How can healthcare providers address the most common denials in medical billing without fully understanding them? Ideally, every healthcare provider would receive timely payments, but the rise in claim denials has made this increasingly difficult. 

An analytical report revealed that the claim denial rate for inpatient treatments and procedures surged by 51% between 2021 and 2023. The primary culprits? Incorrect or missing information and coding errors. 

Insurance companies utilize various denial codes to specify the issues with a medical claim. Regardless of the cause, receiving a denial code means rework and payment delays. To enhance your practice’s revenue cycle, it’s essential to understand the most common denial codes in medical billing. 

Why Understanding Denials is Critical for Healthcare Revenue Cycle Management 

Understanding claim denials is critical for effective healthcare revenue cycle management because they directly affect an organization’s financial health. Denials delay reimbursement, leading to cash flow issues, and, if not managed properly, they can result in significant revenue loss. Analyzing and addressing the root causes of denials helps healthcare providers improve their billing processes, reduce errors, and increase collections. It also aids in identifying systemic problems that may need correction, ensuring that claims are submitted accurately the first time to avoid costly rework. 

Definition of a “Claim Denial” 

A claim denial occurs when an insurance company refuses to pay for a medical service or procedure. This happens after the payer reviews the submitted claim and determines that it does not meet the necessary criteria for reimbursement. The denial could be based on various factors, such as errors in coding, missing documentation, or issues with patient eligibility. 

Differentiating Between Claim Denials and Claim Rejections 

• Claim Denials: A claim denial is a refusal by the insurance payer to provide reimbursement after the claim has been processed. It means the payer has reviewed the claim and decided not to pay for it, either due to medical necessity, policy limitations, or other factors. Denials can often be appealed with additional documentation or corrections. 

• Claim Rejections: A claim rejection occurs earlier in the process, typically before the payer even processes the claim. Rejections are usually the result of errors such as missing or incorrect patient information, invalid codes, or incomplete submission. Unlike denials, rejected claims can often be corrected and resubmitted quickly. 

Categories of Common Denials 

In medical billing, denials are often categorized based on the nature of the issue causing the rejection. Understanding these categories helps healthcare providers address the root causes more effectively. Here are the main categories of common denials: 

1. Technical Denials 

Technical denials occur when there are issues related to the accuracy or completeness of the information provided in the claim. These types of denials typically involve errors such as incorrect coding, missing patient information, or improper submission of claims. Examples include: 

• Incorrect patient details (e.g., name, date of birth, insurance ID). 

• Invalid CPT or ICD-10 codes. 

• Errors in claim format or submission methods. 

2. Clinical Denials 

Clinical denials are related to the medical necessity or appropriateness of the services provided. Insurers may deny claims if the treatment or service is considered unnecessary or not covered under the patient’s policy. This category often involves a review of medical records and clinical documentation. Common reasons include: 

• Services are deemed not medically necessary. 

• Lack of supporting clinical documentation. 

• Procedures outside the scope of the patient’s insurance coverage. 

3. Administrative Denials 

Administrative denials are typically caused by internal or procedural issues related to the claim. These denials are often tied to errors made by the healthcare provider’s administrative staff or the insurance company’s internal processes. Examples include: 

• Incomplete or missing documentation. 

• Claims submitted outside the payer’s filing deadlines. 

• Errors in billing codes or discrepancies in the information submitted. 

4. Authorization-Related Denials 

Authorization-related denials occur when the healthcare provider has failed to obtain the necessary pre-authorization or referral for a particular service or procedure. Insurance companies typically require approval for certain treatments, tests, or surgeries before they will approve payment. These denials can arise from: 

• Missing or expired prior authorization. 

• Incorrect or late submission of authorization requests. 

• Failure to follow payer-specific authorization guidelines. 

5. Eligibility and Coverage Denials 

Eligibility and coverage denials occur when there are issues with the patient’s insurance coverage at the time of service. These denials may happen if the patient is not covered for the treatment, has exceeded coverage limits, or their insurance has expired. Common reasons for these denials include: 

• Invalid or expired insurance coverage. 

• Service was provided when the patient was not eligible for coverage. 

• Benefits exhausted or coverage limits reached. 

By understanding and identifying these categories of denials, healthcare providers can streamline their processes, reduce claim rejection rates, and improve the efficiency of their revenue cycle management. 

Here are the common denial codes used in medical billing, organized by the types of denials: 

1. Eligibility Issues

• CO-11: Patient’s eligibility has expired. 

• CO-22: Coverage not in effect at time of service. 

• CO-45: The Patient’s insurance plan is not valid. 

• CO-16: Missing or invalid subscriber ID. 

2. Missing or Incorrect Information

• CO-5: Service was not documented in the patient’s medical records. 

• CO-6: Incorrect patient information (e.g., date of birth, name, address). 

• CO-24: Missing information or incomplete claim. 

3. Authorization or Pre-Certification Denials

• CO-56: Procedure/service requires prior authorization. 

• CO-51: Service is not authorized. 

• CO-53: Pre-certification not obtained. 

4. Duplicate Claims

• CO-18: Duplicate claim for the same service. 

• CO-19: Duplicate payment (repeated submission). 

5. Procedure Not Covered

• CO-50: Service is not covered under the patient’s health plan. 

• CO-22: Coverage not in effect at time of service. 

6. Coding Errors

• CO-4: Procedure code missing or invalid. 

• CO-27: CPT code mismatch (unbundling, incorrect code). 

