As a medical provider, you’re familiar with the fundamentals of medical claims. A patient receives care, and you rely on their insurance company or another payer to process the payment promptly for timely payments. While this may be an oversimplified application of the life cycle of a medical claim, it is a critical component in building your practice’s financial viability to maximize this process.
A medical claim is complex, often dealing with numerous steps along the way from service to payment. Let’s take a closer look at the life cycle of a medical billing claim from start to finish so you are aware of where potential risk factors for your practice may exist.
1. Gather information during patient registration
Practices must navigate numerous steps before a medical appointment occurs. The life cycle begins when the patient books their appointment for service. At this stage, you must collect the health insurance information from the patient before confirming that your services fall under the patient’s expected payer coverage.
2. Verify a patient’s insurance
Before the patient is seen at their appointment, you need to confirm that person’s information, such as their identity and insurance details. This secondary step including eligibility and verification should never be missed, as it can mean submitting inaccurate information later on. This can cause unwanted financial loss and delays. In addition, you must navigate any prior authorization requirements set by the payer.
3. Patient encounter with documentation
In this step, the medical provider must ensure they accurately record all services rendered to the patient. The provider then hands off this information to the medical billing and coding team.
4. Translate services to medical codes
Once the appropriate team has all the necessary information right after the appointment has been completed, typically the medical coding team or someone apart of the medical billing team, will perform the coding process. This entails converting the provider’s service documentation into standardized codes such as ICD or CPT/HCPCS which is highly important for proper, timely reimbursement.
5. Claim is created and submitted
With the claim accurately coded, the claim is now ready to be generated. It is critical that all documentation is included and accurately recorded within the claim. This should be details about the patient, service(s) received, and any other information important to the billing process. The medical billing team will create and submit the claim for review by the payer.
6. Adjudication from payers
Once the claim is sent, the life cycle of a claim in medical billing moves into the hands of the payer. They will:
- Determine if enough information is available
- Validate coverage through the policy
- Ensure all coding and patient information align
- Verify medical necessity or any appropriate authorization attainment
At this point, the best case scenario is that the payer made a successful adjudication decision. Will they pay for it or send it back to you?
7. Claim actions after decision-making
The life cycle in healthcare claims then comes back to the practice with the decision about whether the claim was paid, partially paid, or not paid at all and the reasons for this. If no errors occur, the payer agrees to make payment.
If it is rejected completely or not paid in full, the payer found an error or is missing information. In these situations, especially where there is an outright denial, you should determine why and fix it quickly, if possible. This may mean going back to the start of the life cycle where a team member would need to speak with the patient for more information.
8. Follow-ups and collections approaches
If the payer does not cover the entire balance for the patient, the patient is responsible for the remaining balance under the terms of agreement with the practice. At this time, the patient is given an explanation of benefits, outlining whether the payer made a payment, how much, and why. If there is any remaining amount, the patient is likely responsible. In situations where the patient does not make payment, there are additional steps to take that can complicate this process. Here is a few different circumstances and outcomes:
- The patient pays what they owe by the deadline you list. That’s great and means everything is in order. No further action must be taken.
- The patient misses their payment, leading to an immediate follow-up call or letter sent to the patient to explain that they missed the payment.
- Over an extended amount of time, if the patient continues not to pay the bill, the debt can be moved to collections for legal action. A collections agency can help encourage the patient make payment.
The healthcare claim life cycle isn’t simple, but it is a necessary, detailed process that helps ensure payments are made by those responsible in a timely fashion. Understanding the life cycle of a claim in medical billing is one of the most important cycles in practice management that promotes financial health.
