Healthcare Claims Processing: The Ultimate Guide To Fewer Denials And Faster Payments

Healthcare payers and providers exchange billions of claims each year to finalize patient encounters, and this number continues to rise. As reported in the latest CAQH Index, medical transactions surged by 11% from 2022 to 2023, hitting an all-time high of 55.1 billion. Despite advancements in the field, the complexity of the healthcare claims processing system leads to nearly 15% of claims being initially denied by private payers, including many that were pre-approved. These denials can have significant financial repercussions for providers, patients, and insurance companies.

Understanding this intricate process is core to mitigating financial risks, streamlining operations, and reducing medical workload. This guide dives into the healthcare claims processing system, uncovers common pitfalls, and provides actionable best practices to boost efficiency and streamline your workflow. 

What Is Claims Processing In Healthcare?

Medical claims may look like billing statements at first glance, but they serve a different purpose. In simple terms, a medical claim is an invoice submitted by the doctor’s office to the relevant health insurance company.

The goal of these claims is to ensure that healthcare providers are properly compensated for their services, while patients receive the benefits outlined in their insurance policies. 

Steps In Healthcare Claims Processing

Steps In Healthcare Claims Processing

The maze of claims processing in healthcare includes several key stages, each vital in ensuring accurate and timely reimbursement.

This section breaks down each critical step, from documenting and reviewing claims to handling denials and analyzing trends. By getting a firm grasp on these steps, healthcare providers can streamline the components of revenue cycle management, reduce errors, and improve their financial outcomes. 

Creating And Reviewing Claims 

The process starts with documenting the patient's visit and converting these details into billable charges using the appropriate diagnostic and procedural codes. An important step during this process is the review phase, often referred to as ‘scrubbing,’ where claims are examined for errors and inconsistencies.

Issues that are commonly identified include:

  • Incorrect codes
  • Duplicate charges
  • Missing information


 

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Certain medical billing services and software, such as DrChrono and AdvancedMD, assist with this scrubbing process to ensure accuracy. 

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Submitting Claims 

After careful review, the claim is submitted to the insurance company. Timeliness and accuracy in submission are fundamental to avoid delays or denials.

Claims can be submitted through various methods, with Electronic Data Interchange (EDI) systems being the most efficient. Certain EDI systems and software, such as Oracle JD Edwards EnterpriseOne and Salesforce, can help smoothen the claim submission phase by streamlining and automating certain elements. 

Processing Claims And Payment Methods 

Once the claim is submitted, the insurance company verifies coverage and aligns the claim with the patient’s policy. Factors influencing the payment amount include policy terms, coverage limits, and network agreements.

Based on these assessments, payments can be:

  • Full
  • Partial
  • Denied

Receiving Payments And Explanation Of Benefits (EOBs) 

Upon approval, the insurance company issues the payment along with an explanation of benefits (EOB). The EOB provides a breakdown of covered services, the insurer’s payment, and the patient’s financial responsibility. 

Billing The Patient 

Following the insurer’s payment, the final bill is issued to the patient, providing accuracy, transparency, and clarity. This bill usually reflects the services provided, payments made by insurance, and any remaining balance. 

Analyzing Claim Trends 

An often-overlooked step in healthcare claims processing is the regular review of claims data. This practice helps identify trends and common issues, allowing administrators to refine their processes over time. By analyzing these patterns, organizations can address recurring problems and enhance the efficiency of their claims processing. 

Common Reasons For Claim Denials

The world of healthcare claims can be challenging, especially in the case of unexpected denials. 

However, understanding common reasons for these denials can help make the process feel more manageable and less overwhelming.

    • Incorrect Or Incomplete Information: Small errors in claim forms or missing documentation often result in denials. Careful attention to detail before submission can prevent this issue.
    • Lack Of Pre-authorization: Certain services require prior approval from the insurance company. Overlooking this step can lead to a claim being denied, so it’s important to confirm pre-authorization requirements in advance.
    • Filing Errors: Another common reason for denials is late submissions or errors in coding. Proper organization and timely submission of claims can help reduce these errors.
    • Coverage Issues: Claims for services or treatments not covered under the patient’s insurance policy often face denial. Knowing the specifics of your coverage plan can help prevent these denials.
    • Medical Necessity: Insurers sometimes deny claims if they believe the treatment was unnecessary or not aligned with the diagnosis. Proper documentation and clear communication with the insurer are key to addressing these cases.

Strategies For Handling Denied Claims

When a claim is denied, it’s important to stay calm. 

Managing denied claims demands a clear strategy, allowing you to navigate the process effectively and improve your chances of a successful resolution. 

Here's a step-by-step guide to help you tackle denied claims with confidence:

  1. Determine The Reason For Denial 
    Identifying why a claim was denied is the first step in resolving the issue. The explanation of benefits (EOB) details the reason for denial, often using remark codes. The EOB also provides a key to help interpret these codes, giving you a clearer picture of what needs to be corrected
  2. Initial Review And Correction 
    Thoroughly reviewing the denied claim allows you to spot any errors, such as incorrect codes, missing signatures, or incomplete documentation. Make the necessary adjustments to ensure all information is accurate and complete before moving forward
  3. Submission And Follow-Up 
    After making the necessary corrections, submit the claim. To ensure that your appeal has been received, contact your health plan a few days after submission. Keep your appeal details handy and request an estimated response time. This follow-up is important to ensure your appeal is being processed and to promptly address any additional issues
  4. Reviewing The Appeal Decision 
    Typically, a decision on your appeal will be provided within 30 days for future treatments, or within 60 days for treatments already rendered. If the appeal is approved, the health plan will reprocess the claim accordingly
  5. Second Appeal Process 
    If the claim is still denied after corrections, filing a second internal or external appeal is the next step. This process depends on your health plan’s policies and requires gathering detailed documentation and following the specific appeal procedures outlined by the insurer. Adhering closely to these guidelines is crucial to maximizing your chances of a successful appeal 

Best Practices For Efficient Claims Processing

Following these practices and maintaining attention to detail can help streamline healthcare claims processing and reduce errors:

  • Understand all requirements
  • Verify insurance eligibility
  • Scrub your claims
  • Submit on time
  • Maintain a claims review log
  • Provide clear billing statements
  • Utilize appropriate healthcare claims processing software or EDIs

    • Final Insights And Recommendations

    Healthcare claims processing is a complex and detailed task, requiring precision, diligence, and a solid understanding of the system. While the process may seem daunting, mastering it can lead to significant benefits, including fewer denials, faster payments, and improved financial stability.

    In a field where even minor errors can have major consequences, the importance of thoroughness cannot be overstated. By focusing on meticulous attention to detail, organizations can transform their claims processing into a streamlined and powerful locomotive.

    As the industry continues to evolve, staying ahead of these challenges will ensure better outcomes for both providers and patients alike.