One of the challenges that healthcare providers in the GCC face is that there are 99 reasons why insurance companies can deny their medical claims.
Though compulsory medical insurance has increased private healthcare expenditure across the GCC, many healthcare providers are reeling at the high rate of medical claim denials due to countless health insurance claim denial reasons.
Such medical claim denials can put a strain on the revenue of healthcare providers by increasing their expenses (for resubmission), revenue write off, and accounts receivable days (AR days).
In this article, we’ll consider the top 10 health insurance claim denial reasons and how healthcare providers can improve their medical claim denial management and keep their bottom line healthy.
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First, what is a medical claim? A medical claim is a bill that a healthcare provider submits to the insurer of a patient detailing the medical services offered and the cost incurred.
A medical claim denial occurs when the insurer, for one of many reasons (as we’ll see below), rejects the medical claim sent by the healthcare provider. Upon rejection of a medical claim, the healthcare provider will need to rework the claim and resubmit it for processing.
The rate of medical claim denials in the GCC, especially in the UAE, has been a concern for healthcare providers.
Different people have put different figures on the denial rate but it ranges from 4% to 10%, according to Health Insurance Arabia, 14%, according to Jobilal Vavachan, CEO of Aster Pharmacy and Clinics, a leading pharmacy chain in the UAE, and 30%, according to Azad Moopen, managing director of Aster DM Healthcare, a private healthcare conglomerate in the Middle East.
The first effect of medical claim denials is that healthcare providers incur an extra cost. It costs money to prepare and submit medical claims. And when such claims need to be reworked and resubmitted more often, the cost adds up.
The Medical Group Management Association puts the average cost of reworking a medical claim at $25. Again, it is not the cost of a single rejected claim that matters but the cumulation of many such rejected claims.
Secondly, medical claim denials lengthen AR days. It takes time to rework and resubmit rejected claims and healthcare hospitals might have to wait for more weeks/months to receive cash.
The problem is especially acute in the UAE where payment for medical claims can take between six months and two years, according to a Gulf News report. Waiting for this long can put a big strain on the finances of healthcare providers, especially the smaller ones that can’t access business loans in the interim.
Finally, not all resubmitted claims are accepted. Some medical claims will still be rejected again. Azap Moopen puts this second-time rejection at 15% in the UAE. Amidst such a rejection-resubmission cycle, some medical claims will go unpaid, creating a loss of revenue for healthcare providers. EzDataMunch, a business intelligence firm, says that healthcare providers have to write off about 1% to 5% of net patient revenue due to this cycle.
So, what are the reasons why an insurance claim may be denied? Let’s look at the top 10 reasons.
According to The Change Healthcare 2020 Revenue Cycle Denials Index, the top reasons for medical claims denials have remained the same since 2016:
The top three problems under registration/eligibility are coordination of benefits, benefits maximum, and plan coverage.
Coordination of benefits (COB) problems arise when a patient has multiple insurance plans with different insurers. There might be certain cases where all the relevant insurance companies have to pool resources to pay for particular medical service(s).
If a healthcare provider charges all the expenses to a single insurer, they will reject the medical claim based on COB.
Denials based on "benefits maximum" occur when the medical expense charged to an insurer is higher than the maximum benefit the patient can receive under the insurance plan. For example, if Mr. A’s maximum benefit is AED10,000 and the medical claim is for AED12,000, the insurer will reject the medical claim.
Similarly, insurers can reject medical claims if the patient’s insurance plan does not cover the specific medical service they are charged for.
Every piece of information on the medical claim form needs to be accurate and no required information should be left blank. Missing or invalid claim data is the second top reason why an insurance claim may be denied.
Below is a sample medical claim form and all the data requested.
Source: Sample Templates
Though healthcare providers are now moving away from physical forms to digital forms, that has not diminished the need for accuracy. Even with digital medical claim forms, every piece of information supplied must be accurate to avoid claim rejection.
The three major authorisation or pre-certification problems are: invalid authorisation, authorisation denied, and services exceeding authorisation.
An authorisation or pre-certification occurs when an health insurer agrees that a medical service, product, treatment is medically necessary for the patient. Before healthcare providers go on with any service, product, or treatment, they need this pre-certification from the insurer.
If this authorisation was not given and the healthcare provider goes on offering the product, service, or treatment, the subsequent medical claim prepared will be rejected.
Also, if the authorisation given is invalid (e.g., no authorisation number or the authorisation number on the medical claim is different from what the insurer gave during authorisation) and the healthcare provider went on to offer the product, service, or treatment without noticing, the subsequent medical claim will also be rejected.