• CO-9: Invalid ICD-10 code or missing diagnosis. 

7. Medical Necessity Denials

• CO-4: Procedure is not deemed medically necessary. 

• CO-88: Medical necessity not supported by documentation. 

8. Timely Filing Denials

• CO-29: Claim submitted after the payer’s timely filing deadline. 

9. Coordination of Benefits (COB) Issues

• CO-21: Coordination of benefits error (primary vs. secondary payer issue). 

• CO-26: Duplicate claim (COB issue, both payers paid). 

10. Bundling Denials

• CO-97: Incorrect bundling of services (unbundling error). 

• CO-98: Services are bundled and cannot be billed separately. 

Causes Behind Common Denials 

Understanding the root causes of claim denials is crucial to effectively address them and minimize their occurrence. Below are some of the most common causes behind medical billing denials: 

1. Human Errors in Data Entry 

Simple mistakes, such as typographical errors, incorrect patient details, or wrong insurance IDs, are one of the primary causes of denials. These errors can result in claims being rejected outright or denied after processing. 

2. Lack of Updated Patient Insurance Information 

Patients may change insurance providers or policies, but if healthcare providers do not verify or update this information before submitting claims, it can lead to eligibility issues and claim denials. 

3. Poor Documentation by Providers 

Failure to provide adequate or accurate clinical documentation can lead to clinical denials. This might include missing information about the medical necessity of a procedure or service, which is essential for reimbursement. 

4. Misinterpretation of Payer Policies 

Insurance payers have different rules, guidelines, and requirements for processing claims. Providers who fail to understand or misinterpret these payer policies can submit claims that don’t meet the necessary criteria for approval, leading to denials. 

Impact of Denials on Healthcare Organizations 

Claim denials can have significant repercussions for healthcare organizations, affecting both their financial performance and operational efficiency. Here are some of the main impacts: 

1. Financial Losses and Reduced Cash Flow 

When claims are denied, healthcare providers face delays in receiving payments, which can result in cash flow problems. The time spent correcting denials also reduces the amount of money coming into the practice, affecting its financial stability. 

2. Increased Operational Costs (Resubmissions, Appeals) 

Handling denied claims often requires significant administrative resources. Billing teams must resubmit claims, provide additional documentation, or file appeals, all of which increase operational costs and strain resources. 

3. Patient Dissatisfaction and Trust Issues 

Denied claims can lead to billing errors being passed on to patients, causing frustration and dissatisfaction. This can erode trust in the healthcare provider, especially if patients are asked to pay out-of-pocket for services they believed were covered by their insurance. 

4. Administrative Burden on Billing Teams 

Denials place a heavy administrative burden on billing and coding teams, requiring them to track, manage, and resolve denied claims. This takes time away from other important tasks and can reduce overall efficiency. 

By addressing the underlying causes of denials and understanding their impact, healthcare organizations can take proactive steps to improve their billing processes and enhance their revenue cycle management. 

How to Prevent Common Medical Billing Denials (Denial Management Strategies) 

• Patient Eligibility Verification before service. 

• Accurate and Thorough Documentation practices. 

• Training for Billing and Coding Teams. 

• Use of Advanced RCM Software and Tools. 

• Regular Internal Audits and quality checks. 

• Strong Pre-Authorization Procedures. 

• Timely Filing Tracking Systems. 

• Clear Communication with Patients regarding insurance responsibilities. 

Role of Technology in Reducing Denials

Technology plays a crucial role in minimizing medical billing denials by streamlining processes, improving accuracy, and enhancing decision-making. Here’s how modern technology is transforming denial management:

1. AI and Automation in Claims Scrubbing

Artificial intelligence (AI) and automation can significantly improve claims scrubbing, ensuring that claims are checked for errors before submission. AI-powered tools can quickly analyze claims, identify potential issues like incorrect coding, missing information, or formatting errors, and automatically correct them before submission. This reduces human error and the chances of claims being denied due to avoidable mistakes.

2. Predictive Analytics for Denial Patterns

Predictive analytics uses historical data and patterns to anticipate future denials. By analyzing past denial trends, healthcare organizations can identify common causes and proactively address them. Predictive analytics can also help prioritize high-risk claims that are more likely to be denied, allowing billing teams to focus their efforts on areas where denials are most common and costly. This helps in streamlining the denial prevention process and reducing the time spent on appeals.

3. Automated Eligibility Verification

Automated eligibility verification systems allow healthcare providers to verify patient insurance coverage in real-time, before providing services. By integrating these systems into the billing process, providers can ensure that the patient’s insurance is valid and active at the time of the visit. This reduces the likelihood of eligibility-related denials, such as when the patient is not covered or their insurance has expired.

By incorporating AI, predictive analytics, and automated verification systems into the billing process, healthcare providers can reduce the occurrence of denials, improve claim accuracy, and ultimately enhance the overall revenue cycle.

Conclusion 

Claim denials are an inevitable part of the medical billing process, but with a clear understanding of the common denial codes and their underlying causes, healthcare providers can significantly reduce their occurrence. By focusing on improving data accuracy, verifying patient insurance information, ensuring proper documentation, and staying updated on payer policies, organizations can minimize costly denials. The impact of claim denials on financial health, operational efficiency, and patient satisfaction is profound, but through effective denial management strategies, healthcare providers can optimize their revenue cycles, improve cash flow, and deliver better care with fewer administrative burdens. Addressing denials proactively is not just about recovering lost revenue—it’s about building a more efficient, patient-friendly, and financially sustainable practice.