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Understanding the Difference Between Denied and Rejected Medical Claims

In the United States, healthcare administrative costs make up roughly 30% of all medical bills that are received by individuals who have obtained medical care. Administrative costs are a component of the healthcare system in the United States that many know exists, but only few really understand. Where do these costs come from?

One of the sources of administrative healthcare costs stems from the complex medical claims process. When the contents of a medical claim spur a debate in our healthcare system, it takes a lot of time, money and resources to resolve the problem properly. When it comes to resolving medical claims, there are a variety of stages that can impact the cost of healthcare administration and the overall outcome for the provider, payer and patient.

What is a Denied Claim?

Denied claims are medical claims that have been received and processed by the payer, but have been marked as unpayable. These “unpayable” claims typically contain some sort of error or lack of prior authorization that became flagged after the claim was processed. Some of the issues for denials may include missing information, non-covered services per plan or even not medically necessary services. Even though it may sound easy to just resubmit the claim for a second review, a denied claim can’t just be resubmitted. It must be determined why the claim was initially denied.

Most of the time, denied claims can be corrected, appealed and sent back to the payer for processing. However, this process can be time-consuming, expensive and requires a lot of resources to get to the core of the issue. If a denied claim is resubmitted without an appeal or reconsideration request and not as a corrected claim, it will most likely be considered a duplicate claim and denied again. If this happens, the claim will remain unpaid and can cause major issues for a provider’s bottom line, especially if it is a recurring issue. Time is also a factor when resubmitting denied claims. Each payer allows only a certain amount of time to send in a corrected claim. If this timeline is not met, the payer may then deny the claim for timely filing. This results in an unpaid claim that becomes provider liability.

What is a Rejected Claim?

A rejected medical claim usually contains one or more errors that were found before the claim was ever processed or accepted by the payer. A rejected claim is typically the result of a coding error, a mismatched procedure and ICD code(s), or a termed patient policy. These types of errors can even be as simple as a transposed digit from the patient's insurance member number. Accurate medical documentation is a critical aspect of billing within the revenue cycle process in the healthcare industry. Providers use these detailed medical records to validate their reimbursements to payers when a conflict with a claim has been issued.

A rejected claim can be resubmitted once the errors have been corrected since the data was never entered into the system. These types of errors will prevent the insurance company from paying the bill and the rejected claim is returned to the biller to be corrected. It’s important to remember that even though this claim never reached the payer, the time to file the claim is still important. Each payer has a certain timeline in which the claim will be considered a timely filed claim. If not filed within the payers’ guidelines, a timely filing denial could be issued. This would result in provider liability.

Signature Impacts Medical Claims Processing

At Signature Performance, we are dedicated to making a lasting impact in the nexus of healthcare by inhabiting the payer, provider, federal and community sectors. Our unmatched experience on both the payer and provider side of the business allows our team the opportunity to evaluate healthcare industry issues from a variety of perspectives and create custom solutions that get to the core of the problem.

According to a 2017 article published by Healthcare Finance News, roughly $3 trillion in medical claims were submitted by hospitals in the United States in 2016 and around nine percent of those charges were initially denied. That comes out to about $262 billion. Even though an average 63% of those claims were recoverable, that effort came with a price tag of roughly $118 per claim, or as much as $8.6 billion in appeal-related administrative costs.

We believe the healthcare industry in the United States deserves only the best, and that sentiment is what motivates our dedicated team to do our very best each and every day. It’s our calling to bend the cost of healthcare administration by improving overall quality and minimizing resources.

To learn more about Signature Performance, contact our team today!


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