Medical Coding: The Key to Eliminating Claims Denial and Reducing Administrative Costs

Medical Coding: The Key to Eliminating Claims Denial and Reducing Administrative Costs

The COVID-19 pandemic has had an unprecedented burden on healthcare systems across the world. However, the pandemic has also accelerated the digitization of healthcare operations. This is true especially for the billing and coding function for hospitals and other primary providers. With error-free, consistent documentation and claims processing becoming the primary factors for a sustainable revenue cycle for healthcare organizations, digitization is an imperative to increase payer-provider synergy.

One of the objectives of medical coding is to accurately capture the services rendered to patients and make reimbursement claims to payers. However, errors in the coding and documentation process often lead to denial of claims. In fact, studies have noted that healthcare enterprises lose upward of $8.6 billion every year on claims appeals.

Understanding the Key Reasons for Denials

Claims are denied for a multitude of reasons, ranging from erroneous or incomplete documentation to faulty diagnosis, to passing filing time limits. Here are the various types of claim denials:

  • Soft Denial: This type of denial is temporary and can be resolved by providers taking follow-up actions and do not require an appeal. Soft denials are commonly caused by inaccurate or incomplete information, billing or coding issues, and pending invoices and itemized bills.
  • Hard Denial: This type of denial results in revenue write-offs and requires providers to submit an appeal to recover the reimbursement. Lack of pre-authorization, untimely filings, non-covered services, and service bundling are some of the reasons for this type of denial.
  • Preventable or Avoidable Denial: Preventable denials are hard denials resulting from inadequate action on the part of service providers. They usually involve elective services that could have been delayed or deferred and account for almost 90% of all denials. Preventable denials are triggered by inaccuracies pertaining to registration and other documentation, ineligibility of insurance coverage, medical necessities, and faulty coding and credentialing.
  • Clinical Denial: This type of denial can occur due to factors like medical necessity, level of care, and length of patient stay. A clinical denial can occur while patients are still receiving care in-house or after they are discharged. This delay of payment is typically caused due to the need for further medical or clinical clarification.
  • Technical or Administrative Denial: In the event of a technical or administrative denial, the provider is notified by the payer. Generally, it is done in form of remittance advice, clarifying the reason for the denial. These claims can be recovered by the timely submission of required additional documentation which may include medical records, coding clarification, and itemized bills.

Medical Coding Errors and Best Practices

A 2017 study revealed that almost 90% of all claim denials are preventable, of which 60% are recoverable. To put the loss in perspective, every denied claim costs on average $31.50, which includes initial cost of $6.50 for initial filing and a remarkable $25 for resubmission. Furthermore, the average cost of appeal a denied claim is $118. Healthcare enterprises are losing 3% of net revenue every year on claim denials alone.

Some of the common coding errors include unbundling, use of multiple CPT codes, upcoding, appending inaccurate modifiers, overuse of modifiers, improper reporting of infusion, hydration, and injection codes, undocumented reporting of unlisted codes, and failing to stay updated with the most recent coding initiatives and guidelines.

Medical coding adds definitive value to healthcare enterprises and aid them in reducing claims denial. However, to achieve the best outcomes, enterprises must follow these best practices:

  • Staying updated with coding rules: Medical coding is known to undergo frequent guideline and mandate changes. In such a scenario, it is paramount for coders to be thoroughly proficient with conventional coding rules as well as update themselves with the new rules and ensure that their codes follow all the necessary guidelines.
  • Verifying patient information: It is essential for healthcare enterprises to process claims based on complete data. It is therefore important to verify every aspect of patient information and the insurance benefits for which they are eligible. Inaccurate data collection and lack of verification commonly leads to high claims denial.
  • Ensuring accurate medical billing: Healthcare providers must invest smartly on medical billing resources to prevent errors causing claim denials. Adequate emphasis must be placed on the best-rounded and most exhaustive medical billing software and the most specialized and skilled medical billers.
  • Creating a fool-proof submission process: The final step has to always be a thorough check of all documents before it is submitted for a claim. It has been noted that failure of meticulously checking documents before submission causes claims to be denied, resulting in the cumbersome and costly process of resubmission and appeal.

One of the ways to eliminate errors in medical coding is to provide proper and comprehensive documentation of the services. This is where clinical documentation improvement (CDI) can become crucial for healthcare revenue cycles. Incomplete or inaccurate documentation of medical records is a major reason for healthcare enterprises losing revenue and credibility. Having an accurate and watertight database is of utmost importance to healthcare organizations, and CDI is key to that objective. We will discuss about how CDI can save hospital major revenue write-offs in our next blog.

The EZDI Edge

Healthcare organizations are gradually moving towards innovations and implementing them on a timely basis to stay ahead of the curve. This is where computer-assisted coding (CAC) software can play a pivotal role in enhancing coding productivity and improving healthcare outcomes. It is, therefore, crucial to choose the right technology solutions provider. Partnering with a multi-dimensional and future-facing technology provider is essential for organizations to achieve medical coding excellence and reduce claims denial remarkably.

As the only fully integrated, born-in-the-cloud technology provider, ezDI’s comprehensive suite of AI-enabled CAC solutions can help healthcare institutions improve their coding and documentation process and ensure negligible revenue losses from denied claims.

For a more detailed exploration of In-House clinical coding in the new normal, read our eBook here.

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By designing a next-generation clinical NLP engine supporting advanced documentation and coding functions, EZDI turned their vision to reality. Their CAC and CDI solutions received tremendous feedback, providing system accuracy and ease of use. EZDI removes the data complexity and highlights what matters for healthcare professionals.

EZDI is a provider of AI-based mid-revenue cycle management solutions to Hospitals and Health Systems.

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