Coding and Billing

Claim Denials Vs. Rejections: How to Approach Each to Improve Cash Flow

By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD

Feb. 2, 2022

Claim denials and rejections are not the same thing, and must be handled differently to ensure your practice receives reimbursement. Here is how you should manage claim denials and rejections, so you can enhance your practice’s cash flow.

As many as 80 percent of today’s healthcare claims experience errors. These errors result in both delayed payments and unpaid claims. Errors result in decreased reimbursement to the practice. Errors come in two primary forms: rejections and denials.

A rejection occurs when a claim fails to meet the payer’s submission criteria. It could be missing information or information presented in the wrong format. Another error leading to rejection is an incorrect digit in the patient’s insurance number. These claims are automatically rejected before a payment review even begins.

Rejections are frustrating and avoidable. The good news is they are easily fixed and can be resubmitted.

The process of reviewing the claim for fixable errors before the claim is submitted to a third party is called “scrubbing” the claim. One easy way to make sure you don’t make these kinds of errors is to use software that scrubs your claims before submission. You can purchase software to do this for you or hire a third-party company to do this for you.

At the third party, once the claim has been accepted because it has successfully passed the automated rejection process, the insurer evaluates the information contained in the claim for payment. Denials occur when the third party deems the claim to be ineligible for payment.

Here are five of the most common reasons a claim may be considered to be ineligible for payment:

1) A lack of pre-authorization when required.

2) Filing past the dated allowed from the date of service.

3) Coding errors.

4) Lack of medical necessity documentation.

5) Programming error on the third-party’s part.

Denials actually come two ways – hard denials and soft denials. A hard denial occurs when a third-party does not believe they are obligated to pay for the service. A soft denial occurs when the insurer requests additional information. Think of a soft denial as the third party telling you “not now, maybe later.”

What To Do
The fundamental action is to measure how many rejections and how many denials you are getting each month. This enables you to see if you have problems in either area or both areas, as well as how big a problem this is.

If it is a very small problem, then it could just be a human error that is easily fixed with training. If it is a big problem, then you will need to rethink your third-party billing process and implement system changes to make sure the problem does not rear its ugly head again.

The costs to not addressing this area of third-party billing are staff time wasted on doing the same thing twice, loss of income to the practice, staff frustration and owner frustration. Improve the quality of life within your practice by measuring and fixing these potential problems.

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