Medical Claims Denial Management

The Situation

Claim payment denials are a significant and chronic issue for healthcare providers, impacting revenue and operational efficiency. The frequency and severity of denied claims vary by practice, specialty, and payer, but they remain a persistent challenge across the healthcare industry.

Industry estimates suggest that 15% to 20% of healthcare claims are initially denied. However, in some cases, especially for smaller practices or certain specialties, the denial rate can exceed 25%. This variability and complexity can lead to significant revenue loss, as around 30% of all denied claims are never resubmitted, representing a massive loss of income for providers.

Resubmitting denied claims can cost up to $25 to $118 per claim, depending on the complexity and effort required. This rework, which adds a significant financial and administrative burden on healthcare practices, is often lost or outsourced at reduced profitability. Efficient denial management is crucial to alleviate this burden.

The Challenge

The administrative cost of managing denials is significant. For healthcare providers, constantly reworking claims can overwhelm billing departments, leading to inefficiencies and higher overhead costs.

Handling claim denials is time-consuming. Healthcare staff must identify the cause of the denial, gather additional documentation, appeal or correct the claim, and resubmit it. This takes time from other essential functions, such as patient care.

Consistent revenue loss and payment delays can lead to financial instability for practices with high denial rates, particularly for smaller practices that lack the resources to manage high volumes of denied claims.

While most initial denials can be corrected, providers often leave denials unresolved due to the complexity and cost of the appeal process. However, successfully appealed claims can significantly improve a provider’s revenue recovery rate.

The Envative Solution

Commissioned by a large claim collections firm in the Northeast for a proof of concept for an AI solution,
Envative quickly applied models to identify the root of the denials and predict when they may occur. Through analyzing historical claim data, we identified patterns and trends that lead to claim denials based on specific criteria, such as coding errors, missing documentation, or payer rules. Manipulating similar models over historical data allowed us to apply a “risk” rating to a claim in preparation for denial and identify possible actions for resolution.

Further, we analyzed payer return files and identified commonly denied codes based on procedure, payer rules, and claim amount. With the newly discovered information, we could automatically scrub and review claims for common errors, such as incorrect codes, missing patient information, or incompatible procedures, before they are submitted to insurers. This would ensure that claims are accurate and complete and reduce the likelihood of denials.

For example, if a claim were denied due to an incorrect diagnosis code, the software would suggest the appropriate code for resubmission.