Denied and Underpaid Claims : How to Uncover Hidden Revenue in Healthcare

Introduction

In the healthcare industry, denied and underpaid claims are among the most significant barriers to a practice’s financial health. Yet, many healthcare providers overlook these claims, assuming they’re lost revenue. However, with a strategic approach, these denied and underpaid claims can be turned into hidden revenue streams, ultimately improving the bottom line. In this blog, we’ll walk through how to uncover these opportunities, focusing on some of the most overlooked “buckets” of revenue in medical billing and claims recovery.

Understanding Denied and Underpaid Claims

What Are Denied and Underpaid Claims?

• Denied Claims: A denied claim occurs when an insurance company refuses to pay for a medical service, often due to issues like incorrect coding, missing documentation, or eligibility problems.
• Underpaid Claims: These are claims where the insurer does not pay the full amount billed. This could happen due to miscalculations, mistakes in the insurer’s reimbursement rates, or simply errors in the processing of the claim.

The Impact of Denied and Underpaid Claims

When claims are denied or underpaid, healthcare providers don’t just lose out on immediate payment. The longer these claims remain unresolved, the more difficult it becomes to recover them. According to studies, healthcare practices often leave substantial amounts of revenue on the table due to failure in following up on these claims. This can lead to cash flow problems and, ultimately, impact the quality of patient care.

In fact, some reports indicate that as much as 25% of healthcare revenue is tied up in unresolved claims, making it essential for practices to have a strategy for managing denials and underpayments.

Common Overlooked Buckets in Claims Recovery

1. Denied Claims Due to Incorrect or Missing Information

One of the most common reasons claims are denied is the presence of incorrect or missing information. This includes incorrect patient demographics, mismatched procedure or diagnosis codes, or incomplete medical records. Healthcare providers often fail to follow up on these claims, assuming that they are lost revenue. However, many of these denials are easily fixable with the correct follow-up and documentation.

• Proactive Review: Develop a workflow for reviewing all denied claims to identify incorrect information. Automated systems or claim management software can assist in quickly pinpointing common errors.
• Appeal Process: Once the errors are corrected, initiate the appeal process. Most insurance companies allow for claims to be resubmitted for reconsideration.
• Documentation Scrutiny: Ensure all medical records are complete and compliant with insurer requirements.

2. Underpaid Claims Due to Bundling and Unbundling Errors

In the medical billing world, bundling and unbundling refer to how insurers group or separate related procedures and services. Underpaid claims can arise when an insurer bundles multiple procedures into one payment, or vice versa, causing the provider to be reimbursed incorrectly.

• Proper Code Review: Ensure that the correct codes are being used to prevent unbundling errors. For example, if a provider performs multiple related services in one visit, they must use the appropriate modifiers to prevent the insurance company from incorrectly bundling the charges.
• Coding & Auditing Software: Ensures accurate claim coding and reviews for potential bundling issues before submission.
• RevShield A.I : Automates accounts receivable follow-up and denial management to optimize collections.
• Practice Management & EHR Systems: Integrates patient data, scheduling, billing, and claim submission for seamless workflows.
• Cred Pro: An in-house credentialing automation tool that streamlines the provider’s onboarding process.
• Payment Posting Software: Automates the posting of payments, ensuring accurate financial records and efficient reconciliation.

3. Claims Denied Due to Lack of Prior Authorization

Many healthcare services, particularly elective procedures and high-cost treatments, require prior authorization from the insurer. A common mistake is assuming that the authorization process is complete without properly confirming that all the necessary paperwork and approvals are in place. When prior authorizations are missed, claims are often denied.

• Timely Follow-Ups: Ensure prior authorizations are obtained well in advance of providing services. This includes following up with insurers to confirm approval is in place.
• Appeal Denials: If a claim is denied due to missing authorization, appeal the decision by providing evidence of the authorization request or submitting the missing documentation.

4. Out-of-Network Reimbursement Issues

For out-of-network providers, reimbursement is often lower than what is billed. However, this doesn't mean that the full amount can’t be recovered. Many providers fail to follow up on discrepancies between the billed charges and the reimbursed amounts. This is especially true when the patient’s insurance plan includes some level of out-of-network benefits that may cover more than initially thought.

• Negotiation with Insurers: Work with out-of-network insurers to negotiate higher reimbursement rates.
• Patient Responsibility: While it’s important to work with the insurer, it’s equally important to confirm the patient’s understanding of their financial responsibility.

5. Medically Necessary Services Denied

Sometimes, even services deemed medically necessary are denied due to insurer policies or lack of clarity in the claim. Insurers may request additional documentation or clarifications to prove that a particular treatment or service was indeed required based on medical necessity.

• Appeal with Documentation: When claims are denied due to lack of medical necessity, appeal by providing more comprehensive documentation. This can include patient history, detailed notes from the provider, and any supporting diagnostic tests.
• Clarify Treatment Plans: Ensure that treatment plans are clearly documented and aligned with insurer guidelines for medical necessity.

Best Practices to Recover Denied and Underpaid Claims

1. Implement a Robust Denial Management System

• Automation: Automated tools can help flag claims that are likely to be denied due to common errors, enabling earlier intervention.
• Data Analytics: Use denial analytics to identify trends in denials and underpayments by insurer, procedure type, or provider.

2. Streamline the Appeals Process

• Document and Track Appeals: Keep detailed records of all appeals, including communication with insurers and any supporting documents provided.
• Dedicated Team: Assign a team or individual to focus on the appeals process to ensure it’s handled promptly and effectively.

3. Educate and Train Billing Staff

• Regular Workshops: Hold regular workshops on denial prevention, proper coding, and how to appeal denials.
• Cross-Training: Cross-train staff in all aspects of the revenue cycle, including patient insurance verification, coding, and claims submission.

4. Audit Your Claims

Regular audits of your claims can help uncover hidden revenue in denied or underpaid claims. These audits allow you to identify systematic issues that may be leading to increased denials or underpayments, so you can address them proactively.

Conclusion: Uncovering Hidden Revenue

Denied and underpaid claims may feel like a drain on resources, but with the right approach, they can be a valuable source of recovered revenue. By understanding the most common reasons for denials and underpayments, and implementing best practices for claims recovery, healthcare providers can unlock hidden revenue that would otherwise go uncollected. A proactive approach, combined with data-driven strategies, can help you turn these overlooked buckets into a thriving stream of income, ensuring your practice remains financially healthy.

Ready to Turn Denied Claims into Revenue?