How to Avoid the Top 5 Medical Billing Errors

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Optimize your medical claims processing strategy by engaging in the seven steps mentioned in this article

Medical billing denials – often caused by minor errors – can have a major impact on an organization’s revenue. Take an average 300-bed hospital for example; a one percent write-off can translate to as much as $2-3 million in lost revenue. To maintain financial viability, providers must proactively manage billing claims so denials can be prevented before they occur.

Medical Billing Denials Exceed the Industry Benchmark

According to a report issued by the Academy of Family Physicians (AAFP), many providers believe that the solution to their organization’s financial viability lies solely in cash flow evaluation. Additionally, providers are not where they should be. The AAFP sets the ideal medical billing denial benchmark at two percent but the industry’s average rate ranges from five to 10 percent. Keeping with the 300-bed hospital model, a 10 percent denial rate equals a maximum of a $30 million loss.

Any effective revenue cycle management attempt to reduce denials requires an approach that begins with evaluating and drilling into the claims denied by payers. There are two denial categories that cause revenue leaks – ones that cannot be corrected (hard) and others that have the potential to be reversed (soft). With rework costs averaging $25 per claim, course-correcting denials can add to the provider’s overall revenue cycle expenses. Avoiding medical billing denials altogether is the ultimate goal. The first step in lowering denial rates is knowing where the problem lies.

Top Medical Billing Denials

The 2013 American Medical Association National Health Insurer Report Card states that the top five reasons for denials can be attributed to:

  • Missing information – Demographic and technical errors, wrong plan code, or no Social Security number. These fields are often the easiest to complete, but frequently get missed. One of the simplest ways to avoid denials is to double check that every required field is filled in. An egregious omission on a claim form can trigger a denial.
  • Duplicate claim or service – Claims resubmitted for a single encounter on the same date by the same provider for the same beneficiary for the same service item – otherwise known as duplicates – are also another major source of denials. Like missing information, training staff to double check accuracy can reduce these errors.
  • Service already adjudicated – This error occurs when benefits for a certain service are included in the payment/allowance for another service or procedure that has already been adjudicated. Creating a unified process that aligns the team on the adjudicated process can help alleviate the issue.
  • Not covered by the payer – According to a report from the U.S. Government Accountability Office, the nationwide rate of denials due to coverage denials was 19%. Medical billing denials for procedures not covered under patients’ current benefit plans can be avoided by checking details in the insurance eligibility response or calling the insurer before administering services.
  • Limit for filing expired – Most payers require medical claims to be submitted within a certain number of days of service. This includes the time it takes to rework rejections, whether the review was automated (system edits to check for improper coding or other mistakes) or complex (licensed medical professionals determining if the service was covered and was reasonable and necessary). Workflow practices should alert staff when medical claims approach the time limit.

Reducing Claim Denials is a Team Effort

Of course, preventing medical billing denials is easier said than done. The reality is that in a value-based care ecosystem, it takes a team effort to ensure medical claims are dealt with properly in the first place. According to a report issued by Health Data Consulting, the clinician plays an integral part in ensuring that medical billing claims are not denied. Historically, the physician’s role has been primarily focused on treating the patient rather than spending time on the minutia of clinical documentation. However, clinical documentation at the point of care plays a critical role in preventing avoidable denials. The clinician is just one example of a key player who plays a role in improving the quality, efficiency, effectiveness and safety of health care.

With a less fragmented team, the focus can then shift to optimizing the medical claims processing strategy by engaging in the following steps:

  • Quantify and categorize denials – This can be done by using tools that track, measure and report on trends by doctor, department, procedure and payer. Technology and analytics are essential to reliable business intelligence, but they are well worth the time and investment.
  • Create a task force – In order to see change, providers have to tap physician champions who understand the importance of accurate clinical documentation and the role the physician plays in not just improving quality outcomes, but also keeping the organization financially viable.
  • Improve patient data quality – This is a source of many errors and, ultimately, denials. At the point of registration, ensure that your front-end staff is putting in quality information and double checking their work.
  • Avoid incorrect assumptions and determine the true reasons for denials – Go beyond generic coding explanations and perform root cause analyses. Is your claim being denied because you are not being granular enough in your documentation? Address this issue with your staff.
  • Develop a denials prevention mindset in all parts of the revenue cycle – Whether it’s your clinical team or your administrators, ownership of adjudicating clinical denials is the responsibility of the entire organization.
  • Optimize claims management software – Help ensure edits are functioning, current and improving your clean claims rate. Your vendor should provide clean claims rate data regularly and offer tips, customized to your organization, to improve it.
  • Use automated predictive analytics and work with payers – Being proactive in your relationship is key. By using data analytics and involving payers in the denials process, you can identify trends that are contributing to your overall denials issues.

For any claims improvement strategy to be effective, the entire organization and all partners must be involved and in sync.

New Challenges in 2017

As providers look ahead to the new year, managing and preventing billing denials will become an increasingly important part of their financial strategies. For example, insurance deductibles (and thus self-pay accounts) will continue to rise, prompting the Centers for Medicare & Medicaid Services to advise providers to be more thorough in double checking a patient’s eligibility to receive care. Avoiding adjudicated and rejected claims also requires avoiding the mistakes that caused them in the first place. Consider investing in more trainings and other team-building exercises that will educate staff and also foster a culture of collective accountability across the enterprise. Managing billing denials takes a village but they must be empowered with the tools and knowledge to act.

About the Author

Kamron Lachney serves as the vice president of Hospital Operations for McKesson’s Business Performance Services. He is currently responsible for acute related revenue cycle management which includes coding, revenue integrity, systems management, billing, follow-up and denials. He has over 15 years of experience in both acute and post-acute settings at four of the largest and most prominent systems in the nation.

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