Medical billing is a vital part of healthcare, ensuring providers get paid for the care they deliver. However, claim denials can disrupt this process, causing frustration, delayed payments, and a hit to your practice’s revenue cycles. For many providers, these most common denials in medical billing aren’t just an inconvenience—they can create significant financial challenges.
Denials include avoidable errors, such as incorrect procedure codes, or missing supporting documentation. Understanding the common reasons why insurance companies deny claims can help you identify problem areas in your billing process and prevent denials before they happen. By addressing these issues, you can improve your practice’s efficiency and ensure that you’re reimbursed accurately and on time.
8 Common Reasons for Denials in Medical Billing
Here are the most frequent issues, which result in claims being denied, along with tips on how to avoid them:
- Coding Errors
- Lack of Prior Authorization
- Incorrect Patient Data
- Duplicate Claims
- Medical Necessity Issues
- Missing or Incomplete Supporting Documentation
- Coordination of Benefits Error
- Fee Schedule Discrepancies
1. Coding Errors
Why It Happens:
Errors in procedure codes or diagnosis codes are among the most common reasons for claim denials. These errors can result from outdated coding manuals, lack of familiarity with current guidelines, or simple human mistakes. For example, entering an incorrect code or forgetting to include a necessary modifier can trigger a denial.
How to Prevent It:
Stay proactive by regularly updating your coding software to include the latest codes and guidelines. Provide ongoing training for your staff to ensure they’re well-versed in current coding practices, including new codes or changes in coding rules, or use a third party to manage. Conduct periodic audits of submitted claims to catch and correct errors before submission. Using billing systems with built-in error-checking and validation features can further minimize mistakes.
2. Lack of Prior Authorization
Why It Happens:
Certain treatments, tests, or procedures require prior approval from the insurance company before they are performed. Missing this critical step often results in automatic denials, regardless of whether the service was medically necessary. Miscommunication between the provider and the payer can also contribute to these issues, especially in complex or less common procedures.
How to Prevent It:
Create a streamlined process for verifying prior authorization requirements for every service or procedure. Maintain a centralized list of procedures that require approval, along with the contact information for relevant insurers. Double-check authorizations during patient intake and again before the procedure. Consistently following these steps can significantly reduce the risk of denials and keep your billing process running smoothly.
3. Incorrect Patient Data
Why It Happens:
Errors in patient data, such as misspelled names, incorrect insurance policy numbers, or mismatched dates of birth, can cause claims to be flagged and denied. These mistakes often happen during the registration process or when transferring information from patient forms to electronic records. Even a single-digit error in an insurance ID can lead to significant delays, creating headaches for both patients and providers.
How to Prevent It:
Implement a double-check process during patient registration to ensure all information is accurate and complete for every visit. Encourage staff to verify patient details with the patient at check-in and to confirm their insurance information, including policy numbers and coverage details. These small but crucial steps can help prevent unnecessary denials due to data entry errors.
4. Duplicate Claims
Why It Happens:
Duplicate claims occur when the same claim is submitted multiple times, often due to miscommunication or oversight during follow-ups. While sometimes unintentional, these duplicates are flagged by insurers, leading to immediate denials. In busy practices, staff may accidentally resubmit claims when unsure of the original claim’s status or when trying to expedite delayed payments.
How to Prevent It:
Invest in a robust billing system that tracks all submitted claims and provides status updates in real-time. Train staff to check claim statuses thoroughly before resubmitting and to document follow-ups clearly. Regularly review outstanding claims to identify and address any legitimate issues without creating duplicates.
5. Medical Necessity Issues
Why It Happens:
Claims may be denied if the insurer believes the service or procedure wasn’t medically necessary. This often happens when the submitted documentation doesn’t sufficiently justify the treatment, or when the diagnosis codes don’t align with the procedure. For example, an insurer might question why a particular test or treatment was ordered if the provided diagnosis doesn’t clearly support it.
How to Prevent It:
Ensure that all submitted claims include clear and detailed supporting documentation that explains the need for the service. Use accurate diagnosis codes that correspond directly to the procedure and meet the insurer’s criteria for medical necessity. Training your team to document thoroughly and communicate effectively with payers can go a long way in preventing these types of denials.
6. Missing or Incomplete Supporting Documentation
Why It Happens:
Insurers require specific documentation, such as medical records, lab results, or provider notes, to validate a claim. If any required documents are missing or incomplete, the claim may be denied. This can occur when providers fail to submit all necessary records or when documentation is unclear or inconsistent.
How to Prevent It:
Develop a checklist for required documentation for each type of claim. Ensure that all necessary files are collected and reviewed for completeness before submission. Implement workflows that involve close collaboration between providers and billing staff to verify that all required information is included. Clear and thorough documentation helps build a stronger case for claim approval and reduces the risk of denial.
7. Coordination of Benefits Errors
Why It Happens:
When a patient has multiple insurance policies, confusion over which insurer is primary and which is secondary can lead to denials. If claims are submitted to the wrong insurer first, they may be rejected outright or delayed while the correct payer is identified.
How to Prevent It:
During patient intake, confirm all insurance coverage details and establish which insurer is primary and which is secondary. Educate your team on coordination of benefits rules and ensure they’re applied correctly. Use billing systems that help track and manage multiple insurance policies to avoid missteps. Accurate coordination ensures claims are routed to the appropriate payer from the start.
8. Fee Schedule Discrepancies
Why It Happens:
When the billed amount exceeds the insurer’s allowed amount as per their fee schedules, the claim may be denied or underpaid. These discrepancies often occur when billing systems aren’t updated to reflect the latest payer contracts or when errors are made in charge calculations.
How to Prevent It:
Stay updated on each payer’s fee schedules and regularly review contracts to ensure compliance. Use billing software that automatically calculates charges based on the insurer’s guidelines. By aligning your charges with payer expectations, you can minimize payment discrepancies and avoid unnecessary denials.
FAQs About Common Denials in Medical Billing
- What are the most common denial codes in medical billing?
The most frequent reasons include coding errors, missing prior authorizations, and incorrect patient data.
- How can I prevent coding errors?
Regular training for staff, updated coding manuals, and advanced billing software can help reduce mistakes.
- Why is prior authorization so important?
Many insurers require prior approval for specific treatments or tests. Without it, the claim may be automatically denied.
- What should I do if my claim is denied?
Identify the reason for denial, correct any errors, and resubmit the claim. Appeals may also be an option if the denial was made in error.
- Why are supporting documents necessary?
They prove the medical necessity and validity of the treatment, ensuring the insurer has all the required information to process the claim.
If claim denials are slowing down your practice, MBA Medical is here to help. With more than 25 years of expertise in medical billing, we can simplify the process, minimize errors, and ensure you’re reimbursed on time.
Contact us today to learn how we can take the burden of medical billing off your hands. Let us help you focus on what matters most: caring for your patients. Ready to get started? Take a quick assessment or schedule a consultation with our team to learn more!