Medical Claims Processing: Office Ally's Complete Guide

Medical claims processing is a vital part of any well-run medical practice. It involves the submission, review, and adjudication of claims to make sure healthcare providers receive payment for the services they provide. As healthcare evolves, providers must stay up-to-date with technology, policies, and government regulations. 

This process can be very complex, which can lead to errors and delays in payment. Understanding the steps and what they mean can minimize errors, make the process run more efficiently, and ultimately garner payment promptly. This contributes to a healthy revenue cycle for healthcare, which in turn provides a stronger healthcare system; with solid revenue, healthcare systems can invest in the latest healthcare technologies to treat their patients. If run successfully, it’s a cycle that can benefit all involved.

What is a Medical Claim? 

A medical claim is a bill generated by healthcare providers that gets submitted to that patient’s health insurance company after services have been provided. The bill is coded according to the services rendered to the patient during their visit. When the provider submits the claim for processing, they include the codes and the charges for the visit. It then goes to the insurance provider, who assesses the claim and determines reimbursement to the provider. 

Medical claims are valuable data sources for healthcare organizations. They contain diagnosis and procedure information, which can be used to trace referral patterns and improve the population’s overall health. While this information can help treat patients, it can also help healthcare organizations enhance treatment plans and their go-to-market strategies.

What Information is Included in a Medical Claims File? 

Each medical claims file contains details on the patient and their visit. The medical claims file is split into two sections: the claim header and the claim detail.

Claim Header 

The claim header provides a summary of the information in the claim. It also contains confidential patient information such as date of birth, zip code, and gender. Other information includes:

• Primary diagnosis code
• Patient insurance company’s name
• Total charge for the claim
• In-patient procedures National Provider Identifier (NPI) for the physician and facility
• Diagnosis-related group (DRG)

Claim Detail 

The claim detail includes information on secondary diagnoses or procedures that occurred during the patient’s hospital stay. The claim details, also referred to as a service record, provides information such as:

• Procedure codeDate of service
• Diagnosis codeMedical supplies or devices used
• Medical transportation (if applicable)
• Pharmaceutical information
• National Drug Code (NDC)
• Physician’s NPI number
• Harge for services

An insurance provider will use this information to assess how they will reimburse the provider for their services. Length of stay and 30-day readmissions may impact the reimbursements.

What Are the Steps in Processing a Medical Claim? 

The medical insurance claims process contains the below six steps, from when a patient checks in at a healthcare facility to when they receive their bill. We’ll break down each one in order to explain their role in the medical claim submission process.

Step 1: Patient Registration

The process begins when a patient comes to the healthcare organization and checks in to be seen. Their identity is verified (usually by checking their driver’s license), and their health insurance information is collected. The patient typically fills out forms with details about their address, age, and policy information before being seen. Accurate and complete information is crucial in this step so that the remaining steps can work efficiently. 

Step 2: Insurance Eligibility Verification 

The staff is then responsible for confirming the patient’s insurance coverage and benefits policy. Verifying eligibility ensures the services a patient is provided with are covered under their insurance. It also helps them understand co-pays, co-insurances, and deductibles. At this point it can be determined whether the patient’s insurance provider requires a pre-authorization for the care they will receive.

Verifying coverage prior to providing services will limit delays further down the line. Patients who understand their coverage when seeking medical services can avoid unpleasant billing surprises and large bills.

Step 3: Medical Coding 

Medical coding in healthcare puts a patient’s services breakdown into a standardized code for billing and reporting purposes. Codes are generated for a diagnosis, a procedure, and treatments through a medical classification system. Some of the most common ones are: 

• ICD-10-CM (International Classification of Diseases, 10th Edition, Clinical Modification) 
• CPT (Current Procedural Technology)
• DRG (Diagnosis-Related Group)
• HCPCS (Healthcare Common Procedure Coding System)
• NDC (National Drug Code)

These codes track patient health information, provide data, and monitor patient treatment outcomes. Providers can use these codes to describe the procedures, diagnoses, supplies, and prescriptions they administered and why. Medical coding and claims can also help to define the patient’s condition. 

Step 4: Claims Transmission

With the claim prepared, it is then filed. Claims can be filed either electronically or in paper format. The claim is typically sent to the clearinghouse for processing before being sent to the payor. 

Step 5: Adjudication 

Adjudication happens when the payor receives the medical claim. The payor reviews the claim and either approves it or requests more information. The patient will be charged for the remaining amount. The payor has 30 business days from receiving the claim to provide acceptance or denial. Processing takes longer if all necessary information wasn’t initially offered.

