30% of insurance claims get denied on their first submission. Part of this is because of the complicated nature of the claim adjudication process. There’s nothing simple about the claim submission process. Any medical biller with some experience will agree that there are a lot of steps. Every claim you submit goes through an adjudication process, regardless of which insurance company it gets submitted to. If you aren’t a seasoned medical biller, you are probably asking yourself, “what is claim adjudication?” Let's find out.
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What is a claim? According to Healthcare.gov, a claim is a request for payment that a healthcare provider submits to a health insurer for items and services potentially covered by the insurer. If that sounds confusing, let me break it down further. A medical claim is a document. Healthcare organizations use these documents for reimbursement from insurance companies (aka payers).
Here’s the kicker: healthcare insurance companies don’t use the same language and terminologies as doctors in the examination room. Therefore, healthcare providers need to use sequences of numbers and letters to “code” the diagnosis and services rendered. Medical claims have charges and codes to standardize services for faster payer approval and reimbursement. These codes are Current Procedural Terminology (CPT) codes that describe the medical services provided to patients.
What does "adjudication" mean? Unfortunately, adjudication is a legal term. This means that on any other day, you would need to search for the definition on Google and try to make sense of lawyer jargon. However, you clicked on this video and I’ll break it down for you! Adjudication is a legal process that tries to resolve a dispute or decide the outcome of a case. When people take a disagreement or accusation to court, the courts process all the information provided to analyze the situation.
Using the law, the courts will decide what right and wrong actions took place during the relevant incidents. When there’s enough friction and controversy in the case to warrant judicial intervention, the case becomes, quote, “ripe for adjudication”. A case doesn’t need adjudication when it pertains to hypothetical questions or possibilities. This is because The constitution only allows courts to preside over actual cases and controversies. Adjudication has a second legal definition of the actual judicial decision. A “doctrine of former adjudication” helps determine the effects of a judgment. When this happens, a final judgment in a prior court proceeding prevents the re-litigation of any issues relevant to the ruling.
If you’ve been watching this video up until now, you’ve learned what a claim is and what adjudication means. Now for the question of the day: what is claim adjudication? According to Law Insider, claim adjudication is a process that insurance payers go through to determine how much they owe the provider.
They use the claim sent from the healthcare provider to decide. For every claim submitted to a health insurance company, the payer needs to make one of three decisions: 1) Pay the full amount listed on the claim, 2) Pay only part of the amount listed on the claim, or 3) Deny the claim. The ideal scenario for a healthcare provider is for the payer to pay the total amount. If you have access to the healthcare organization’s bank account, then you would see a credit appear for the total amount listed in the claim. That said, the worst scenario is when the claim adjudication leads to a denied claim. Claim denials happen when there is a blatant error in the document. Normally your clearinghouse’s scrubbing process fixes these mistakes. However, not all organizations thoroughly look through claims to find errors.
When a denial happens, the payer sends back the claim to the healthcare organization. They also submit a claim rejection code and explanation. Insurance companies don’t provide compensation for denied claims until the healthcare company fixes the claim, fills out an appeal form and resubmits it.
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