Once a claim reaches a payer, it undergoes a process called adjudication. In adjudication, a payer evaluates a medical claim and decides whether the claim is valid/compliant and, if so, how much of the claim the payer will reimburse the provider for. It’s at this stage that a claim may be accepted, denied, or rejected. A quick word about these terms. An accepted claim is, obviously, one that has been found valid by the payer. Accepted does not necessarily mean that the payer will pay the entirety of the bill. Rather, they will process the claim within the rules of the arrangement they have with their subscriber (the patient).
A rejected claim is one that the payer has found some error with. If a claim is missing important patient information, or if there is a miscoded procedure or diagnosis, the claim will be rejected and will be returned to the provider/biller. In the case of rejected claims, the biller may correct the claim and resubmit it.
A denied claim is one that the payer refuses to process payment for the medical services rendered. This may occur when a provider bills for a procedure that is not included in a patient’s insurance coverage. This might include a procedure for a pre-existing condition (if the insurance plan does not cover such a procedure).
Once the payer adjudication is complete, the payer will send a report to the provider/biller, detailing what and how much of the claim they are willing to pay and why. This report will list the procedures the payer will cover and the amount the payer has assigned for each procedure. This often differs from the fees listed in the initial claim. The payer usually has a contract with the provider that stipulates the fees and reimbursement rates for a number of procedures. The report will also provide explanations as to why certain procedures will not be covered by the payer. (If the patient has secondary insurance, the biller takes the amount left over after the primary insurance returns the approved claim and sends it to the patient’s secondary insurance.)
The biller reviews this report to make sure all procedures listed on the initial claim are accounted for in the report. They will also check to make sure the codes listed on the payer’s report match those of the initial claim. Finally, the biller will check to make sure the fees in the report are accurate concerning the contract between the payer and the provider.
If there are any discrepancies, the biller/provider will enter into an appeal process with the payer. This process is complicated and depends on rules that are specific to payers and to the states in which a provider is located. Effectively, a claims appeal is the process by which a provider attempts to secure the proper reimbursement for their services. This can be a long and arduous process, which is why billers must create accurate, “clean” claims on the first go.