Payment refused: Mismanaging claim denials can cost your practice money

October 1, 2008

Industry experts estimate that as many as 20 percent of all claims for services are returned to physicians without payment.

Many physician practices make a bad situation worse by just resubmitting these denials without making any corrections. And, of course, the claims are just denied again.

When you consider that it costs $15 on average in staff time to work a denial and resubmit it, you can see how mismanaging denials can end up costing your dermatology practice money. Worse, this is money that you should be collecting the first time around.

The reasons for denials vary. The first step in your claim denial prevention strategy should be to identify why claims are being denied.

Do this before your staff spends time to correct denials. That sounds so logical, but it's a frequently overlooked step.

Remark codes

The reason for the denial will be described by the "remark code" included on the explanation of benefits (EOB) that you receive back from the insurance company.

Each company seems to have its own set of remark codes, so you may need to contact the insurer to get more information. This is especially important when the remark code is something vague, such as "claim lacks needed information."

Your first question should be, "What information exactly are you missing from this claim?"

After you identify the problem, get working on the resolution without delay. There is often a time frame of just a few months in which you can resubmit a claim after it's been denied, and if you miss the deadline, you're out of luck.

To work a claim, pull the patient record, research the remark code, question staff, and call the patient, if you have to, but don't delay.

Of course, if during the course of your research you discover that the claim was filed incorrectly in the first place, correct it and resubmit it.

Problems such as the wrong patient identification number or a missing CPT code can be corrected quickly.

Don't, however, fight tooth and nail to get paid for a claim that never should have been submitted in the first place, such as a service that was not documented. Insurance companies will respond that if it isn't documented, it didn't happen. Not only could you be in a heap of trouble for billing for services that arguably weren't performed, they certainly won't be reimbursed.

If the claim was billed correctly but you disagree with the insurer's decision to deny it on other grounds, you'll need to follow the insurance company's resubmission process. As with remark codes, every company has its own procedures.

With some companies, it takes only a phone call to reconsider a denied claim. Others may require specific electronic or paper forms.

Put it in writing

Depending on the reason for the denial, you may need to prepare a formal, polite letter that outlines your practice's viewpoint.

Make a convincing case by attaching documentation that supports your request. Depending on why the claim was denied, attachments might include your documentation of the service, images of the patient's condition, copies of current medical literature, or a record of the original filing of the claim.

When you submit the appeal letter, send a copy to the patient. Notifying the patient is important for two reasons - first, the patient should be made aware of the denial, and secondly, the patient may also be motivated to contact the insurance company. That's especially true if the denial means the patient might owe more for the service.

With both the practice and the patient communicating with the insurer, pressure is increased for the company to reconsider the denial.