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ACA Claim Denial Rates: What’s Behind the Numbers
Getting multiple claim denials from patients with ACA insurance plans? It’s not just you. These plans are known for higher denial rates.
Widely cited data from Kodiak Solutions and Premier, Inc. suggest initial claim denial rates have reached as high as 12-15% in recent years, while this report from IHIMA indicates similar denial rates for hospital and inpatient claims. Roughly 85% to 90% of these denials are avoidable.
This represents a huge loss of revenue and time. Effective claim submission can be a fairly complex process especially for inpatient care facilities and providers. In this comprehensive guide, we’ll go through the claim submission process, common mistakes, and best practices for improving your organization’s clean claim rates.
Claim submission in medical billing is the process of sending healthcare claims to insurance payers for reimbursement after services are provided. Simple, right? But it’s never as straightforward as you’d think.
Medical claims contain detailed information, some of which can be difficult to accurately determine. A bill contains patient demographics, insurance information, diagnosis codes, procedure codes, provider information, and supporting documentation. Even minor mistakes made during registration, coding, or documentation can lead to claim rejections, denials, and delayed payments.
Claim submission affects every aspect of the back-end revenue cycle including reimbursement speed, denial rates, cash flow, compliance, and patient financial experiences. The goal is to submit a claim that demonstrates medical necessity and meets payer requirements so reimbursement will occur.
This is known as a clean claim. Claims may be submitted electronically through clearinghouses or directly to payers. Electronic submission is now the industry standard.
You can think of claim submission as the bridge between clinical care and reimbursement. The more bills that make it across the bridge, the better off you’ll be.
There are several advantages to getting your bills right the first time (clean claims):
Inaccurate claims, on the other hand, can cause trouble in both the short- and long-term:
The root causes of claim denials often happen upstream of actual billing due to errors made during registration, eligibility verification, authorization, and coding. The best way to avoid claim denials is to submit clean claims that contain no errors or reasons for the payer to deny or delay payment. In fact, many organizations use the clean claim rate as one of their key revenue cycle performance indicators.
Whether or not you use these KPIs as part of a comprehensive revenue cycle audit, it’s important to understand each step of the claim submission process.
First, you’ll collect basic patient demographic information: name, date of birth, address, phone number, and insurance information. You’ll verify that patient records match payer records to prevent eligibility and identity-related denials. If the coverage belongs to a spouse or parent, you’ll need to confirm subscriber information. Errors are commonly committed during patient registration, and they can cause problems downstream during the RCM process.
During the insurance verification stage, you’ll confirm that the patient’s coverage is active, then verify benefits, copays, deductibles, coinsurance, and network status. This is the time to determine whether the planned service requires a referral or prior authorization, and to confirm that all required authorizations are obtained and documented before claim submission. You’ll update coverage information at every visit, just in case the patient’s policy has changed or expired. Eligibility issues remain a leading cause of claim denials, so it’s particularly crucial to be accurate during this step.
Coding is the step where your team will assign diagnosis and procedure codes that accurately reflect the services that were performed. It’s important to make sure that coding is supported by proper documentation, and that modifiers are applied correctly when required. Coding policies may differ from payer to payer. You should review the payer-specific requirements, because reimbursement and compliance are directly affected by coding accuracy. Learn more about strategies to improve coding accuracy.
To generate the claim, you’ll compile all the information from the first 3 steps: patient, provider, coding, and charge information. Then you’ll verify that all of the information is complete before submission. When it’s required by payer policies, you’ll need to attach supporting documentation. Once you’ve confirmed that the rendering provider and the billing provider information is accurate, you should be ready to submit the claim.
Claims are normally submitted electronically through a clearinghouse or directly to the payer. This is where the benefits of claim scrubbing become apparent. It’s a pre-submission review process that identifies missing data, coding conflicts, modifier issues, and payer rule violations. Automated claim validation helps reduce preventable errors before claims reach the payer.
