Claim Rejections vs. Claim Denials: What’s the Difference?

It is important that healthcare providers and billers understand the nuances between claim rejections and claim denials. While both can disrupt the billing process, there is an essential difference in why they occur and how they need to be handled. As you work to simplify the billing process let us explore their differences and highlight best practices for each.

What is a Claim Rejection?

Claim rejections occur when a medical claim fails to meet specific criteria of either the payer or X12 standardization. Unlike denials, claim rejections happen before the claim is processed. A claim rejection usually comes from errors in data entry, formatting issues and missing information.

As a result, the claim never enters the payer’s system as a legitimate billable claim. When a rejection is received, billing staff will need to correct and resubmit the claim.

How are Claim Denials Different?

While claim rejections are usually administrative errors that can be corrected and resubmitted. On the other hand, claim denials involve a more complex review process. It is more challenging because the insurance payer has processed the claim and determined that it does not qualify for payment because medical services will not be covered by the patient's insurance plan.

When following up on insurance claim denials, healthcare practices must adopt a more targeted approach. Unlike simple corrections for rejections, denials often require a comprehensive review. They cannot be resubmitted but require an appeal. An appeal involves detailed documentation and sometimes even patient interaction to resolve and secure payment.

How to Avoid Rejected Claims

Understanding common claim rejection reasons helps healthcare providers manage medical claims more effectively. This approach reduces errors and improves the chances that a claim will be accepted. Let’s explore some common causes of rejection and how to avoid them.

Incomplete Claims

If a claim is complete, it has all required information and documentation. These claims process more smoothly and with fewer interruptions. In contrast, incomplete claims lack one or more necessary details.

For claims that require supporting documentation, it is important to ensure all necessary documentation is attached to the claim, such as medical records, lab results, or referrals. These missing elements can result in immediate rejections or additional requests for information.

Incorrect Billing Codes and Errors

Another common reason for rejection is incorrect billing codes. Misentered codes, outdated or inaccurate procedure codes and simple typographical errors are a common cause of rejections​.

It is important that you verify that all procedure and diagnosis codes are correct and up-to-date. Use the appropriate ICD-10, CPT, or HCPCS codes as needed. Staff should also be trained regularly, and codebooks updated often to minimize common mistakes.

Incorrect Patient Information

Rejections often occur when claims contain inaccurate patient information. These errors might include wrong names, incorrect dates of birth, or mismatches in insurance details. You should ensure all patient data is accurate because any discrepancies can lead to claim rejections​.

Using a practice management software and/or an EHR system can help keep patient data accurate and up-to-date. They provide quick access to patient history, treatment details, and previous claims, which can be essential for accurate billing and reducing errors.

Duplicate Claim Submission

Medical claims submitted multiple times will be rejected and labeled as a duplicate medical claim. Properly tracking and managing claim statuses in a clearinghouse portal helps prevent these redundant submissions.

Issues with Coordination of Benefits

Poor coordination of benefits when multiple insurance policies are involved is a common reason for claim rejections. There are a few ways this occurs in practice. Staff may incorrectly determine the primary insurance or fail to submit the claim to the correct payer first. Both of these examples can cause delays and rejections. Effective communication between all parties and meticulous record-keeping are essential.

How to Avoid Denied Claims

By understanding the common causes of claim denials and implementing effective prevention methods, healthcare providers can streamline their billing processes and strengthen trust with patients. Let’s look at some of the common reasons.

Medical Service Not Covered

Claims are usually denied because the submitted medical services will not be covered. The discrepancy can occur due to policy exclusions or limitations on certain types of treatment. In addition to clear communication with patients about their coverage, Insurance verification is a crucial step in preventing these denials. By verifying patient eligibility at scheduling and again at the time of the appointment you can ensure that the patient's insurance coverage is active, unchanged and adequate for the services they are seeking.

Furthermore, using software that integrates with your clearinghouse to verify eligibility can significantly improve this process. These tools can check the patient's insurance status quickly and accurately, which helps reduce errors that can lead to insurance claim denial.

Ill-Timed Claim Submission

Submitting claims at the right time is crucial to their acceptance. Delays can lead to denials for timeliness violations, particularly with insurers setting strict filing deadlines. Claims might be submitted too early before services are recorded. Both circumstances usually lead to denials.

We recommend looking at your largest volume payers and getting an understanding of their unique timeframe requirements.

Follow Up on Rejected or Denied Claims

Despite all efforts, sometimes claims are still rejected or denied. Providers must have a strategy for effectively managing these claims. When claim rejections or denials occur, staff must quickly identify and correct the underlying issues, then either resubmit the claim or appeal directly to the payer for denials. These steps can turn rejection and denials into approvals. The result is more revenue collected for your practice.

Office Ally’s Clearinghouse Helps Your Practice Streamline the Billing Process

By using Service Center, Office Ally’s all-payer clearinghouse portal, you will have an intermediary that checks and processes medical claims between you and insurance payers. It is an ally that ensures claims are accurate and meet all requirements before submission. Partnering with Office Ally will help your practice achieve smoother operations, improved claim acceptance rates, and better financial health.