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Reduce avoidable Medicaid claims denials

Thanks to innovative technology, state leaders can now better address the complexity of billing and reimbursement processes.

November 15, 2023 | 3-minute read

John Campbell
Director of Product Management, Optum State Government Solutions

Dustin Haisler
Govtech, eRepublic Chief Innovation Officer

Joe Morris
Govtech, Deputy Chief Innovation Officer

Addressing the persistent problem of avoidable claims denials

Dustin: Let’s first explain what you mean by avoidable denials in Medicaid claims processing, and why they are a problem.

John: When we say avoidable denials, we mean claims for services rendered and submitted in good faith. Not those that might fall into the fraud, waste and abuse categories.

We’ve seen studies that show that Medicaid claims are denied at a substantially higher rate than Medicare or commercial claims — 25% compared to 7.3% and 4.8%. The research shows that 86% of all denied Medicaid claims are avoidable in one way or another.

We want to identify techniques and processes that we can implement to reduce that number. Solutions that improve transparency of program rules and reimbursement requirements can help.

Joe: What are some of the ways avoidable claims denials affect states, managed care organizations (MCOs) and providers?

John: There is an impact on all sides. It causes friction between the groups and adds to their administrative costs. Consider a phone call checking on a claims submission. It takes time and requires staff for both payers and providers. Then there’s the effort to rework a claim, if it’s been denied inappropriately.

Avoidable claims denials create an outsized burden for Medicaid providers. Researchers estimate the cost of incomplete payments (CIP) siphons away about 17% of expected Medicaid revenue, compared to 5% for Medicare and 3% for commercial. This can have a substantial impact on providers and their performance within the program.

Joe: How can state governments modernize the claims process to improve provider satisfaction and program efficiency?

John: I’d focus on the technology. We don't want to get hung up on things we can't control. For example, how the legislature is going to allocate program administration and operations funds, which directly drive reimbursement rates. But we can work on technical solutions that come in at a low cost and can improve revenue, provide transparency into program rules and reimbursement requirements, and support collaboration between payers and providers.

States can look for data and analytics solutions designed to share information with providers in a way that they can access it as they’re building their claims and not just through provider portals where the documentation is published.

Solutions that allow real-time messaging can also help. Consider the benefits of a solution that analyzes a claim and, if needed, communicates back to the provider the reason why the claim needs to be reviewed and resubmitted.

Dustin: Can you share an example of how your recommendations are being used?

John: One state is working to improve transparency. They’re using a tool to support oversight and collaboration with their managed care organizations (MCOs). In this case, the tool provides real-time metrics about providers’ claim submission patterns and MCO response to those claims. The state isn’t using real-time messaging yet, but by seeing how their claims payment process performs, leaders can take corrective actions or provide reporting to legislative bodies and stakeholders much more rapidly and meaningfully than ever before.

Another example we are seeing is how Medicare MACs are using editing tools. And they are receiving positive feedback. They’re able to send clear messaging back to providers that is specific to the claim, the rules surrounding the member, the date of service and all the other factors that go into adjudication. Providers can act on the messaging in days or even minutes and get their claims cleaned up and back to the payer with no lag.

Joe: What are the metrics payers and providers can use to track progress and evaluate success in reducing or eliminating avoidable claims denials?

There are a few obvious metrics any group implementing these solutions will want to track — like auto adjudication rates and denials rates over time. They may also want to develop insights into suspend rates and how those changes affect the workload of operations teams.

Then there's going to be a whole host of custom metrics that each can implement on their own. Other metrics to consider might be those around fraud, waste and abuse. Since the new tools can be placed ahead of claim submission and can communicate proper billing expectations from payer to provider, they may also impact that category.

Dustin: Is there a typical champion for managing these avoidable claims denials in a Medicaid agency?

John: The solutions that I'm espousing are very IT-centric. So, IT professionals can get behind them and show the benefits and the costs that are associated with the solutions.

I also look to team members in the provider enrollment and management space because providers are the ones most negatively impacted by improper claims denials. And the claims team has a role to play because by reducing improper claims denials, we're also improving the performance of the claims system itself, which brings the overall workload of the operations teams down.

Joe: What benefits can states expect from reducing avoidable claims denials?

John: With new tools, states can develop an objective view of claims processes. They’ll be able to identify problem areas and educational opportunities. That will help streamline the billing process, improve payment rates, increase provider satisfaction, and ultimately, help state staff and providers focus on delivering the care and services their beneficiaries need.

For more insight into how your organization can use technology to modernize the claims process, watch the full video. 

Watch the video