Claim denials are on the rise, with about 60% of medical group leaders reporting an increase in denial rates this year compared to the same period in 2023.

An uptick in denial rates at the beginning of the calendar year is a familiar trend in healthcare, typically stemming from new coding guidelines being effective in January. Nevertheless, it's undeniable that this phenomenon significantly impacts your revenue streams and disrupts smooth operations.

Understanding the underlying causes of denials is imperative to navigating this challenge, maintaining financial stability, and ensuring smooth operations year-round. 

Let's discuss the common reasons for medical claim denials that disrupt your cash flow and divert valuable resources away from patient care.

The 13 Common Reasons Behind Claim Denials

A recent study by Premier reveals a troubling trend: private payers deny nearly 15% of submitted insurance claims initially. While over half of these denials are overturned, the financial impact on providers is substantial, with an average cost of $43.84 per claim fought, totaling an astonishing $19.7 billion annually.

Let's address this issue by tackling it at its core. Here are 13 common medical billing errors that are the root cause of medical claim denials.

1. Duplicate Claim

Submitting a claim more than once for the same service can result in claim denials. Here are the five most common reasons for these denials:

• Billing a Service Twice — occurs when a service is accidentally billed twice despite being performed only once
• Resubmitting a Claim — when providers fail to receive a reimbursement for a service
• Billing for Repetitive Services — submitting a claim for a service performed multiple times on the same day without the appropriate modifier
• Multiple Submissions — another provider has already submitted an identical claim (same service, same day with the same CPT code)
• Inaccurate Resubmission — resubmitting a corrected claim without clearly identifying it as a resubmission

2. Coverage Deficiency

A common reason for claim denials is insufficient patient coverage, meaning the patient's health plan doesn't cover the service. This can arise due to various factors, like policy limitations or exclusions for specific procedures or treatments by the insurance company.

Providers must conduct thorough insurance verification to check if the service is covered before providing it. This proactive approach helps avoid claim denials due to insufficient coverage, ultimately ensuring smoother reimbursement processes.

3. Unmet Deductible

Most health plans come with a deductible. Until the patient meets that deductible, the insurance company won't chip in. Consequently, insurers may deny a claim if the patient hasn't met their deductible. Verifying insurance coverage and deductible status before providing services helps prevent claim denials, leading to a smoother medical billing process.

4. Unbundling

Unbundling occurs when you assign multiple codes for different parts of a comprehensive procedure. This practice elevates the reimbursement amount and is typically prohibited.

For instance, let's say a patient undergoes a comprehensive eye examination, which includes various tests such as visual acuity, intraocular pressure measurement, and retinal examination. Ideally, one must bill these services together using a single comprehensive code. Unbundling occurs when you bill each test separately without using the comprehensive bundle code for the complete procedure.

5. Exceeding Coverage Limit

Exceeding the coverage limit means surpassing the maximum benefit allowed by an insurance plan for a particular service or treatment. For example, if a health plan stipulates coverage for up to 20 physical therapy sessions annually, any visits beyond this limit would exceed the coverage threshold.

If you submit a claim for a service that exceeds the patient's coverage limit, it may result in a denied claim. Patients may have to pay out-of-pocket, as the insurance company will not cover the additional services. Both patients and healthcare providers must review coverage limits to avoid such denials.

6. Invalid or Missing Modifier

An invalid or missing modifier on a claim can lead to its denial. Modifiers are two-digit codes that provide additional information about the performed procedure without altering the core meaning of the CPT or HCPCS code. 

Common types of modifier errors that can lead to claim denials include:

• Invalid Modifier Combinations — Insurers can deny a claim due to invalid modifier combinations, such as:
  • Payer-Specific Combinations — Not every payer recognizes the same modifiers
  • Inappropriate Multiple Modifiers — Billing incompatible modifiers together 
  • CPT/HCPCS Mismatches — Not all modifiers apply to every HCPCS or CPT code
• Incorrect Modifier for Procedure — Improperly using modifiers 25 (significant, separately identifiable E/M service), modifier 50 (bilateral procedure), and 59 (distinct procedural service) without justification
• Omission of Necessary Modifiers — Failing to include required modifiers

7. Documentation Discrepancies

Accurate and thorough documentation is crucial for the successful processing of insurance claims. When discrepancies occur, such as incomplete or inconsistent information, it can result in claim rejection.

For instance, marking a critical inpatient procedure as an outpatient service can result in claim denial. This discrepancy in the place of service can prompt the insurer to question the claim's validity, potentially resulting in delays or denials in reimbursement.

8. Incorrect Coding

Accurate medical coding is vital to secure full reimbursement for medical procedures, diagnoses, and services. However, frequent changes in medical codes, including deletions and additions, can complicate this process.

Additionally, documenting medical services across two consecutive days poses a challenge. For instance, consider continuous intravenous hydration administered from 11 p.m. to 2 a.m. Instead of using a single code for the procedure, coders should differentiate between the initial (96374) and sequential (96376) administrations to accurately represent the service provided over two days.

9. Incomplete Information

Incomplete information on a claim, such as missing prior authorization or service period details, can lead to claim rejection. For instance, insurers may reject the claim if a service lacks prior approval or fails to provide the service within the approved service period. An MGMA stat poll highlights prior authorization as the top reason for claim denials(42%). Moreover, incomplete patient details or insufficient documentation of medical necessity can contribute to claim denials.

10. Insufficient Clinical Justification

Insurance companies may deny a claim if the provided medical documentation does not adequately support the necessity of the billed services. Insurers require detailed evidence that the services rendered were medically necessary based on the patient's condition and clinical guidelines.

For example, insurers can deny a claim for an expensive imaging test like an MRI without clear documentation justifying its necessity over cheaper alternatives like X-rays or ultrasounds. Similarly, insurers can deny a claim for physical therapy if the documentation supporting the patient's ongoing need for extended treatment is inadequate.

11. Dual Coverage Complications

The confusion surrounding dual coverage — an individual covered by two different insurance policies — is another reason for claim denials. Failure to coordinate between the two can lead to complications, such as identifying primary/secondary insurers and navigating complex claim processing rules.

12. Missed Deadline

Even with meticulous accuracy in code assignment and thorough documentation, failing to meet the filing deadline leads to claim denial. These deadlines vary among insurance plans, ranging from 90 days to several months from the service date. Approximately 7% of claims face denials due to delays in timely filing. Recognizing the importance of prompt submission and implementing strategies to prevent delays can significantly reduce the likelihood of denials.

13. Error in Patient Information

During data collection or entry, errors or typos in patient info lead to claim denials. Mistakes such as misspellings in names, inaccurate insurance details, and incomplete medical histories can result in rejection by insurers. Robust verification processes during patient intake, EHR (electronic health record) implementation, staff training, and routine audits can help mitigate this issue.

Target over 99% Revenue Recovery

A denial rate of less than 5% should be your practice goal. Maintaining the denial rate between 5 and 10% is still acceptable, with room for improvement. However, a denial rate exceeding 10% is a red flag and mandates urgent attention and intervention.

At Glenwood, we provide a 95% first-pass acceptance rate, strive for a 96% claims payment within 30 days, and aim for a 99% collection rate for payer claims. Leveraging cutting-edge technology (GlaceEMR & GlaceRCM) and industry expertise, we meticulously track every service to prevent billing errors and ensure clean claims. We also implement a robust denial resolution strategy to seal unnecessary revenue leaks. Let's discuss how we can help your practice optimize your revenue cycle and secure financial success.