The Intake

Insights for those starting, managing, and growing independent healthcare practices

Understanding the medical claims process to get paid

Practices need to improve their understanding and management of the medical claims process to boost profitability.

This is an image of a woman looking at a computer screen with a colleague and smiling. This is meant to represent someone who is happy about their medical claims process.

At a Glance

  • The profitability of a business improves with a better claims process
  • Rejections can occur at 3 stages: within the practice, at the clearinghouse, and at the payer
  • Ignoring denied claims can lead to losing thousands of dollars of net revenue

Why do clean claims matter? Bottom line: Improving your claims process improves the profitability of your business. This guide provides valuable tips, tricks, and resources to help you achieve your goal of “Clean Claims Nirvana” by attaining a First Pass Acceptance Rate (FPAR) of greater than 95%. By doing this, you’ll:

  • Prevent recurring front-end rejections
  • Reduce time-consuming follow-ups on accounts receivable
  • Work to eliminate labor-intensive claims denial management

Rejections and denials — what’s the difference?

Let’s define what we mean by a clean claim. A clean claim contains all of the information required by the payer and is filed in a timely manner. The terms “rejection” and “denial” are sometimes used interchangeably when discussing claims and the overall revenue cycle, but they are actually different. 

The consequences of not properly understanding the difference and addressing both the cause and the effect of each type of claim can have a big impact on your net collections rate.  Let's first understand rejection and denial management in their own right:

This all may seem obvious, but understanding the difference between a rejection and a denial is critical to properly handling each type of claim and reducing future rejections and denials.

Three stages of rejections

A rejection can typically occur at one of these 3 stages in the billing process.

1. Within your practice

The first stage of rejection is within the practice management software, before the claim is even sent off to the clearinghouse. A good practice management system will have an electronic claims submission feature that conducts internal edits that check for things like proper setup of providers, payers, and patient demographics. A common error that prevents claims from even making it out of the practice management system is missing referring provider NPI. Taking the time to review practice, provider, and payer information prior to submitting claims will save a lot of time and frustration and is the first step toward achieving our goal of a FPAR of greater than 95%.

50% of rejected or denied claims don’t get reworked. That’s lost revenue.

Taking the time to review practice, provider, and payer information prior to submitting claims will save a lot of time and frustration. ”

2. At the clearinghouse

The next stage of rejections happen at the clearinghouse. These rejections typically include payer information that the clearinghouse can build into edits to prevent claims from getting to the payer and rejecting there. 

For example, if a subscriber ID is required to have an alpha prefix and a provider submits a claim that is missing that prefix, there will be a claim rejection code and the clearinghouse edits will catch that error and return the claim as rejected. Billers can correct the claim and resubmit.

3. At the payer

Most common rejections involve patient demographics and eligibility.

The final stage of rejections occurs at the payer. These are commonly related to patient demographics and eligibility issues that are discovered when the claim reaches the payer. 

The most common patient-related rejections are also the most preventable. “Subscriber and Subscriber ID Mismatched” or “Not Found” are usually an indication that the patient was not eligible at the time of service or that there is a data entry error in the patient’s demographics. These rejections can be prevented by simply making sure that real-time eligibility checks are conducted at the time of service. It’s all too common that practices will lose revenue on visits due to not checking eligibility, then not reworking rejected claims in a timely manner.

Start understanding the medical claims process

Understanding your practice’s claims process and improving it will boost the profitability of your business. Ignoring denied claims will do the opposite; practices that write off just one denied claim a week can lose thousands of dollars of net revenue.

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Written by

Aimee Heckman

Aimee Heckman is a healthcare business consultant with more than 25 years of experience in medical practice management, revenue cycle management, PM/EHR implementation, and business development. As a Certified Professional Biller (CBP) and Certified Physician Practice Manager (CPPM), Aimee has demonstrated success in assisting physicians with maintaining their independence and surviving the ever-changing healthcare business environment.

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