Payers don’t miss a thing. They evaluate eligibility, coverage, coding, medical necessity, authorization status, and policy compliance. In fact, nowadays, it’s more likely that a payers’ AI tool is overreporting claim submission errors. Not only do payer rules vary from company to company, but they can also vary between plans within the same organization.
Payer adjudication is the review process that payers use to evaluate submitted claims. It determines the validity of the claim and calculates exactly how much the payer, provider, and patient are financially responsible for.
There are four possible outcomes:
Payment details are communicated through remittance advice and EOB documentation. It’s important to address denials and underpayments as quickly as possible.
There are many different errors that can trigger a denial, and they can occur during almost any step of the RCM process:
These front-end errors often occur before coding or billing begins. They are some of the most easily prevented causes of claim denial.
Even when coding is correct, insufficient documentation or authorization can stop or delay reimbursement.
Many of these issues are preventable through front-end accuracy checks and claim scrubbing technology. Check out this post to learn more about denial management in RCM.
Everything covered so far applies to inpatient claims too, but inpatient care adds several layers of complexity that outpatient and office-based billing don’t have to deal with. A single hospital stay can generate claims from the facility and from every physician who treated the patient, and each of those claims runs on its own rules for medical necessity, coding, and timing.
Inpatient care is billed through two separate claim streams that have to tell a consistent story about the same stay. The facility submits an institutional claim (the UB-04, or its electronic equivalent, the 837I) using revenue codes and ICD-10-PCS procedure codes, and it’s reimbursed under the MS-DRG system. Physicians and other providers bill their own services separately, using standard CPT and ICD-10-CM codes much like they would for an office visit. Payers process these two claim types independently, but documentation gaps or coding choices on one side often surface as denials on the other.
Outpatient claims mainly need to justify why a service was performed. Inpatient claims also have to justify the admission: that the patient needed inpatient-level care rather than observation or outpatient treatment. Payers lean on criteria like the Two-Midnight Rule and screening tools such as InterQual or MCG to make that call, and case management or utilization review teams are often involved while the patient is still admitted. Getting the admission status wrong is one of the most common reasons an otherwise clean inpatient claim gets denied or downgraded to observation after the fact.
A single prior authorization at the time of admission usually isn’t the end of it. Longer stays are often subject to concurrent or continued-stay reviews, where the payer periodically checks updated clinical documentation to confirm the patient still meets criteria for inpatient care. Missing one of these reviews, or failing to submit updated notes, can result in a partial denial for the unsupported days, even when the earlier part of the stay was approved.
Physicians rounding on inpatients use a different set of E/M codes for initial hospital care, subsequent hospital care, and discharge day management. When an attending physician and consulting specialists are billing for the same patient on the same day, the documentation needs to clearly support each provider’s distinct role so the claims aren’t flagged as duplicate services. On the facility side, coders also have to apply present-on-admission indicators and select an accurate principal diagnosis.
There is an art to improving your clean claim rate. Here is a list of steps that are crucial for optimizing this critical KPI.
Significant revenue loss isn’t normally caused by one or two large, expensive errors. More often, it’s a pattern of small mistakes that can only be detected by carefully monitoring your analytics tools. Learn more about how to streamline denial management with AI.
Claim submission is one of the most important processes within the revenue cycle. Denial prevention is quicker and much less expensive than denial correction, and accurate registration, verification, coding, documentation, and claim scrubbing contribute to faster reimbursement and fewer denials. Even if you think your organization is on top of your RCM, it’s important to evaluate your claim submission workflows. There’s a very good chance that you’ll identify opportunities for automation and process improvement. Claimocity combines powerful billing software for hospitals and inpatient facilities with an experienced RCM team to help organizations improve claim accuracy, reduce denials, and streamline reimbursement.
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Getting multiple claim denials from patients with ACA insurance plans? It’s not just you. These plans are known for higher denial rates.
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