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 health care claims denials and underpayments, where our providers often face risk of nonpayment 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 health care 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. In late 2020, Becker’s Hospital Review reported a spike in hospital systems closing down, citing that at least 47 hospitals nationwide had been forced to close or file for bankruptcy, which steadily increased throughout the COVID-19 pandemic. Across the board, health care 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.

The most common types of claims denials and underpayments include administrative or clinical reasons, some of which are based on 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.

Additionally, according to the American Journal of Managed Care, recent reports show that since the onset of the COVID-19 pandemic, claims denials have increased by 11% nationwide, with the highest denial rates being in regions where the largest wave of COVID-19 outbreaks initially occurred.
Proactive denials management and prevention is the key to averting hospital revenue loss. A few key takeaways that providers should keep in mind when tackling reimbursement issues include:

• 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. For example, providers must follow any payor-specific rules for submitting a claim for payment.
• When the payor fails to properly reimburse the provider, the provider should review the payor’s remittance advice to determine the specific reason(s) for the denial or underpayment. Providers should correspond with appropriate staff members (i.e., medical billing staff, medical coding staff, nurse reviewers or physicians) to come up with a plan for recovering payment on the claim. Providers can submit an appeal to the payor addressing the improper denial or underpayment, along with evidence that substantiates payment of the claim, including but not limited to prior authorization approvals and medical records documentation.
• Track trends in denials and underpayments to identify root causes of these denials and potential avenues for claims payment and resolution of trending issues.

To maximize revenue, it is essential that providers develop a cross-functional team that takes proactive measures to address claims denials and bolster their bottom line.

While denials management may be a non-traditional space for attorneys, attorneys may be one of the most valued players that providers can have on their team. Attorneys may act as an extension of the providers’ revenue cycle team, helping providers avoid claims denials and underpayments through proactive denials management and dispute resolution tactics that successfully resolve complex denials, underpayment trends, plan audits and overpayments.