While most medical claims for professional services Texas Tech Physicians submits to payers are adjudicated promptly and we are paid the full contracted amount, a notable minority of claims is returned unpaid. This is a chronic challenge and denials eat away at net revenue.

Payers have increased the sophistication of their computer systems and, in the process, developed different payment algorithms that correspond to the terms of the contracts we have with them. We are not dealing with an individual claim processor anymore. Payers also know, and are counting on the fact, that only a small percentage of medical practices will follow up on claim denials and resubmit them corrected or as appeals. We do not want to be in that group that does not follow up. We, too, have our electronic tools and use, for example, a claim-scrubber to check claims before they are submitted to mitigate denials.

Of course, we are not alone in this situation of managing denials. Every medical practice in the nation faces the same challenge we do. In fact, the American Medical Association reports that between 1.38 percent and 5.07 percent of claims are denied by insurers on the first submission. And, even the best-performing medical practices experience a denial rate of 5 percent, according to the Medical Group Management Association in its 2012 Performance and Practices of Successful Medical Groups report. Having denials is not unexpected. What is unacceptable is failure to “work” denials in a timely and organized manner.

The first step in successful claims resolution is to identify why a claim has been denied. When adjudicated claims are returned unpaid, the insurer will indicate the reason on the accompanying explanation of payment. These indicators, known as claims adjustment reason codes (CARC), are applied at the line item (CPT code) level.

Different people might classify these differently. But, denials generally fall into one of these broad categories:

• Provider Enrollment
• Registration
• Coding
• Authorizations
• Medical Necessity

Our challenge is to recognize opportunities to identify and correct the issues that cause claims to be denied by insurers before the claim is submitted. Then, once a denial is received, we must classify it by reason, source, and cause, and have an effective denial management strategy to appeal those that are able to be appealed.