoid mistakes and delays throughout the claims adjudication process by providing accurate and timely information when needed.
With the advent of digitization, many patients prefer arranging and registering for care online. Thus, every digital touchpoint offers the chance to confirm that patient-provided information is accurate and matches data already on file.
So, the fourth tip to optimize the adjudication process is patient-provider collaboration.
Standardize Claims Adjudication
By improving operations and reducing uncertainty for healthcare providers, standardizing the claims adjudication process provides uniformity across all dimensions. Providers can improve cash flow and business growth by lowering errors, speeding up the claims process, and increasing efficiency as a whole.
Healthcare Claims Adjudication Software
Claims adjudication software can help payers evaluate claims for medical necessity, coverage, and contract obligations. Besides, it can automate processes for benefits administration, enrollments, auto-adjudication, claims adjudication, and premium invoicing.
Bottom Line
When dealing with insurance payers, nothing is as simple as it seems. This also applies to the claims adjudication process.
It is undeniably among the most laborious revenue cycle procedures, given that the submitting firm has little influence over its outcome.
However, the strategies discussed in this guide will help your healthcare facility proactively avoid unfavorable outcomes by overcoming common mistakes and errors in claims before submission.
