Rejection is never something a healthcare service provider wants to see from a payer. Yet, it is quite common but very much avoidable with the right processes and knowledge in place. In medical billing and coding, several types of rejection exist, and each type requires a different process to resolve it.
How many types of rejections are there in medical billing? The following details shine light on the various levels a healthcare practice may encounter.
Soft vs Hard Rejections
Understanding the difference between soft and hard rejections is key to knowing which claims can be corrected and resubmitted, as well as which ones involve additional steps to fix the rejection.
What is a soft rejection?
Soft rejections are “easier” to deal with because you can typically overturn them with less effort. They often occur at the clearinghouse rejection level, where claims are reviewed for completeness and proper formatting before being sent to the payer. It is possible for these to also happen at the payer level, though. These are temporary issues and can usually be corrected and resubmitted without needing an appeal.
Common reasons for soft rejections:
- Missing patient information (i.e. date of birth, insurance information, or name)
- Missing or outdated modifiers
- Incorrect diagnosis codes applied
- Typos or formatting errors
- Missing required fields
Prevention methods for soft rejections include putting a cross-check process in place to ensure claim reviews happen prior to submission and to track such rejections over time. This may indicate reasons for such instances to occur, such as a lack of training.
What is a hard rejection?
Hard rejections usually happen at the payer level, before adjudication. They involve issues related to policy rules or submission requirements. Some can be corrected and resubmitted, while others may require a formal appeal or result in permanent denial if not fixed quickly.
Common reasons for hard rejections:
- Services not covered by the patient’s insurance plan
- Missing or unapproved prior authorization
- Duplicate claim submission
- Claim submitted after the payer’s timely filing deadline
Prevention methods for hard rejections are critical for cost savings and lost revenue within your company. To prevent these rejections, ensure patient insurance verification happens prior to care, update medical billing software, and train staff to double-verify information when it comes to prior authorization and policy rules.
Clearinghouse vs Payer Rejections
Another way to look at the types of rejection in medical billing is to consider when in the claims process the incident occurs. The sooner a mistake occurs in the billing process, the less time is wasted trying to reverse it. There are checks and balances in place to mitigate some of these rejections.
Clearinghouse rejections
Also sometimes referred to as front-end rejections, happen as a result of:
- Invalid claim formatting
- Incomplete patient or provider information
- Duplicate claim submissions
- Missing required fields or codes
You can avoid these mistakes by validating information prior to submission of the claim. Accurate entry of data is the core prevention strategy here. Also, review all clearinghouse rejection reports your practice sees on a daily basis to avoid delays and prevent them more effectively.
Payer rejections
These occur after the claim reaches the payer but before adjudication. Rejections that happen from the payer’s side before the claim enters their system, happen because of:
- Plan coverage criteria not met
- Incurred bundling of services
- Disputes over the allowances or charges
- Filing deadline issues
Prevention of payer rejections requires improving policy adherence and knowledge, and engaging with payers more directly to resolve repeated problems. The use of automated coding methods can also reduce these risks.
Payer-Specific Rejection Reasons
Each payer has specific rules you must follow to successfully receive payment for the services provided. Not understanding these differences between payers often leads to avoidable rejections. Since many healthcare practices deal with numerous payers and various rules on any given day, it’s easy to see how these challenges can occur.
The following are some common examples that you may see:
Terminology differences
The simplest of differences in terminology can create frustration. For instance, one payer may refer to the individual receiving care as a “member,” another as a “patient,” and yet another as a “subscriber.” Entering the wrong information in a field expecting a specific label, such as listing the patient instead of the subscriber, can trigger a rejection.
Documentation and process concerns
Payer rejections also occur when claims don’t meet the documentation or policy requirements of that specific payer. Coverage limitations, authorization rules, or missing medical necessity notes may vary from payer to payer.
For example, Medicare requires the use of specific modifiers to indicate that procedures performed on the same day are distinct and separately billable (CMS.gov). Failure to apply the appropriate modifier can result in claim rejections. Consider the following scenario:
- A patient undergoes an abdominal ultrasound early in the day to evaluate abdominal pain. Hours later, due to worsening symptoms, a second ultrasound is ordered to reassess for new findings.
- The first ultrasound would be billed with CPT code 76700.
- The second ultrasound, being a repeat diagnostic service by the same provider on the same day, would require modifier 76 (76700-76) to avoid rejection as a duplicate procedure.
- Without applying modifier 76, the second claim may be rejected even if it was medically necessary.
Rejections can also happen when policy updates aren’t reflected in your billing workflow. Even a small misalignment with a recently updated rule or code requirement can be enough for a claim to be rejected.
Common Reasons for Rejections and How to Avoid Them
Many medical billing rejections are avoidable. Consider some of the most common and the associated strategies:
Patient information inaccuracies
Incorrect or incomplete patient demographics such as birthdates, name spelling, or insurance ID numbers.
How to avoid it: Double-check all patient information at check-in and during every encounter. Use automated verification tools when available.
Prior authorization failures
Missing or invalid prior authorizations for services that require payer approval before delivery.
How to avoid it: Implement clear workflows for verifying and documenting prior authorizations before services are rendered. Set up alerts for services that typically require pre-approval.
Services not covered
Submitting claims for services that are not included in the patient’s insurance plan or benefits.
How to avoid it: Verify insurance coverage and benefits at every patient touchpoint—before, during, and after the appointment
Coding errors
Use of incorrect or outdated CPT, ICD-10, or HCPCS codes, or simple typographical errors.
How to avoid it: Provide regular training for coding teams and providers. Use coding software with built-in error detection and automatic updates.
Incomplete documentation
Missing or vague clinical documentation that fails to support the medical necessity of services.
How to avoid it: Ensure thorough charting by providers and double-check documentation requirements for each service before claims submission.
