The Five Most Common Types of Medical Claim Denials
[SSI Claims Denial Management Series: Part 2 of 3]
May 24, 2022
Medical claim denials are when an insurance company or carrier refuses to honor an individual’s or provider’s request to pay for healthcare services obtained from a professional. Medical claim denials are a constant headache that negatively affects hospital and health provider revenue, cash flow, and operational efficiency. Fortunately, we can avoid many denied claims with the right expertise and processes. While it’s impossible to eliminate denials 100%, improving your understanding of and preparation for the most common types can help eliminate the chance of them ever occurring in the first place and substantially impact your bottom line.
In this blog, we explore the five most common types of medical claim denials so you can start taking the proper steps to avoid them.
The 5 Most Common Types of Medical Claim Denials:
- Eligibility issues
- Missing or invalid claims data
- Authorization issues
- Non-covered services
- Missing documentation
1. Eligibility-related denials often result in a hard denial or one where you will not likely be paid, including those related to:
- Coordination of benefits
- Plan coverage
- Incorrect plan code entry
- Maximum benefit exceeded
- Inactive coverage
- Member not found
Eligibility-related denials often stem from either the information not being obtained from the patient during preregistration or when they present at registration. These denials can even come from coverage changes during the patient’s hospital stay, especially among patients whose stay spans a month or more. The most effective way to prevent these healthcare denials is to gather the pertinent patient information upfront, but this still won’t prevent all eligibility denials. So, in addition, rerunning eligibility checking before billing the claim is another option, along with utilizing a coverage discovery tool that will go out and look for active coverage on a patient. Ultimately, when it comes to eligibility-related denials, it is worth the effort to deploy every strategy you can to prevent or lessen their occurrence.
2. Missing or invalid claims data denials are generally considered soft denials, meaning you can usually fix the claim and resubmit it for payment. These healthcare denials occur when submitted data does not pass the payer’s adjudication edits – a clear sign that vital data may be missing. Also, if you’re billing secondary claims, it may mean there was missing or invalid data in the remittance advice information submitted on that claim. In most cases, you can prevent these denials using a robust edits library within your billing or denial management software that stops claims from being submitted with missing or invalid data. Alternatively, you may be able to utilize your host system, such as those included as part of your EHR, to manage and correct potential missing or invalid data, reducing any additional intervention before the claim is submitted. Appropriate resourcing of these claims-related healthcare denials helps dramatically reduce the change of hard denials and thereby loss of revenue for the organization.
3. Authorization related denials, in most cases, end up being hard denials. They cannot be fixed, nor will you be able to recover any payment. This scenario occurs when a required authorization was not obtained prior to service or an invalid authorization number was included on the claim. Sometimes you may receive prior authorization, but insurance still denies the claim due to an eligibility issue such as the patient’s coverage changing or expiring after receiving the authorization but before it was used. Payers often have time limits or expiration dates associated with authorization numbers, and if not used within their specified timeframe, will result in a denial.
In cases where you receive notice that services exceed authorization, you may be able to appeal these claims and recover the denied amount. However, these healthcare denials depend on having the appropriate documentation for why the services exceeded authorization and proving why the provided services were necessary.
4. Non-covered service denials are almost always hard denials, meaning it’s doubtful you will be able to recover any dollars associated with these claims. When these types of healthcare denials occur, it’s often because the payer’s plan did not cover the provided service. You can also get this type of denial when a patient’s stay exceeds the maximum number of allowed days for a particular service. In addition, a non-covered service denial could also be associated with restrictions on a managed care plan that were not adhered to. Although you may be able to provide documentation via an appeal for these types of claims, more often than not, these claims will not be able to be recovered.
5. Missing documentation denials are generally soft denials, and you will likely be able to fix what’s missing and resubmit the claim. Just as the description states, these healthcare denials are missing documentation; either the requested documentation was not provided initially or provided but not received. In this case, it’s often referred to as a technical denial. Sometimes the documentation was simply not provided in the timeframe required by the payer. In other cases, inadequate or insufficient information was received, and therefore the claim was denied. But, appealing these claims may be possible by resubmitting additional details as the payer needs.
Another type of missing documentation denial is when the documentation provided does not substantiate the service. You still might be able to appeal these claims if you can provide the documentation necessary to prove why the service was necessary and did need to be performed. In all cases of missing documentation denials, if you plan to try and fix what’s missing, you must be sure to promptly provide any necessary additional documentation per each payer’s guidelines. Having a solid clinical documentation improvement (CDI) system will also help you prevent these types of healthcare denials.
Take Steps to Improve Processes & Reduce Medical Denials
Now that you have a clear idea of the five most common types of medical claim denials, you can begin to make educated steps towards eliminating them from your operations altogether. In Part 3 of the SSI Claims Reporting & Management Series, we uncover expert insights with a detailed Q&A on key strategies to help improve the results of your claim denial management efforts.
Continue to Part 3: Q&A with SSI Revenue Cycle Expert, Lori Brocato, VP, Product Management
Go back to Part 1: Two Critical KPIs Your Organization Needs to Watch
Since 1988, SSI has been ensuring healthcare providers are paid timely, efficiently, and accurately. Download our free eBook: Claim Denial Management – Key Strategies to Help You & Your Organization Make Improvements for a convenient, all-inclusive exploration of Parts 1-3.
Want to speak directly with one of our specialists? Contact SSI Today.