Medical Coding: The Key to Eliminating Claim Denials and Reducing Administrative Costs

By AGS Health

July 23, 2022

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

Medical coding has several objectives: to capture patient services, influence future medical decisions based on patient history, and submit accurate claims to payers for full reimbursement.

However, claims are frequently denied due to coding errors and missing documentation. Studies have noted healthcare enterprises lose $8.6 billion annually on claim appeals.

Understanding the Key Reasons for Denials

Claims are denied for various reasons, including incorrect or incomplete documentation, faulty diagnosis, and failure to meet filing deadlines. The following are the different types of claim denials:

  • Soft Denial: This temporary denial can be resolved by providers taking additional steps; it does not require an appeal. Inaccurate or incomplete information, billing or coding issues, pending invoices, and itemized bills are common causes of soft denials.
  • Hard Denial: This type of denial results in revenue write-offs and requires providers to file an appeal to collect the reimbursement. This type of denial is caused by a lack of pre-authorization, late filings, non-covered services, and service bundling.
  • Preventable or Avoidable Denial: Preventable denials are strenuous denials resulting from inadequate action on the part of service providers. They account for nearly 90% of all denials and usually involve elective services that could have been delayed or deferred. Inaccuracies in registration and other documentation, insurance coverage ineligibility, lack of medical necessities, and faulty coding and credentialing all contribute to avoidable denials.
  • Clinical Denial: This type of denial can occur because of patient status, medical necessity, level of care, and length of patient stay. A clinical denial can happen while the patient is still in the hospital or after being discharged. This delay in 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. Typically, it is done in the form of remittance advice, clarifying the reason for the denial. The timely submission of required additional documentation, such as medical records, coding clarification, and itemized bills, can help recover these claims.

Medical Coding Errors and Best Practices

According to HFMA (May 2021), 90% of all denials are preventable, and 2/3 of those preventable denials can be successfully appealed. To put the loss in perspective, every denied claim costs on average $31.50, which includes an initial fee of $6.50 for initial filing and a remarkable $25 for resubmission. Furthermore, the average price of appealing a denied claim is $118. Healthcare enterprises lose 3% of net revenue every year on claim denials alone.

Examples of common coding errors include:

  • Unbundling
  • The 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
  • Failing to stay up to date with the most recent coding initiatives and guidelines

Medical coding systems add significant value to healthcare enterprises and aid them in reducing claims denial. Enterprises must, however, follow these best practices to achieve the best results:

  • Staying updated with coding rules: Medical coding is known to undergo frequent guideline and mandate changes. Coders must be well-versed in both traditional and new coding regulations to ensure their codes adhere to all the necessary guidelines.
  • Verifying patient information: It is essential for healthcare enterprises to process claims based on complete data. It is important to verify every aspect of patient information and the insurance benefits they are entitled to. Inaccurate data collection and lack of verification commonly lead to high claims denial.
  • Ensuring accurate medical billing: Healthcare providers must invest in medical billing resources to avoid errors that cause claim denials. Providers must prioritize coding accuracy.
  • Creating a fool-proof submission process: The final step must always be to thoroughly review all documents before submission. Failure to thoroughly review documents before submission causes claims to be denied, resulting in the cumbersome and costly process of resubmission and appeal.

Providing proper and comprehensive documentation of provider services is one way to eliminate medical coding errors. This is where clinical documentation improvement (CDI) can be crucial for healthcare revenue cycles. Healthcare organizations lose revenue and credibility due to incomplete or inaccurate documentation of medical records. An accurate database is essential, and CDI is key.

The AGS Health Edge

Healthcare organizations are leveraging technological advancements to improve documentation and coding accuracy. Computer-assisted coding (CAC) software plays a pivotal role in enhancing coding productivity while improving healthcare outcomes. As a result, selecting the right technology solutions provider is essential. To achieve medical coding excellence and dramatically reduce claims denials, organizations must partner with a multi-dimensional and future-facing vendor.

AGS Health’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 as the only fully integrated, born-in-the-cloud technology provider.

By using a hybrid approach that blends technology and outsourced medical coding services, staff can be used to validate codes and ensure providers are fully reimbursed.

Read AGS Health’s Hybrid Approach white paper for more details.

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We employ a team of 12,000 highly trained and college-educated RCM experts who directly support more than 150 customers spanning a variety of care settings and specialties, including nearly 50% of the 20 most prominent U.S. hospitals and 40% of the nation’s 10 largest health systems. Our thoughtfully crafted RCM solutions deliver measurable revenue growth and retention, enabling customers to achieve the revenue to realize their vision.

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