Know the rules to avoid common errors, appeal unfair denials

One of the most frustrating things about dealing with health insurance companies is addressing denied claims. Fortunately, there are simple steps within the control of a practice's billing staff to reduce denials. Billing errors can be placed into general categories, and knowing what types of errors are the most frequent can help staff avoid making them in the first place.

Q: We struggle to keep up with the denial notices from our patients' insurers. How frequently do denials occur, nationally?

A: The chances of having a claim denied are relatively low. The 2008 American Medical Association's National Health Insurer Report Card charted the denied claims rate, calculated as the percentage of claim lines denied, which includes claims that are partially denied. For large private insurers, the results were 6.8% of claims for Aetna (this was the highest denial rate), 4.62% for Anthem Blue Cross Blue Shield (BCBS), and an average denial rate of 3.88% for private insurers as a group. In the same year, Medicare denied 6.85% of its claims.

One year later, AMA reported that all the surveyed insurers were denying fewer claims: Aetna's denial rate was down to 1.81%, Anthem BCBS reduced its rate to 4.34%, and private insurers overall were down to 2.79%, while Medicare denied only 4% of claims. The reasons for the denials were varied, but there were lower rates of denials for services rendered outside of the patient's coverage dates, denials for absence of a pre-certification/authorization, and denials for non-covered services. This could be due to factors such as more accurate coding and program requirement compliance by physicians, or perhaps due to more effective physician education efforts by the payers.

Q: What are the most common types of errors that practices make, and how can they avoid them?

A: Presented below are the most common health insurance claims billing errors, regardless of the insurance company.

Wrong patient ID used

Patient identification numbers for the insured policyholder and his or her dependents can be nearly identical. Be sure that the submitted claim reflects the identification number of the patient, and not that of the spouse or parent.

Coordination of Benefits (COB) section is incomplete

If the insurer is aware that the patient has additional coverage with another insurer, the absence of this insurance coverage information could cause claim payment denials. When the claim is being submitted to a secondary insurer, that insurer might not process the claim for payment until it receives the primary insurer's explanation of benefits (statement of benefits paid on that particular claim). This is typically called a “held” or “pended” claim. But less patient companies might deny the claim, requiring the primary insurer's explanation of benefits to be submitted before the secondary insurer's payment is made.

Diagnosis code does not match procedure

Many payment policies (and claim payment systems) are written so that payment is dependent on specific combinations of diagnosis and medical procedure codes. Be sure to use the correct diagnosis code, including the fifth digit if necessary.

Physician identifier incorrectly noted

The standard claim form, the CMS-1500 form, requires the use of multiple identifiers, such as the national provider identifier (NPI), the tax identification number (TIN), the employer identification number (EIN), the NPI of the billing entity, or the NPI of the rendering provider, each increasing the possibility of a billing error. Be sure to list the identifier(s) in the correct place(s) on the claim, and be sure not to transpose any of the digits.

The required and requested identifiers will vary, depending on the insurer. Be sure that you are familiar with the requirements from your payers, and that your claims contain the correct identification number(s).

Duplicate claim filed

A number of events can cause a claim to reject as a duplicate. Corrected claims, additional claim information, or other claim resubmissions require an accompanying note that the information was being resubmitted. To avoid duplicate claim denials, many insurers request that you allow two to three weeks for your claim(s) to be processed. Before you resubmit a claim for payment, check with the payer to verify receipt of your claim and for the status of your claim.

Bundled services billed separately

Increasingly, more services cannot be billed as separate services. Many times, these are identified in a set of claims edits designated by an insurer. Typically, the edits “tie together” services that either have overlapping components, or are nearly always performed in combination with each other. As a result, claims for one of the separate services are typically denied.

Patient eligibility status

Be sure to verify the patient's eligibility dates. (It's generally a good idea to verify this prior to the patient's initial visit, and then at least intermittently.) Insurers will deny claims for services rendered before or after the patient's enrollment period, unless there was an extenuating circumstance.

Incorrect place of service code

Most claims will be for services rendered in the physician's office (place of service [POS] code 11), an outpatient hospital department (POS code 22), or an inpatient hospital department (POS code 21). It is critical to code for the correct setting; if the physician's stated POS does not match up with the facility's POS, the claim is likely to be denied. You can find the complete list of POS codes in your CPT book, or online.

Q: What's my recourse if I think a denial is unfair?

A: Beyond knowing what the common errors are, know about appeals processes that are in place. The appeals process for each insurer will have its own idiosyncrasies; there isn't a national standard. However, most insurers post the appeals policy on their own Web sites.

In addition, alert ACP if you believe that Medicare or another payer is inappropriately denying claims and/or maintains an unfair policy. For instance, an insurer may deny payment for a service justified with a clinically appropriate diagnosis code. Or, an insurer policy may bundle payment for two services that are truly distinct. It is important to know the rules to ensure prompt payment. It is also important to try to change unfair rules.