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Understanding Claim Processing in Healthcare

by | Oct 16, 2023

Efficient healthcare claim processing is key to the success of every healthcare operation’s bottom line. In the past few years, as the healthcare industry has become more complex, providers have had to deal with changes in policies, regulations, and technology.  

Such complications have made it difficult to navigate claim processing and resulting in many errors and delays. That is why it is important to understand the different steps of healthcare claims processing.  

What is Healthcare Claims Processing? 

A claim is a request made by a healthcare provider to insurance companies to receive reimbursement for services rendered. Typically, a claim includes treatment, diagnosis and CPT Codes. 

Once the healthcare providers send a claim to the payer, the payer reviews the claim to determine whether it meets the requirements for reimbursement. If the claim is approved, the payer remits payment to the provider for services rendered. 

What Are the Steps in Processing a Claim? 

The healthcare industry can be a maze of complexities and intricacies, with every aspect of it requiring meticulous attention and scrutiny. Claim processing steps in healthcare and billing are a prime example. The following step-by-step guide to claim processing will demystify each step and explain the roles involved in processing insurance claims. 

1.) Patient Registration 

It all begins with the initial patient check-in and collection of personal and insurance details. Accurate and complete information is a claims processing best practice. Registration information includes demographics, name, policy type, policy number, and group number. Training staff to complete all steps ensures that no important details are missed. 

2.) Eligibility Verification for Health Insurance Companies 

To avoid claim denials, a medical practice must be diligent in confirming eligibility. Confirming patient insurance coverage and the benefits policy is conducted by healthcare providers to ensure services offered to patients are covered by their respective plans and to know limitations such as deductibles, copays, and coinsurances.  

Verification helps avoid delays in claim processing. Patients, however, should have a clear understanding of the policies to avoid surprises and better manage their medical bills.  

3.) Medical Coding 

Medical coding involves translating a patient’s clinical documentation into standardized codes for billing and report generation. This process captures diagnosis codes, treatment codes, and procedure codes using medical classification systems like ICD-10-CM (International Classification of Diseases, 10th Edition, Clinical Modification) and CPT (Current Procedural Technology). These codes track patient health information, provide statistical data, and monitor medical treatment outcomes. 

4.) Claims Transmission 

Once the claim is prepared, filing is the next step. The healthcare claims processing department can choose to transmit claims electronically using EDI (Electronic Data Interchange) or paper format.  

HIPAA 837 format is the standard electronic format submission. CMS1500 claim form is utilized for paper claim submission. Subsequently, the claim is transmitted to clearinghouse or payer for processing. Final determination paid or denied.  

5.) Adjudication 

The payer will either approve the claim or request additional information. After reviewing, the insurance company will either issue a denial or payment. 

6.) Patient Statement Generation 

The final phase of the healthcare claims processing cycle is the generation of the patient statement. The patient statement provides the patient clear documentation of the amount charged. The patient statement informs the patient of any remaining balance, so that patients are notified of what unpaid amount they are responsible for. 

The Importance of Efficient Claims Processing: Optimizing Claims Processing 

As healthcare professionals, your primary focus is patient care, but billing and insurance claims processing is a critical aspect of maintaining the health of your practice. Efficient medical claims processing is vital for healthcare providers to maintain cash flow, reduce revenue loss, and ensure complete and timely reimbursement. 

Optimizing Your Claims Management Software in Healthcare 

One way to optimize your claims processing is to evaluate all the software your practice is using. Are there any areas in the claim process that slow down or delay the payment? There may be redundant claims processing workflows that can be streamlined or eliminated to reduce the time and effort required to complete tasks.  

Examine Your Overall Claim Processing Cycle 

Another critical area to monitor is your overall claim processing cycle. Are there any bottlenecks in the process that slow down the claims process and lead to delayed payments? Identify areas that can be improved to reduce costs and increase revenue so that you can begin to find effective solutions.  

Look For Strategic Outsourcing 

Outsourcing certain aspects of processing to healthcare consultants is an excellent way to optimize claims. Bringing in outside help can provide your practice with expertise not found in-house  

Experienced consultants help your staff find solutions that reduce errors, improve efficiency, and reduce costs. Outsourcing can also help your practice keep up with the ever-changing landscape of healthcare insurance regulations and policies that directly impact your revenue

Summary: What is Claims Processing in Healthcare? 

Claims processing consists of all the steps needed to obtain payer reimbursement that coincide with all the services given to a patient. When claims are not processed properly, this can lead to denials, delays, and patient complaints. 

Best practices in claims coupled with optimizing software workflows, examining your overall claim processing cycle, and looking for strategic improvements in efficiency reduces errors, and increases revenue. By understanding the claims process and focusing on these areas, your practice can thrive, allowing you to provide excellent patient care while maintaining financial stability

Master Healthcare Claims Processing with Expert Consulting from Medical Advantage 

Medical Advantage can help you find, set up, and customize claims processing functions, as well as train your staff to have a more efficient claims process that maximizes reimbursement. If you would like to learn more about how your practice can generate new revenue with better healthcare claims processing, reach out to us today. 


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