Appealing a Claim Denied Due to Lack of Authorization

When it comes to navigating the managed care world, the system can be streamlined, efficient and profitable as long as the proper procedures are followed. However, when it comes to authorization for services rendered outside of the primary care physician’s (PCP) office, these procedures must be followed precisely otherwise an office runs the risk of denial of claims.

The basic premise of managed care (and HMOs in particular) is that all services outside of the PCP office require both the direction of the PCP and an official authorization. This is done primarily for cost containment purposes, as most of these plans operate within a capitation based system. If you are working for a specialty physician that participates in managed care plans, keeping a tight rein on the authorization process is certainly the rule of the day.

The best defense, of course, is a good offense. This means that the office staff should make absolutely certain at the time the appointment is made that there is a valid authorization in place. In addition to simply querying the patient about the existence of an authorization, be sure to also clarify:

• What is included in the authorization (e.g., just a consultation versus consultation plus lab work)
• That your physician name is on the authorization
• The expiration date of the authorization
• The number of visits covered by the authorization

If it appears that everything is in place, you should feel comfortable with seeing the patient.  At the time of the appointment, be sure to get a copy of the authorization and file in the patient’s chart.

While you have done everything you can on the front end, it is still possible that the claim may get denied. If this happens it will be well worth your time to initiate the appeal process. First, try to resubmit your claim on paper with an actual copy of the authorization. When doing so, make that you send it to the proper street address or PO box for the payor and not simply a general mailbox.

If the claim gets denied after the first paper submission, then you will need to appeal directly to the payor via more formal means. If you are working with an HMO medical group, you may also want to get their Provider Relations Department involved at this stage as well. Craft a detailed letter explaining why you feel that your claim should not be denied. Include the fact that you did have an authorization in place, but also reaffirm the medical necessity of the visit. You may also find it helpful to get in touch with the ordering PCP and have them confirm that your visit was, in fact, authorized. A short note from the PCP should help to make your case.

Once you start the appeal process, be sure to stay on top of the situation. If there have been no word from the payor after fourteen days, resend your correspondence. As a last ditch effort, you can also involve your patient in the process and ask that they appeal directly to the plan on your behalf. Most health insurance plans do not want unhappy consumers and this may very well push the process in your favor.

Why would a medical billing claim get denied due to lack of authorization?

Medical insurance claims can be denied due to authorization issues for various reasons. Some of the most common reasons include:

• Lack of Preauthorization: Certain medical procedures, treatments, or services require preauthorization from the insurance company before they are performed. If the healthcare provider fails to obtain preauthorization or if the authorization request is denied, the insurance claim may be rejected.
• Expired Authorization: Authorizations for medical services are often time-limited. If the authorization has expired by the time the claim is submitted, the insurance company may deny the claim.
• Incomplete or Inaccurate Information: Errors or omissions in the authorization request, such as missing patient information, incorrect procedure codes, or insufficient clinical documentation, can lead to claim denials.
• Authorization Not Obtained for Additional Services: Sometimes, during a medical procedure or treatment, additional services or procedures may be required beyond what was initially authorized. If these additional services were not preauthorized, the insurance claim for those services may be denied.
• Out-of-Network Providers: Insurance plans often have networks of preferred healthcare providers. If a patient seeks treatment from an out-of-network provider without proper authorization, the insurance claim may be denied or processed at a reduced reimbursement rate.
• Medical Necessity Criteria Not Met: Insurance companies may deny authorization if they determine that the requested medical service or treatment does not meet their criteria for medical necessity. This often requires the healthcare provider to provide additional documentation or justification for the requested service.
• Policy Limitations or Exclusions: Certain insurance policies may have limitations or exclusions on specific medical services or treatments. If the requested service falls under a policy exclusion or limitation, the authorization request may be denied.
• Provider Not Contracted with Insurance Company: If the healthcare provider is not contracted with the patient’s insurance company, authorization requests may be denied automatically.
• Appeal Not Submitted in Time: If an authorization request is initially denied, healthcare providers typically have the option to appeal the decision. However, if the appeal is not submitted within the specified timeframe or if the required documentation is not provided, the claim denial may be upheld.
• Policy Coverage Changes: Changes in the patient’s insurance coverage, such as policy cancellations, lapses, or changes in benefits, can result in authorization denials for previously approved services.

Addressing these common reasons for authorization denials requires thorough documentation, proactive communication with insurance companies, adherence to preauthorization requirements, and timely appeals processes when necessary.

How to avoid medical billing claim denials

• Verify Insurance Coverage: Verify patients’ insurance coverage and eligibility before providing services to ensure that the services are covered under their insurance plans. This can help prevent denials due to coverage issues.
• Obtain Preauthorizations: Obtain preauthorizations or pre-certifications from insurance companies for procedures, treatments, or services that require prior approval. This helps ensure that services are authorized and reduces the risk of denials for lack of authorization.
• Accurate Documentation: Ensure accurate and comprehensive documentation of patient encounters, including diagnoses, treatments, procedures, and medical necessity. Detailed documentation supports the medical necessity of services provided and helps prevent denials due to incomplete or inadequate documentation.
• Code Correctly: Use accurate and up-to-date medical billing codes (ICD-10, CPT, HCPCS) to describe the services provided. Incorrect or outdated codes can lead to claim denials or delays in reimbursement. Regularly train staff on proper coding practices to minimize errors.
• Timely Claim Submission: Submit claims to insurance companies promptly to avoid timely filing denials. Monitor claim submission timelines and follow up on any delayed or rejected claims promptly.
• Appeal Denials: Develop a systematic process for appealing claim denials, including thorough review of denial reasons, submission of additional documentation if needed, and tracking of appeal outcomes. Persistently appeal denials that are unjustified or incorrect.
• Stay Informed: Stay informed about changes in insurance policies, billing regulations, and coding guidelines that may impact claim submission and reimbursement. Regularly update staff on relevant changes through training sessions or newsletters.
• Outsource Medical Billing: Consider outsourcing medical billing to a reputable company like Quest National Services. Outsourcing medical billing can streamline the billing process, improve accuracy, and reduce the administrative burden on the medical practice. Quest National Services offers comprehensive medical billing solutions, including claim submission, payment posting, denial management, and revenue cycle management, allowing medical practices to focus on patient care while ensuring efficient billing operations.

For informational purposes only.