A claim can be denied if the patient didn’t get pre-authorization for a service (if applicable) or has insufficient coverage. If the claim gets denied, the patient can submit an appeal to get coverage for the costs.

If the payor rejects the claim, it may have been incorrectly formatted or contain a medical coding error. Having a solution that will ensure claims are processed correctly the first time is crucial in minimizing claim rejections and help the process run smoothly. Denied claims can be resubmitted for payment once all errors are corrected. 

Step 6: Patient Statement 

Finally, a statement is generated for the patient. The statement breaks down the services provided, associated costs, and what their insurance covers. It lets the patient know what portion of payment they are responsible for, and it is usually due upon receipt. Information on how to make a payment is also usually included. 

Why Optimizing the Medical Claims Process is So Important

Billing and insurance claim processing is vital to the healthcare revenue cycle. Processing medical claims efficiently not only ensures timely reimbursement but also prevents revenue loss and bolsters cash flow.

Improving Patient Satisfaction 

When the medical claims process operates efficiently, revenue is returned to the healthcare organization, enabling it to invest more into its facilities, equipment, and staff. This can improve the overall patient experience with the latest technologies, highly-trained staff, and the most up-to-date facility designed for patient care. 

A smooth process also eliminates confusion for the patient on their financial responsibility and enables them to pay for their services easily and in a timely manner. This can result in patient retention because of the positive billing experience.

Reducing Administrative Burden

With an optimized medical claims process, the administrative staff can spend less time correcting errors and more time providing patient-centered service and care. They will feel more fulfilled in their role, which can lead to better employee retention.  

Financial Impact of Optimized Medical Claims Processing

Healthcare organizations are businesses and, like all businesses, must generate revenue to continue to be successful. With optimized claims processing, providers are swiftly reimbursed for their healthcare products and services by insurance payors and patients. This facilitates the healthcare revenue cycle, which reduces financial strain. 

Why Claims Get Denied and What Can Be Done 

There are instances when a claim gets denied. If this happens to you, here’s what you can do.

Reasons for Claim Denials

First, understand the reason for the denial. Here are a few common reasons:

• Medical Coding Error: incorrect coding
• Duplicate Charges: unnecessary multiple charges of the same kind on one bill
• Network Errors: when a patient was out-of-network when receiving services
• Upcoding: when providers intentionally inflate service costs to account for an assumed increase in resources

Insurance companies often fail to investigate discrepancies, and they are only discovered when the party responsible for the error amount receives the bill — the patient. 

How to Handle a Denied Medical Claim 

A patient will be notified on the Explanation of Benefits (EOB) if a claim is denied with the reason for the denial. A patient can then contact their insurance provider and the healthcare facility where services were rendered to speak to the billing department for further explanation. Either party can view the claim in their system, break down the costs, and help the patient understand the claim denial and what they can do. It is important that the healthcare provider include the medical claim number so it can be found in the system.

Usually, the patient will be encouraged to file an appeal if the claim denial seems to be a result of an error. 

How to Minimize Claim Denials

Claim denials can be minimized through data accuracy. When billing and insurance information is correct, denials are less likely, as each reason for denial stems from billing inaccuracies.

What is a Medical Claims Clearinghouse? 

A medical claims clearinghouse is an e-intermediary between healthcare providers and payors. 

Clearinghouse Roles: Interaction with Payors and Providers 

Payors can reject claims that are incorrectly coded or formatted, resulting in the claim having to be resubmitted, prolonging the process, and delaying payment. The clearinghouse formats medical claims according to each payor’s requirements, which helps payors streamline their medical billing processes.

Claim Scrubbing and Error Reduction

Providers send their claims to a clearinghouse, where they are scrubbed, standardized, and screened before they’re sent to the payor. This helps avoid errors in medical coding, reducing the amount of time spent waiting for reimbursement. 

How Can Office Ally’s Service Center Clearinghouse Help Your Practice 

Medical claim processing software can help the process run efficiently and error-free. It can impact how long it takes to process a medical claim by reducing the time from beginning to end, closing the claim faster, and ensuring accuracy.

The medical insurance claim process is a cycle that requires accuracy for it to operate efficiently, make it easier on all parties involved, and ultimately generate healthcare revenue. Service Center, by Office Ally is a clearinghouse that can help healthcare providers simplify their revenue cycle management in three easy steps. Improve your process, integrate the software seamlessly into other systems, and receive payment faster. Ready to generate more revenue at your healthcare organization? Learn more and get started with Office Ally today.