Four Best Practices to Reduce Claim Denials


The average claim denial rate across the healthcare industry is 5%-10%, according to the American Academy of Family Physicians (AAFP). This metric quantifies the effectiveness of your revenue cycle management process. If your practice is experiencing higher than average or increasing claim denials, below are four best practices to help you reduce them.

1. Validate Current Insurance Coverage

An effective way to minimize claim denials is to ensure that proper protocols are in place and followed. Your front line staff should be equipped, trained and incentivized to validate current insurance coverage for every patient. Provide your staff with monthly reports of claim denials due to lapsed or out-of-network coverage and talk about steps that can be taken to avoid future occurrences.

2. Ensure Prior Authorization

Some insurance contracts require prior authorization in order for your practice to be reimbursed for a healthcare service. The payer must agree that the service is medically necessary and provide notice that they agree to cover its cost prior to the service being performed.

Know which of your services require prior authorization and the process to obtain it from each payer. As your contracts renew, communicate all changes related to prior authorization to your front line staff and billing and coding partners.

3. Know and Follow Guidelines for Preventive Visits and Routine Screenings

People are encouraged to have preventive medical visits and routine screenings, as regular checkups can lead to earlier diagnosis and easier treatment for emerging medical conditions. In order to be reimbursed correctly for these visits, medical practices must know and follow payer guidelines concerning frequency and medical necessity.

For example, most insurance plans allow for an annual wellness visit. Providers must ensure that at least 365 days have passed since the patient’s last wellness visit in order to be reimbursed correctly. In another example, the American Medical Association (AMA) recommends that people age 50 – 75 be tested regularly for colorectal cancer. Some insurance plans cover the cost of this test once every five years, while others cover it only once every ten years. If there is a family history or other risk factor, insurance plans may cover the cost of the screening before age 50 based on medical necessity, as defined by their contract.

4. Resolve Clearinghouse Issues Quickly

Clearinghouses are companies that function as intermediaries that forward claims information from healthcare providers, or their billing company, to insurance payers. In what is called “claims scrubbing,” clearinghouses review the claim for potential errors. For example, a clearinghouse will verify that the procedural and diagnosis codes being submitted are valid for that date of service.

Clearinghouses send daily reports with identified issues. Quick corrective edits help prevent time-consuming processing errors that result in claim denials.

Heal Your Bottom Line

Every claim denial negatively impacts your practice’s profitability. If your claim denial rate exceeds industry average or is rising, follow the four best practices outlined above and you will be on the path to a healthier financial outlook for your medical practice.

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