3 common reasons for medical claim denials

Published: April 6, 2023 by Experian Health


With billions of dollars at stake, reducing medical claim denials regularly tops the “must-fix” list for healthcare providers. But despite being highly motivated to resolve the challenge, many organizations face operational roadblocks. In Experian Health’s State of Claims 2022 survey, 62% of healthcare executives said they lack sufficient data and analytics to identify issues when claims are being submitted, while 61% believe a lack of automation is holding back performance improvements. Overcoming these obstacles will unlock the insights and streamline workflows needed to address the root cause of the problem – why are claims being denied in the first place, and how can providers prevent those issues from arising in the future?

In June 2022, Experian Health surveyed 200 revenue cycle decision-makers to understand the current state of claims management. Watch the video to see the results:

By pinpointing the most common reasons for medical claim denials, providers can increase the first-pass clean claim rate, ramp up the likelihood of reimbursement, and reduce the overhead to rework and resubmit claims. This article looks at the top three reasons for denials and how automation and artificial intelligence (AI) can generate the data, analytics and operational efficiencies to improve cash flow.

Reason 1: Missing or incomplete prior authorizations

Many of the reasons why claims are denied are tied to how well payer and provider systems communicate with one another, and prior authorizations are a prime example. The process requires providers to seek agreement from the payer to cover a service or item before it is administered to the patient. Failure to do so results in the claim for that treatment being denied. Unfortunately, obtaining prior authorizations is not always a straightforward process: sometimes the patient’s treatment must begin before the authorization process is concluded. Other times, the authorization only covers certain aspects of the treatment.

To navigate this process successfully, providers must keep on top of frequent changes to payer policies. Staff must use multiple payer portals to track authorization requests; however, it’s a costly and time-consuming process. It’s no surprise, then, that authorizations are among the top three reasons for denials for 48% of respondents in the State of Claims 2022 survey.

As with any challenge involving digital systems “talking” to one another, authorizations are a great use case for automation. Automation can be used to check payer policy changes, alert staff when prior authorization is needed, gather relevant documentation, and review authorization requests for accuracy. This significantly reduces the burden on staff and minimizes the risk of claims being submitted without the necessary authorizations in place.

Experian Health’s Prior Authorizations technology automates authorization inquiries and checks requirements in real-time. It uses AI to help users find and access the appropriate payer portal to speed up the authorization workflow. Users will have confidence that they’re looking at the same account information and policy details as the payer, which means lengthy negotiations can be avoided. Staff can also get accurate status updates on pending and denied submissions so they can take appropriate action and maximize reimbursement.

Reason 2: Failure to verify provider eligibility

For 42% of healthcare executives, provider eligibility is one of the top three reasons for medical claim denials. If a provider is out-of-network, or a service or procedure is not covered by the patient’s health plan, then the payer may deny the claim. To avoid denials, providers need to run checks to verify that planned treatment will be eligible for reimbursement. As with authorizations, these checks generate mountains of work for patient access teams. Staff must pore over payer websites and call insurance agents to track down information. Automating this process offers significant time savings and reduces the risk of erroneous claims.

For example, Experian Health’s eligibility verification software gives providers accurate eligibility data from over 890 payers to eliminate billing errors and avoid claims for services that aren’t covered. The data is accessible via a user-friendly dashboard so staff can view patient information in a clear and consistent format, regardless of which payer it comes from. This helps prevent avoidable denials, increases revenue and provides the detailed reporting and analytics that many healthcare executives say they desire.

Reason 3: Code inaccuracies

Inaccurate medical coding is a frequent culprit behind denied claims, as stated by 42% of healthcare executives. Even the smallest mistake can result in a denial, leading to payment delays and extra work for the staff. These denials are particularly frustrating because they should be avoidable. But with thousands of coding terms to factor in – that are frequently being updated – medical coders have their work cut out for them. Matching patient encounters to the right codes with automation drastically reduces the workload and risks of errors. Automated claims management solutions can reduce the manual load by pulling out relevant information from clinical charts and cross-referencing them with coding directories to ensure the claim is filled out correctly.

Automation can also be used to check the accuracy of other aspects of the claim. These solutions can check for duplicate charges, missing fields and ensure patient information is correct and free of typos. A tool like Claim Scrubber can help providers prepare error-free claims for processing by reviewing each line of the claim before it’s submitted. ClaimSource®can help providers manage the entire claims cycle, by creating custom work queues and automating claims processing to ensure that claims are clean the first time.

Leveraging AI Advantage to reduce medical claim denials

With 35% of hospitals and health systems reporting $50 million or more in lost revenue because of denials, it’s clear that claims management and denials prevention are ripe for innovation. The financial consequences compound with each denied claim, because of the additional rework needed. And given ongoing labor shortages, healthcare providers cannot afford to have their staff spend valuable time on avoidable administrative tasks.

Experian Health recently launched AI Advantage™, to help providers combat these challenges. This solution brings together two components that optimize denials management using AI and automation. It gives providers real-time insights, so they can be proactive and avoid unnecessary denials:

  • AI Advantage™ – Predictive Denials uses AI to identify undocumented payer adjudication rules that result in new denials. It identifies claims with a high likelihood of denial based on an organization’s historical payment data and allows them to intervene before claim submission.
  • AI Advantage™ – Denial Triage comes into play if a claim has been denied. This component uses advanced algorithms to identify and intelligently segment denials based on potential value, so that organizations can focus on resubmissions that have the most impact to their bottom line. By doing so, it removes the guesswork, alleviates staff burdens, and eliminates time spent on low-value denials.

This solution can complement existing claims management workflows, such as ClaimSource and Denials Workflow Manager. As providers look to mitigate the growing volume of medical claim denials, these brand-new solutions respond to two weak spots reported in the State of Claims survey: the lack of data and the lack of automation. AI Advantage brings the two together seamlessly to help providers expedite claims processing, reduce denials and maximize revenue.

Find out more about how AI Advantage™ can help providers transform the claims management process and reduce denials for good.

Related Posts

RCM managers need to anticipate and adapt to changes in healthcare. This blog post discusses 12 revenue cycle management trends to watch.

Published: June 13, 2024 by Experian Health

Learn why healthcare claims get denied, how to prevent healthcare claim denials and ways technology can support better denial management.

Published: June 5, 2024 by Experian Health

“We are really happy with Experian. It takes away duplication of efforts and allows us to see the bigger...

Published: June 3, 2024 by Experian Health

Subscribe to our blog

Enter your name and email for the latest updates.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Subscribe to the Experian Health blog

Get the latest industry news and updates!