Six Common Root Causes of Hospital Claim Denials and Solutions that Increase Your Revenue

Since 2008, the American Medical Association (AMA) has taken the lead to bring reform to the medical billing and payment system. Even amidst the COVID-19 pandemic, the AMA played a crucial role in shaping the federal response to the omnibus legislative package in December 2020. 

While healthcare organizations may still end up with a denial rate of less than 10%, despite their best efforts, studies show a full 90% of denials can be avoided from the outset. While insurers have taken steps to increase claims efficiencies with electronic filing systems, provider errors and claim omissions cannot be cured by relying solely on improved communications. 

Because of the complexity of each insurer and Medicare/Medicaid claim requirements, increasing your revenue is most efficiently achieved with accuracy and preventing denials with technology solutions. An analytical, data-driven approach to claim management has its own costs, but they are a tiny fraction of the nearly 3% of net patient revenue that can be reclaimed. 

Here are six of the most common reasons for hospital claim denials and how Advent Health Partners can help reduce or eliminate those denials for our clients. 

  • Cause 1: Documentation Errors at Intake

Something as simple as misspelling a name, miswriting a street address, transposing numbers in a date, or forgetting to complete other patient demographics can be some of the causes that ensure a claim will fail from inception. Since insurance coverage verification must happen in the registration process before services begin, both the hospital and the patient could be set up for disappointment. 

  • Cause 2: Lack of Eligibility

While a patient may have coverage, changes to their plan may alter their level of coverage. Often, patients do not realize these changes occurred. 

  • Cause 3: No Pre-authorization

Pre-authorization can fall through the cracks in care delivery for a variety of reasons. Still, the confusing array of requirements and contractual obligations from the pool of payer organizations is often a root cause. Many claims are denied simply because of a lack of pre-authorization.

  • Cause 4: Coding Errors

Incorrect or incomplete coding shuts down claims more than almost any other error. Even since the ICD-10 rollout in 2015, old processes of coding and updating still cost healthcare organizations. 

  • Cause 5: Insufficient Documentation 

With the Center for Medicare and Medicaid Services (CMS) commanding a paradigm shift towards meaningful use and value-based care documentation, provider justifications must be far more specific. Physician-entered codes and notes that don’t satisfy CMS requirements can earn a denial more readily these days. 

  • Cause 6: Lack of Medical Necessity

Issues with pre-authorization, coding errors, insufficient documentation, and inability to prove medical necessity can produce a claim denial, leaving the denial management team scrambling after clinicians to provide more or better documentation. However, if the claims review application already solved the coding, pre-authorization, and documentation problems, medical necessity does not present a problem. 

Solution: Understanding Your Root Causes and How to Address Them

By managing your claims against denials before they even leave the billing office, you can bypass the resource-draining efforts to rework claims up to 90% of the time. With more compensation coming in on the first claim and far less leakage from the pursuit of inappropriate hospital claim denials, your improved revenue cycle will likely see a significant ROI from your new technology partner. 

If you’re ready to eliminate claim denial errors with technology that provides immediate ROI for hospitals and health systems, schedule a time to discuss your root cause analysis needs with our team.