American College of Physicians: Internal Medicine — Doctors for Adults ®


Your PracticeClaims denied? Take steps to get what you're owed

From the December 2000 ACP-ASIM Observer, copyright 2000 by the American College of Physicians-American Society of Internal Medicine.

Phyllis Maguire

Denied claims: a tally

Atlanta—Two years ago, physicians at University Physicians Inc., the University of Maryland School of Medicine faculty practice in Baltimore, realized that denied claims were costing them millions of dollars a year. And while they were surprised at the size of the problem, they soon learned they were not alone.

Sara M. Larch, the practice's chief operating officer, conducted an informal survey asking other practices around the country about their experiences. She found that nearly half of more than 100 practices she heard from had no idea how many of their claims were being rejected.

Statistics proved to be just as discouraging. Ms. Larch discovered that of the five billion medical claims filed in the United States each year, roughly 30 are denied. Of those denials, she said, half are never resubmitted or appealed. As a result, physicians write off payments for 15%—or 750 million—of all claims.

At the annual meeting of the Medical Group Management Association (MGMA), Ms. Larch said that too many practices choose not to appeal rejected claims and write off revenues that they are rightfully due. But she said there are simple strategies to help keep claims from being denied in the first place—and successfully appeal those that are rejected.

The payoff for chasing down denied claims can be huge. This year alone, Ms. Larch's group should recover as much as $1 million that otherwise would have been denied.

Defining the problem

Ms. Larch urged groups to start by "taking a practice snapshot" to find out how many claims get denied—and why.

Small practices, she said, should keep a handwritten spreadsheet for a week and track denials from their two or three biggest payers. Each entry should include the name of the payer and patient, the date of service, the claim amount and the reason the claim was denied. Larger practices can download denial information from their practice software and should track denials according to practice location and specialty.

Ms. Larch suggested assembling a "denial SWAT team" to zero in on specific denials. But even if you can't dedicate staff to work on denials, a few simple procedures can help them track and begin to correct denied claims. List all "zero payments" in your practice management system, and keep similar types of rejected claims together so staff can follow up on them more easily. All denials that need to have patient charts pulled, for example, should be kept together.

Remember that you're fighting the clock, Ms. Larch said. Most payers give you only 30 or 60 days to appeal denied claims.

Cleaning up your claims

Tracking denied claims will help you pinpoint areas of claims processing that your practice needs to improve. Because it costs roughly $25 in staff time to file an appeal, you want to make your claims as clean as possible. Ms. Larch outlined the most common reasons that claims are rejected and suggested steps to produce cleaner claims:

  • Registration errors. Payers deny claims if the patient's name or address doesn't match insurance records, or when the patient subscriber number is incorrect. If your practice encounters many of these errors, take a hard look at your registration process.

    Simplify your registration form so that important billing information doesn't get lost among all the other questions. Consider advance registration, in which staff members call patients to collect information before they come for their appointment. When patients arrive with their insurance cards, have staff verify the advance information.

    Make sure your front desk staff—who typically register patients—and your billing staff are working together. "Convince them that the enemy is the payer, not each other," Ms. Larch said.

    One technique that can help is "job visiting." Have your billing staff occasionally sit at the front desk and train new front desk staff to identify the information that they need to process claims. Front desk staff can also spend time in the billing office and work with explanation of benefits forms.

  • Verification. If you don't verify patients' coverage, you won't know if they have switched jobs or dropped out of a health plan. The problem is compounded if your independent practice association verifies benefits for you but is using outdated records.

    Ms. Larch's group verifies patient coverage for every appointment (unless the practice sees the patient often). She tells staff to write down the date of verification and the name of the payer's employee who confirmed the patient's coverage.

    She also suggested that practices demand a clause in their contracts that says you will be paid for claims if a patient loses coverage shortly after you have verified eligibility. "If someone from my office called three days before an appointment to verify coverage," Ms. Larch said, "I don't want to hear that the patient lost coverage in those three days" and not be paid.

  • Incomplete information. Errors often result when staff fail to record the date of a patient's illness or injury, or when an outpatient hospital treatment is billed as an office procedure. Beware of incomplete CPT or ICD-9 codes; some payers demand codes to the fourth numeral after the decimal point for specificity. Similarly, make sure your staff members use the correct modifiers on procedure codes.

