What Is a Rejected Claim in Medical Billing?

A medical claim is a formal request for payment that healthcare providers submit to an insurance company for services rendered. It includes specific codes detailing the services, such as diagnoses, procedures, and supplies. A rejected claim occurs when this initial request for payment is not accepted for processing due to identified errors, preventing it from entering the payer’s system for review.

Rejected Claims Versus Denied Claims

Understanding the distinction between rejected and denied claims is important in medical billing. A rejected claim is returned by the payer’s system, often through an intermediary like a clearinghouse, before it reaches the insurance company’s processing system for adjudication. These rejections occur due to basic formatting, data entry, or coding errors, meaning the claim never truly enters the payer’s system and no claim number is assigned. Correcting a rejected claim and resubmitting it is a straightforward process.

In contrast, a denied claim has been received and processed by the payer but has been deemed unpayable for various reasons. Reasons for denial can include a lack of medical necessity, services not being covered by the patient’s plan, or duplicate billing. Denials require a more complex appeal process, as the claim has already been adjudicated and recorded by the payer.

Common Reasons for Claim Rejection

Medical claims can be rejected for various reasons, often stemming from inaccuracies or omissions in the submitted information. Incorrect patient demographics, such as mismatched names, dates of birth, or policy numbers, prevent the claim from being matched to the correct patient record. Invalid or missing provider information, such as an incorrect National Provider Identifier (NPI) or tax identification number, is another frequent issue.

Coding errors represent another significant source of rejections. This can involve using invalid Current Procedural Terminology (CPT) codes for procedures, International Classification of Diseases, Tenth Revision (ICD-10) codes for diagnoses, or Healthcare Common Procedure Coding System (HCPCS) codes for supplies, or codes that do not align with the date of service or patient’s age and gender. Incorrectly applied or missing modifiers, which provide additional details about a service, can also lead to rejection.

A mismatch in the payer identification (ID) is another common reason for claims to be rejected. This occurs when the claim is sent to the wrong insurance company or an incorrect payer ID is used, meaning the claim cannot be routed to the appropriate recipient for processing. Claims may also be rejected if they are identified as a duplicate submission.

Missing pre-authorizations or referrals can cause rejections if required approvals for services were not obtained or included with the claim. Claims filed beyond the timely filing limit set by the payer can also be rejected by automated systems.

Steps to Address a Rejected Claim

Addressing a rejected claim begins with a thorough review of the rejection report. Clearinghouses or payers provide specific rejection messages or error codes that pinpoint the exact reason for the claim’s return. Identifying the specific error from the report is the next step.

Once the error is identified, necessary changes must be made to the claim. This might involve updating patient demographics, correcting procedure or diagnosis codes, or adding missing provider information. The claim must then be resubmitted through the appropriate electronic or paper channels.

A rejected claim, unlike a denied claim, does not require an appeal process. Correcting the error and resubmitting is the standard procedure. Prompt correction and resubmission are important to avoid further delays in payment and to remain within any timely filing limits.

Preventing Future Claim Rejections

Preventing future claim rejections involves implementing proactive strategies within the medical billing process. Thorough verification of patient information ensures complete and accurate demographics and insurance details are collected at every patient encounter, including policy numbers, group numbers, and patient addresses. Regular staff training is important, keeping billing personnel updated on the latest coding guidelines, payer-specific rules, and emerging rejection patterns.

Leveraging clearinghouse reports and analytics can aid prevention. These reports highlight recurring errors or trends that can be addressed through process improvements or additional staff training. Staying current with coding standards, such as updates to CPT, ICD-10, and HCPCS codes, as well as specific payer guidelines, is essential. This ensures accurate coding from the outset.

Utilizing pre-claim edits and scrubbing features offered by billing software or clearinghouses can prevent rejections. These automated tools check claims for common errors before submission. This “scrubbing” process ensures claims are clean before they are sent to the payer, minimizing the likelihood of encountering rejections.