Finally, if the product, service, or treatment offered exceeds the scope of the authorisation given, the medical claim will be rejected.
If an insurer does not cover the service offered by the healthcare provider, the medical claims subsequently prepared will be denied. This problem is common with managed care (insurance plans that contract with healthcare providers to provide services for patients within the plan at cheaper prices) and healthcare providers need to be double sure of what is covered and what is not.
Related to this, if a medical claim does not clearly specify the billing issue (the service the provider is billing the insurer for), the insurer will reject it.
Sometimes the insurer will request for the patient’s medical documentation before processing a medical claim. If such medical documents are not available or provided, they may deny the claim.
Even when the documents are available and provided, the claim can still be rejected if the insurer believes that the medical service was unnecessary.
For example, the insurer might want to know if the medical service offered aligns with the diagnosis made. If it doesn’t (the diagnosis is not severe enough for such medical service or treatment), they will reject the claim.
Similarly, the insurer can reject the claim if cheaper treatments were not tried before conducting a surgery or any other costly and advanced procedure.
Some medical claims are also rejected for reasons the healthcare provider might not detect.
Insurers have deadlines for claims submissions. Some are more lenient if such deadlines are not met and they won’t penalise you. Others may require extra paperworks or reject the medical claim altogether.
Every medical claim includes a medical code. A medical code is an alphanumeric code that represents a particular medical diagnosis, service, procedure, or product.
Some of the common medical coding problems include “unbundling, use of multiple CPT codes, upcoding, appending inaccurate modifiers, overuse of modifiers, improper reporting of infusion, hydration, and injection codes, undocumented reporting of unlisted codes, and failing to stay updated with the most recent coding initiatives and guidelines,” according to EZDI, a clinical documentation software.
The Department of Health in the UAE has a coding manual for healthcare providers in the country.
Some insurance plans like Health Maintenance Organisation (HMO), a common healthcare insurance plan globally, require that the patient stay within a particular network of hospitals. She can only go outside the network for specialised services based on recommendation from another healthcare provider within the network.
If a healthcare provider is not within the network and there is no specific referral for a specialised service (in the case of an HMO), the insurer will reject the medical claims.
In an Exclusive Provider Organisation (EPO), another common healthcare insurance plan globally, costs related to out-of-network providers are not covered for any reason (even when there is a referral). The insurer will reject any medical claim for such costs.
Having looked at the top 10 reasons why an insurance claim may be denied, let’s conclude by looking at the best ways to prevent medical claim denials from affecting your bottom line.
According to the Change Healthcare 2020 Revenue Cycle Denials Index, quoted above, 86% of denials are avoidable. Therefore, healthcare providers must direct efforts towards denial-prevention strategies.
While training and retraining staff to be more efficient is key, a better strategy is to use data-driven and artificially-intelligent revenue cycle management (RCM) software.
The benefit of such software is that you can predict if a medical claim will be rejected before sending it. By looking at the common reasons why insurers reject your claim, the system can easily identify when a prepared medical claim contains any of such errors. This way, you can easily detect faulty claims upfront and rework them before sending them to the insurer.
Such software can also help your medical claim denial management by ensuring that already rejected claims are perfected the second time. As noted above, 15% of resubmitted claims are still rejected.
A data-driven and artificially-intelligent RCM software will also benefit from other automated systems like the electronic health records (EHR) where you can store and update patients’ data digitally in real time.
Of course, healthcare providers that don’t have a budget for such software can focus on training their staff to be more efficient and manually analysing the history of their denied medical claims to understand the major risk factors. Nevertheless, sooner or later, a more effective medical claim denial management will require a better RCM software.
When you reduce the number of your insurance claims that insurers deny, it will save you from spending money on reworking claims. Also, it will reduce the number of your claims that you will write off.
However, even if your claims are not denied, some healthcare providers still take between six months and two years to process your claims and pay you cash. Waiting for that long can cripple your business, especially if you are a small provider with no access to business loans.
To solve this problem, Klaim, a healthcare financing solution, buys your medical claims for a financing fee and pays you cash within seven days. Instead of waiting for the cash you need to operate, Klaim will do the waiting and collect the money from your insurer.
Nonetheless, Klaim only purchases medical claims they believe have a high probability of being processed and paid. Therefore, an improved RCM that drastically reduces your claim denials is still needed to get the maximum benefit that a platform like Klaim provides.
To summarise, if you want to improve your cash flow and keep your business steady, you must keep your claim denials to the barest minimum.