December 08, 2016
Area(s) of Interest: Practice Management Payor Issues and Reimbursement
It’s no secret that claim rejections and denials can result in a significant amount of lost revenue. Consider this – a practice submitting 80 claims a day at an average reimbursement rate of $100 per claim should expect to receive $8,000 in daily revenue. If 10 percent of those claims were rejected or denied (eight claims per day at $100 per claim equals $800 per day), and the practice only appealed one out of every 10 rejections or denials ($720 per day loss), the practice could expect to lose as much as $180,720 annually (251 business days at $720 per day in denials or rejections). The numbers are staggering and the loss of income could cover the cost of several full-time employees.
While it might not be feasible for a solo or small physician group to appeal every single denial or rejection, practices can significantly reduce potential lost revenue by identifying and addressing the three most common reasons for denial or rejection.
Identify whether the denial is a result of an internal billing error, a payor error, or medical necessity denial (i.e., not in line with the payor’s medical or reimbursement policy).
- Internal billing error – Share your findings with staff, identify the dollars lost due to the error and use the results as a training tool. Often, offering a modest incentive to staff to improve will generate big results.
- Payor error – If a particular payor error is contributing to a large number of denials or rejections, contact the payor directly. Addressing the root cause with the plan is more effective than continually appealing each and every claim denied for the same reason. If the payor is not responsive to the requests to fix the problem, contact the California Medical Association’s (CMA) Center for Economic Services for assistance at (888) 401-5911 or firstname.lastname@example.org. CMA members and their staff receive FREE reimbursement assistance from practice management experts.
- Medical necessity denials – Get a copy of the written medical policy. Medical necessity denials are often the result of either a lack of documentation or incorrect linking of diagnosis codes to CPT codes on the claim form. Other times, it’s a conflict with a payor’s medical policy. Share the findings with staff, including the dollars lost. Get the physician involved, as medical necessity appeals are more successful when he or she is involved in writing the appeal. If the appeal is not successful, request a peer-to-peer between your physician and a physician of the same or like specialty at the payor. If the peer-to-peer isn’t successful, assist your patient in filing an Independent Medical Review (IMR) request with the Department of Managed Health Care or the Department of Insurance. For more information on filing an IMR request, see CMA On-Call document #7155, “Independent External Medical Review.”
Remember, thanks to a CMA-sponsored California law, payors are required to have a fast, fair and cost-effective appeal process to resolve provider disputes. Make the most of appeals by familiarizing yourself with the most common types of denials, underpayments and partial payments and learn how to most effectively respond using CMA’s “Know Your Rights: Quick Guide for Appeals.”