Claim adjudication is the process used by a payer to decide if a claim should be reimbursed. Although each payer has its own multistep process for approving claims, the process is generally the same for all payers.
Claim adjudication can be a quick process when a clean claim is received. "Clean" in this instance means that all the information on the claim is correct and consistent with healthcare policy. The claim adjudication process has improved because of the great advances in software and the edits created. This process collects a large amount of information, verifies it, and issues payment. The Software is a huge improvement over the days where every claim was manually reviewed by hand. The process of claim adjudication begins when the claim is received.
The software performs a comprehensive review to discover obvious errors that would prevent the payer from reimbursing the provider. This step is referred to as a front end edit. For example, the software validates that the patient is covered under the policy and determines if the policy covers procedures, tests, and other services that appear on the claim. Likewise, it determines if each procedure on the claim is dated and if the date is within the time limit for submitting the claim based on policies established by the payer.
Each procedure is closely examined by the software to determine if preapproval is required. If so, it looks for corresponding authorization numbers given to the provider when the procedure was preapproved. It also analyzes each procedure for place of service and validates if the service can be performed at the location indicated. Errors are captured during the edit stage of the claim adjudication process and grouped by denial code.
Some common error may include but are not limited to:
Assumption coding: The inappropriate assignment of codes based on assuming, from a review of clinical evidence in the patient's record, that the patient has certain diagnoses or received certain procedures/services even though the provider did not specifically document those diagnoses or procedures/ services in the medical record. This error is easily picked up during the edit, which automatically withholds reimbursement until the provider supplies supporting documentation.
Truncated coding: This occurs when claims contain a diagnosis code that isn't at its highest level of specificity.
Mismatched coding: This occurs when an element of the claim is not consistent with other elements, such as a hysterectomy performed on a male patient.
Improper documentation: This occurs when the documentation submitted with the claim is inaccurate or incomplete. The claim is either rejected or reimbursements are withheld until proper documentation is submitted to the payer.
Noncompliance: Claims must adhere to policies of the payer otherwise reimbursement will be denied. For example, two providers perform the same exam on the same patient on the same day in the hospital; one in the morning and the other in the afternoon. Only one of them will be reimbursed for the examination. Generally the one received first is paid.
Preapproval: Payers require preapproval for certain medical procedures prior to the services being rendered. The claim will be denied if the procedure is performed without the approval of the payer. The provider can perform the procedure before seeking approval, but is taking a risk of the claim being denied.
Upcoding or downcoding: Upcoding is when the procedure billed is billed at a higher level than what was actually performed. Upcoding would cause more money to flow into the practice. On the other hand, downcoding is when the procedure billed is lower than what was actually performed. Some offices feel if they downcode their claims they will avoid an audit. The MAB recommends coding truthfully and maintaining accurate medical records to support your coding in an audit.
Typographical errors: Data entry errors result in incorrect information appearing on a claim. This is especially troublesome in the patient's ID number, date of birth, patient name and address. These would cause automatic denial of the claim.
Omissions: Failing to include basic information on a claim. If you are not sure of some information, research it prior to submitting a claim. Submit only clean claims.
Claims that fail the edit can be denied outright or forwarded to a claims examiner. A claims examiner is the payer's medical insurance specialist who reviews the claim and decides the appropriate course of action. For example, if the claim is missing information, the claims examiner might ask the provider to resubmit a corrected claim. The resubmitted claim must pass the same edit before the next step in the claims adjudication process which is the medical review.
If you are resubmitting the claim, make sure to put in Box 19 "Resubmitted Claim" The medical review department has a team of claims examiners and medical professionals who determine if the patient received appropriate, necessary and the most cost-effective care from the provider. The examiner makes sure that the patient didn't receive elective, experimental or unnecessary procedures, which are not normally covered by a payer. They compare the claim to previous claims for the patient to determine if the patient has reached frequency limits of their policy. A frequency limit sets the maximum number of times of a medical service can be rendered over a period of time. For example, most policies will limit one preventative visit per year. Subsequent medical exams must be associated with a diagnosis and procedure other than a preventative exam. The examiner also conducts a utilization review if care was given in a healthcare facility, such as a hospital to determine if the facility was the appropriate place for the care. If the examiner determines that claim is not approved for reimbursement, they could apply a penalty if the payer agreement was violated. For example, a penalty could be imposed if the provider submitted the claim after the filing deadline. If all checks and reviews have been approved, the examiner authorizes reimbursement.
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