Your healthcare practice never wants to hear about payer denials or rejections. Yet, they are common and can play a significant role in your practice’s financial well-being. In fact, www.physicianpractice.com states that approximately 20% of all medical claims are denied, rejected, or underpaid, while up to 60% of these claims are never resubmitted.

Knowing the difference between a rejection and denial as it applies to how a payer treats a claim is fundamental. A claim rejection vs denial can be confusing, but once you understand the intricacies of these two forms of nonpayment, you’ll have a better idea of how to seek reimbursement.

What Are Claim Rejections and Denials?

Take into account the difference between denial and rejection by comparing these two definitions:

• Claims rejections: The payer or clearinghouse immediately stops the claim once received by the processing system. This often occurs due to missing or inaccurate data or incorrect information on the claim. Once you correct that information, you can resubmit the claim, in many situations.
• Claims denials: A denied claim was received and processed by the payer but for some reason determined to be unpayable, such as due to a violation of the terms of the contract or an error after processing. In denials, you cannot just resubmit the claim, but rather, you must determine what caused the denial and, if possible, rectify that.

The rejection vs denial difference may seem small so far, but there are numerous implications to each you must consider.

Claim rejection

Now, consider what rejection means a bit more closely. A rejected claim occurs in the following situations:

• The clearinghouse or payer’s front-end claim validation process finds a discrepancy and rejects the claim.
• The clearinghouse may identify errors in the claim data that must be addressed before the claim can move to the payer for a successful adjudication. This typically includes formatting errors, the wrong date of birth for the patient, or a typo.
• The payer may reject a claim after it goes through the clearinghouse. The payer reviews the claim details to ensure the necessary elements are present. If there is a lack of information or the payer’s guidelines are violated, the payer rejects the claim.

Note that rectifying the problem in these situations could be straightforward. Correcting the typo or updating the incorrect data enables you to resubmit the claim for consideration.

Claim denial

Let’s take a closer look at the difference between denial and rejection by breaking down what a denial means:

• The claim went through processing and adjudication.
• The payer receives the claim and reviews it to match the patient’s benefits to the medical policies of the contract.
• A discrepancy was found during this review, leading to the denial of the claim.

The most common reason for this is due to a lack of coverage for the services provided. In other situations, the service was not properly coded or documented. A third common reason is that, while the service may be covered, the policy limits are met or exceeded.

When a healthcare provider receives a denial of a claim, it means you cannot receive payment for the services you already provided. This impacts cash flow and revenue for the healthcare practice.

It may be possible to review the claim and gather additional information to determine the cause of the denial. For example, if inappropriate codes caused the denial, you may be able to rectify this and resubmit the claim for reconsideration. However, don’t overlook the added time and cost of having to track back to find out what went wrong. According to www.physicianpractice.com, the cost to rework claims can average over $25 per claim while appeal costs can surpass $100, which can add up quickly.

What Are the Differences Between Claim Rejections and Denials?

The following is a look at the specific difference between rejection and denial:

• Evaluation: A denial occurs after a claim has been evaluated (adjudicated) by the payer, while a rejection happens earlier in the process—either at the clearinghouse or during the payer’s initial validation checks. In a rejection, the claim has not yet undergone full evaluation.
• Follow-up options: A claim denial is typically a finalized decision, though it may be appealed or corrected depending on the reason. A rejected claim is an incomplete or invalid claim that was never processed and can usually be corrected and resubmitted without an appeal.
• Practice impact: A denial means your practice receives no compensation unless you win an appeal. A rejection means there’s likely to be a delay in paying you, but you can resubmit the claim to recover those losses.

Claim Rejection Reasons

In the comparison when it comes to rejections vs denials, rejection reasons are numerous and often easier to fix. Some of the most common include:

• Missing information: Name inaccuracies, date of birth, patient insurer member ID mistakes.
• Claim unreadable: This occurs when the claim is unclear and cannot be processed properly.
• Coordination of benefits: The insurers responsible for payment are unclear, often applicable when the patient has more than one policy.
• Errors in codes: Coding errors, such as human-entered code mistakes or incorrect billing codes.
• Improper format: If the format is not submitted the way the payer requires.

Claim Denial Reasons

When comparing claim rejections vs denials, denials are always going to be more worrisome. If you receive one or more, it is critical to find out what went wrong so you can correct that error without having to face additional denials in the future. Some of the most common reasons for a denial include:

• No benefits: Benefits for the service are not available or are exhausted, often due to a cap on the amount of care provided during the service period.
• Lack of medical necessity: The payer believes you have not proven the service was medically necessary for the patient, either to treat or diagnose their condition.
• Excluded coverage: The payer’s policy excludes the coverage for some reason, often specifically within the policy or contract.
• Out-of-network: The provider for the service is out of network, and no coverage is available for out-of-network providers as per the contract.
• Termination of coverage: The patient’s coverage is no longer in place, meaning they do not have an active plan.
• No prior authorization: In situations where prior authorization was mandatory but was not received prior to providing the service, a denial is likely.

To overturn this, you must appeal the decision made by the payer. This takes time and may not be possible, depending on why the claim denial occurred.

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