Simplifying Claims Adjudication

Beginning with the submission of a claim to an insurer or payer, and concluding with its acceptance, denial, or reduction - is termed claims adjudication.

And while the initial claims adjudication definition is not complicated, the finite details of adjudication are intricate and made up of many steps and variables. With 30 percent of claims getting denied on their first submission, adjudication itself is much more elaborate. 

So, it pays to fully understand the process and minute details to work towards a higher rate of approval on claims. 

What steps make up the claim adjudication process? with claims adjudication definition

Step 1: The initial processing review  

In the first step, claims are scanned for simple errors or omissions. Seems link no big deal, right? Unfortunately, it is. Often, claims get denied at this stage. If a claim is unable to make it past this stage, it gets sent back to the organization that submitted it. Fortunately, it can be resubmitted, albeit at a cost to the company.  

Here is what payers must check to confirm accuracy in the first step. 

• The patient’s name 
• The patient’s subscriber identification number 
• The service code 
• The date of service 
• The diagnosis code 
• The patients gender 

In this step, accuracy is the key to getting through this stage and averting a denial.  

Step 2: The automated review 

This step brings about even more detailed scrutiny of the payer’s policy. So, what are they looking for now? 

Eligibility of the patient on the date of service  

The potential problem? A possibility that the coverage could have termed or is inactive. 

• Availability of pre-certification or authorization 

The potential problem? The pre-certification or authorization was either not obtained or not added to the claim before its submission. Also know about what is adjudication in insurance

• If the claim submitted is a duplicate 

The potential problem? A claim has already been submitted for the same date or procedure. Repeated errors could result in major problems for your practice and lead to an eventual fraud investigation. 

• The timeline for filing has passed 

The potential problem? Insurers typically allow a time limit of 90 to 120 days for submitting an initial claim. If your original claim does not adhere to the filing deadline, it cannot be processed for payment. 

• Invalid diagnosis or procedure code 

The potential problem? The diagnosis codes and the procedure codes on the claim are cross checked for accuracy. 

• The services provided were medically redundant 

The potential problem? The care provided was not appropriate or cost-effective. 

Step 3: The manual review 

The manual review is the purview of a trained medical claims examiner who acts as a guardrail in the process. The involvement of physicians and nurses is common at this point in adjudication, and medical records can be requested for comparison with the claims. This is no cause for concern as this is standard procedure in processing a claim and simplifying claims adjudication.

Step 4: Payer determination  

Now, the adjudication process finally culminates into one of the following scenarios. 

1. Paid, the payer has decided that the claim received is reimbursable and hence paid in full. 

2. Reduced, the claims’ examiner decides that the service level billed is too high and downcodes the procedure code to a lower level. Unfamiliar with downcoding? Learn more here. 

3. Denied, the payer determines that the claim received is not reimbursable. 

Now that you better understand the claims adjudication process, it's time to get paid. The payment, known as remittance or explanation of payment, is one of the more positive results of the claims adjudication process.  

What is remittance? 

It is not as simple as payers simply giving money to a practice. The money associated with the claim carries with it explanations pertaining to the following: 

1. Payment 

2. Reduction of payment 

3. Adjustments 

4. Denial 

The remittance amount can include the following information: 

• Payer Paid Amount 
• Approved Amount 
• Allowed Amount 
• Patient Responsibility Amount 
• Covered Amount 
• Discount Amount 
• Claims Adjudication Date 

Learn more about how to improve your claims adjudication process here.