Hospitals are receiving more claim denials from payers, with the average rate increasing by 23 percent in 2020 compared to 2016, according to a research report conducted by Change Healthcare. The analysis includes 102 million hospital transactions valued at $407 billion in total charges across more than 1,500 U.S. hospitals.
Since 2016, the denial rate for hospital claims has been increasing steadily but the COVID-19 pandemic has accelerated this upward trajectory, pushing the denial rate up from 20 percent in the second quarter. To educate the providers, we shared this analysis of the Cause of denials trends for 2020, as most of these claim denials are potentially avoidable.
Top Cause of Denials
For the year 2020, 26.60 percent of total denied claims are due to a lack of eligibility and registration. Eligibility and registration have been a top denial for the last few years but its percentage has spiked in last year. Claim denials due to eligibility and registration error constitute a one-fourth portion of total claim denials.
It signifies the importance of a strong front-end team that is good at eligibility and benefits verification. A high percentage of missing or invalid claim data signifies the importance of the back-end team whose contribution is neglected by saying it’s a data entry process.
| Cause of Denials | Percentage |
| Registration / Eligibility | 26.60% |
| Missing or Invalid Claim Data | 17.20% |
| Prior Authorization/ Certification | 11.60% |
| Service Not Covered | 10.60% |
| Medical Documentation Requested | 9.20% |
| Medical Necessity | 6.60% |
| Unknown | 6.40% |
| Untimely Filling | 5.40% |
| Medical Coding | 4.80% |
| Provider Eligibility | 0.90% |
| Avoidable Care | 0.70% |
Breakout of Top Three Denial Causes
The top three denial reasons constitute more than 50 percent of overall claim denial reasons so we provided a breakout of these top three denial reasons. Most of the time front-end team fails to get secondary insurance information and fails to assign benefits. Denials caused due to benefits maximum and plan coverage are signs of absence of eligibility and benefits verification process.
| Registration/Eligibility (26.6%) | |
| Coordination of Benefits | 41.5% |
| Benefit Maximum | 28.4% |
| Plan Coverage | 23.3% |
| Other | 6.8% |
Claim data includes patient demographics, insurance information, diagnosis codes, procedure codes, modifiers, date of service, rendering provider information, and billing information. Wrong inputs in any of these claim fields will lead to claim denial.
| Missing or Invalid Claim Data (17.2%) | |
| Unspecified Billing Issue | 73.2% |
| Missing/Invalid EOB | 17.5% |
| Other | 9.3% |
Successful prior authorization or pre-certification requires submitting authorization/ certification requests with required documents. With prior authorization or pre-certification request, the payer should be convinced about medical necessity.
| Authorization/Pre-Certification (11.6%) | |
| Invalid Authorization | 61.2% |
| Authorization Denied | 25.9% |
| Services Exceed Authorization | 7.5% |
| Other | 5.4% |
Reasons for Increase in Denials
As we are analyzing claim denial trends for 2020, let’s look at the major reasons for the rapid increase in claim denials.
- Lack of resources: Lack of experienced resources is a prime reason for the increase in denials. As medical billing and coding are handled by non-experts, billing complex clinical cases meets with denials. You must have a trained team who has the expertise to appeal the denial and who has the ability to conduct root cause analysis.
- Staff attrition and training: Tight labor market impacts the hiring and retaining of qualified staff, finding and retaining them is a big challenge for any healthcare institute. The complexity of denials requires robust training and education programs, not all healthcare institutes can provide the required training.
- Growing denials backlog: Your staff may face challenges of increasing denial backlogs due to timely filing deadlines.
Medical Billers and Coders (MBC) can help you too. Our team of expert medical billers and coders can help to streamline your billing and coding processes like eligibility and benefits verification, prior authorizations, charge entry, claim submissions, payment posting, denial handling, accounts receivable management, medical coding, and provider credentialing.
To learn more about our commitment to excellence and performance for medical practices and healthcare providers, contact us at info@medicalbillersandcoders.com / 888-357-3226
FAQs
1. What is the average increase in claim denials for hospitals?
The average rate of claim denials for hospitals increased by 23 percent in 2020 compared to 2016, with the COVID-19 pandemic further exacerbating this trend.
2. What are the top reasons for claim denials?
The top reasons include lack of eligibility and registration (26.6%), missing or invalid claim data (17.2%), and prior authorization issues (11.6%).
3. How does poor eligibility verification affect claim denials?
Inadequate eligibility verification can lead to significant claim denials, as it often results in missing or incorrect patient insurance information, impacting overall reimbursement.
4. Why are prior authorizations crucial for claims?
Prior authorizations are essential to demonstrate medical necessity for certain services; without them, claims may be denied or delayed, leading to revenue loss.
5. How can MedicalBillersandCoders (MBC) assist in reducing claim denials?
MBC offers expert services in eligibility verification, prior authorizations, claim submissions, and denial handling, helping healthcare providers streamline their billing processes and improve revenue cycles.
