Understanding the claim adjudication process is crucial for any medical biller or RCM director. It's not just about getting a claim paid—it's about knowing what happens between submission and payment. This knowledge can help you strategize, avoid denials, and improve your practice’s financial health.
What Happens When a Claim is Received?
As soon as a claim enters a payer’s system, it begins its journey through adjudication. This initial step usually involves verifying that the claim meets basic submission requirements. Think of this as the sorting phase. Claims filed with missing information or incorrect codes are immediately flagged and often rejected (not denied) before they even reach further review.
Initial Scrutiny
The first thing a payer checks: Is the claim complete and accurate? Missing patient information, incorrect subscriber IDs, or wrong CPT codes can result in an outright rejection. This is why double-checking claims before submission isn’t just a good idea—it's essential.
Another quick check involves the submission timeline. Claims submitted past the payer’s timely filing limit get kicked back without a second glance. Each payer has its own deadline, which can range from 30 to 180 days post-service. Miss it, and you’re out of luck.
Primary Validation
Once a claim clears the initial gauntlet, it moves to primary validation. This step checks whether the services provided align with the patient’s benefits and whether they’re covered under the patient’s plan.
Coverage Verification
Here, the payer verifies coverage specifics. Does the patient's plan cover the services billed? If not, the claim is denied—not rejected this time—and a denial code is assigned. Common denial codes include CO-96 (“Non-covered charge(s)”), which means the service isn't part of the patient's benefits.
Plans also have nuances (read: annoying quirks). For instance, some plans cover a service only if performed by a certain type of provider. If your claim involves a specialist, and the patient's plan covers only generalists for that service, it’s denied. No discussion.
Clinical Validation
The next stage involves a deeper dive—clinical validation. This is where payers assess medical necessity, often relying on their own criteria or nationally recognized guidelines.
Medical Necessity
Payers have a love affair with the term "medical necessity." A service must be deemed necessary for the diagnosis or treatment of an illness to get paid. If they decide a service doesn’t meet their necessity criteria—denial. Here, denial codes like CO-50 (“Service not deemed medical necessity”) pop up frequently.
This is the stage where documentation quality matters. The more robust (there's that one allowed usage) your supporting documentation, the stronger your case for payment becomes. Providers who skimp on documentation often find themselves battling denials that could have been avoided.
Financial Calculations
After clearing clinical validation, a claim enters the financial realm. This is where payers determine what they will actually reimburse for the claim.
Deductibles, Copays, and Coinsurance
Once a service is approved, payers calculate patient responsibility—deductibles, copays, and coinsurance. These are subtracted from the allowable amount before the payer issues payment.
Imagine a claim with an allowable of $200. If the patient has a $50 copay and a 20% coinsurance, the payer will deduct $50 and then 20% of the remaining $150. The provider receives $120 from the payer, and it’s up to you to collect the rest from the patient.
Contractual Adjustments
Contractual agreements between payers and providers often mean the full billed amount isn’t paid. If you billed $300 for a procedure, but your contracted rate with the payer is $250, the payer will adjust the claim down to $250. This doesn’t magically disappear; it’s recorded as a contractual adjustment (often CO-45).
Payment Issuance
Finally, if a claim survives all these steps, the payer issues payment. This can come as a check or, more commonly, an electronic funds transfer (EFT).
Remittance Advice
With payment, you receive a remittance advice (RA) or explanation of benefits (EOB). Understanding this document is as important as the check itself—it details why each charge was or wasn’t paid in full. It’s your roadmap for any follow-up action, whether that's appealing denials, rebilling, or collecting patient payments.
The Real World of Adjudication
The claim adjudication process is anything but straightforward. Each stage is a hurdle, and payers are known for making those hurdles higher than necessary. Knowing the ins and outs of this process isn’t just academic. It's actionable intelligence that can save time and money.
By understanding what happens at each step—and why—practices can preemptively address common issues that lead to denials. Better yet, they can devise strategies to streamline internal workflows, from coding to collections.
The takeaway? Master the adjudication process, and turn it from a black box into a predictable system. That’s how you stay ahead.
Related Articles
