One of the most frustrating aspects of healthcare for patients, after receiving medical care, is dealing with an insurer and provider to figure out why a claim was denied, and how to navigate the system.
The patient experience includes claims
“It’s not that we’re just not empowered, the system is purposefully convoluted, purposefully difficult to navigate, and the rules are purposefully obfuscated,” says healthcare entrepreneur and speaker Mandi Bishop regarding claims. She says no one is empowered end-to-end across the whole process, and no one is incentivized to fix it, “There are a whole lot of arbitrary chiefs, but they are only a chief over a teeny-tiny siloed portion.”
When a medical claim is denied, Mandi says an insurer should provide a reason, but they don’t send a letter or a clear explanation for the reason, “Typically, on the Explanation of Benefits (EOB), the insurer will give the patient a code for a denial, with a brief summary description of what that code is. But it is very, very vague. It doesn’t explicitly reference any paragraph or clause in your plan,” she explains.
The codes and EOBs are also not standardized, and are specific to a particular plan. An Explanation of Benefits that I reviewed had no explanation for the single letter-double digit remark code denying a five-figure medical claim that actually should have been covered by the plan.
Without knowledge of the reason for a claim denial, it is very difficult for patients to figure out. First, they need to know specific billing codes for procedures. As a healthcare insider, Mandi was able to negotiate this process for a friend. She shared the patient’s complex ordeal in a series of three posts very much worth reading: “Blondie and the (Medical Coding and Billing Error) Beast.” The problem started with a wrong billing code, evolved into multiple insurers’ denials, the family being sent to collections, and Mandi drafting the appeal.
Your healthcare provider should be the first to appeal
Four out of five medical bills contain errors. While healthcare organizations should be the first to appeal, they may or may not. Time may also run out, and the provider or hospital – and worse, the patient – could lose their chance for an appeal.
In many cases, the provider or healthcare organization has an outsourced medical coding provider, who may not get the correct information from the EHR, and an outsourced billing department who perpetuates the medical billing error.
Despite knowing there is a mistake, some healthcare organizations consider the human cost of dealing with denials too cumbersome, and some write-offs advantageous.
Denials costly for healthcare organizations
The American Academy of Family Physicians reports that an industry average of claims denials for medical practices is between 5 percent and 10 percent. The Government Accountability Office (GAO) reports that up to one-quarter of claims are denied.
Some organizations even see denial rates on first billing as high as 15-20%! For those providers, one out of every five medical claims has to be reworked or appealed … success rates vary from 55-98%, depending on the medical denial management team’s capabilities. When all else fails, write-offs can range from 1-5% of net patient revenue. In an average 300-bed hospital, 1% can mean $2 million to $3 million dollars a year—significant by any standards. – Kamron Lachney, “Medical Billing Denials are Avoidable.”
The Top 5 Medical Billing Denials
According to the 2013 American Medical Association National Health Insurer Report Card, these are the top 5 reasons for denials:
Duplicate claim or service
Service already adjudicated
Not covered by payer
Limit for filing expired
Healthcare organizations are looking for ways to minimize the cost of denials to their bottom line. They engage new analytics platforms, and the trend is even to collect payments from patients before medical care is received. Is this the ideal patient experience? Is anyone using design-thinking for claims and billing errors to see the problem from a patient point of view?
Denials and appeals costly for patients
Can developers help?
There is no definitive resource or app to help patients with a denial and the appeals process. Patients find themselves dealing with someone far removed from their medical situation, and aggressive in the collection process, with their credit easily threatened.
Patients are already responsible for greater co-pays, and greater costs of their healthcare, but they do not have any more control of the process, and there is a need for healthcare innovation.
The patient cannot steer the ship without any navigation.
Please share in the comments any examples of payers or healthcare organizations working to improve the claims process for the patient.
Update: We discovered the Better app for out-of-network claims, see Part 2 of this series: Empowered patient missing in medical claims process.