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Claims Denials & Underpayments: What’s Impacting your Bottom Line?

October 4, 2021

By: Lindsay Burrows

Most of us pay for health insurance with hopes of only using it for routine checkups and annual visits to our primary care physicians. We feel a sense of security knowing that we have a health insurance policy; however, most of us are not privy to the dark world of healthcare claims denials and underpayments, where our providers often face risk of non-payment for emergent and elective procedures. It is commonplace to believe that enrolling in a health insurance plan allows you to visit your provider for the healthcare goods and services necessary to treat your condition, and in turn, the provider will receive payment for the services you received. This is not always the case.

For some time now, insurance carriers, third-party administrators, and self-funded payors (collectively, “payors”) have engaged in a pattern and practice of using improper claims tactics to avoid paying providers. Across the board, healthcare providers and hospital systems have continued to experience an influx of denials and underpayments, leaving hospital systems scrambling to meet fiscal year requirements and physician group practices struggling to keep their doors open.

Providers seemingly enter this cat-and-mouse game somewhere between the provider’s initial intake of the patient to the provision of life-sustaining care and subsequent patient discharge. Many providers are unaware that they are even entering this dark world of healthcare claims denials and underpayments, until the life cycle of the health insurance claim commences. After providing healthcare goods and services to the patient, providers must submit a claim for payment to the payor, which then goes through processing and adjudication. Thereafter, the payor determines whether it will pay, underpay, or deny the claim. Then, the provider is issued an explanation of benefits that advises the provider of the payor’s determination.

Payors decide not to pay claims for many reasons, the most common being for administrative or clinical reasons, some of which include billing errors, missing or incomplete documentation, failure to meet prior authorization requirements, untimely filing, coordination of benefits issues, and medical necessity issues, among others. Payors have become very creative with their denials and have routinely hired third-party auditors to detect minute claims issues, in efforts to reject claims and avoid paying providers.

Thus, providers must be even more creative in order to outsmart payors and recover payments. Providers must proactively manage claims denials and underpayments, and identify best practices to bolster their bottom line.

According to the Healthcare Financial Management Association, recent research into denial rates notes that out of $3 trillion in total claims submitted by providers, $262 billion were denied, translating to nearly $5 million in denials, on average, per provider. Providers typically do not address more than half of these denials. Interestingly enough, as many as 65% of claims denials are never resubmitted, resulting in an estimated 3% loss of net revenue.
It is no surprise that providers need assistance with proactive denials management and prevention. With this in mind, here are a few key takeaways providers should keep in mind when tackling reimbursement issues:

  • Some administrative claims denials can be remedied at or prior to the time of admit. Providers must be sure to educate staff members on pre-service requirements to avoid backend reimbursement issues.
  • Payors change their requirements frequently, so providers must stay privy to these changes in order to maximize returns.
  • Tracking trends in the denials and underpayments is key to identifying root causes of these denials and potential avenues for claims payment and resolution of trending issues.

All in all, it is always a plus to have the right players on your team. Denials management and dispute resolution is an integral part of Wolfe | Pincavage’s healthcare practice. We leverage our sophisticated managed care expertise and industry relationships to successfully resolve complex denials, underpayment trends, plan audits and overpayments.  Our denials management team has prevailed and eliminated overpayment demands, while assisting clients in defending against health plan audits and recoupment activity. Check out our practice areas page to learn more: https://wolfepincavage.com/practiceareas/denials-management-dispute-resolution/