    Ms. Larch said that the easiest way to reduce coding errors is to upgrade your coding guides or software every year. She also suggested annually updating your encounter forms with new codes.

  • Referral problems. Problems often arise when a primary care physician forgets to send the subspecialist referral documents that need to be included in the claim. Alternately, subspecialists who provide patient services that are not called for in the referral can expect claims for those services to be denied.
  • Supporting information. Frequently, physicians list CPT codes that aren't supported by ICD-9 codes on the claim. Support the services you bill with the right diagnosis codes, or payers will reject the claim as medically unnecessary.

    Payers may also deny a claim for a clinical reason: They say the procedure is being done "too frequently" or that it is an alternative or experimental treatment. When you appeal these cases, send peer-reviewed material to support your use of the treatment. If you are having repeated problems with claims involving medical judgment, it's time for a physician from your group—not an administrator—to personally meet with the payer's medical director.

    Payers also deny claims by saying that they need reports, test results, emergency room notes or other documentation. The catch? Many don't allow you to submit that information with the initial claim. "Press payers to be able to send records the first time," Ms. Larch suggested. "Sometimes you can negotiate with them."

  • Bundled procedures. Some payers follow Medicare bundling guidelines, where groups of procedures are covered by a single code, while others have their own bundling guidelines. "Someone in your practice needs to know all the bundling rules to make sure that you're billing correctly—and they vary from payer to payer," Ms. Larch said.
  • Duplicate claims. When payments are delayed, don't automatically refile a claim. Filing what will be considered a duplicate claim may expose you to charges of fraud. At the very least, you'll face yet another rejected claim. Use the appeals process for claims that are "lost" or denied.

Appealing claims

When should you appeal denied claims? Always, said Ms. Larch. You can buy appeals software to help with the process or outsource it to a vendor. Keep in mind, however, that outsourced vendors generally keep 20% to 50% of what they collect.

Ms. Larch said that most practices don't appeal claims because they think they lack the staff or the time. But even small practices can develop a basic template letter to simplify the appeals process.

The appeal letter should identify the claim, the reason the appeal should be approved and the names of the attached documents that bolster your position. When you draft an appeal, be sure to include any pertinent information that you didn't send with the original claim.

Have your staff track exactly how many denied payments you salvage and how different payers respond to appeals. First appeals are successful 60% of the time, Ms. Larch said. Second appeals also have a 60% success rate, she added, so don't give up after the first try. For second appeals, re-use your original appeal letter information and rewrite it for the next reviewer.

If your claim still isn't paid after the second appeal, ramp up your efforts. Contact the payer's claims office or provider relations manager. Arrange a meeting with the payer's management. Have your lawyer call or send a letter. Ask the patient to get involved.

Ms. Larch advised against taking denied claims to small claims court; claims denied there can't become part of a larger lawsuit later. If you do decide to sue, you should have at least $100,000 at stake to make litigation worthwhile.

In many states, attorneys general and insurance commissioners are giving physicians new muscle by filing class action suits against insurers for payment violations. When you contact a state regulator, include a list of denied claims and their dates. Some state medical societies and state MGMA chapters can also help physicians fight inappropriate denials.

Ms. Larch said that sometimes, however, you have to let certain denials go. "If the practice made a mistake that isn't correctable—like billing the wrong insurer and not taking care of it—you've lost it," Ms. Larch said. Sometimes writing a claim off is your only option. But only, she insisted, "after you've tried to correct it and tried to appeal."

Denied claims: a tally

  • HCFA rejects 26% of all claims processed, according to Sara M. Larch, chief operating officer of University Physicians Inc., the University of Maryland School of Medicine faculty practice in Baltimore. Of those claims, 40% are never resubmitted.
  • In 1999, the first year in which it tracked denial data, the Medical Group Management Association (MGMA) found that the median denial rate among its medical practice members was nearly 14%.
  • Among better performing practices, the claim denial rate was down to only slightly more than 7%, according to the MGMA's "Performance and Practices of Successful Medical Groups Report."


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