Claim Adjudication Determination Process in Medical Billing

Claim Adjudication Determination Process in Medical Billing

Do you ever think about what exactly happens to your medical insurance claim when it leaves the office of your doctor? Learn everything you need to know about it with ZEE Medical Billing.

Claim adjudication is the process of paying or denying claims submitted after comparing them to the coverage or benefit requirements in the insurance industry. The medical claims adjudication process involves a chain of steps.

It is important to understand the different steps of the claim adjudication in order to understand how the insurance company determines how claims are paid, rejected, or denied.  Medical billing specialists can use these steps to generate, submit, and follow up on claim processing to ensure maximum reimbursement.

Steps of claim adjudication

The five steps of the claim adjudication are:

  • The initial processing review
  • The automatic review
  • The manual review
  • The payment determination
  • The payment

The Initial Processing Review

Claims are checked for simple claim errors or omissions in the initial processing review. Problems spotted during the initial processing review include:

  • The wrong patient name or incorrect spelling
  • The subscriber identification number or plan number is wrong
  • The place of service code is wrong
  • The date of service is wrong
  • The diagnosis code is missing or invalid
  • The patient’s gender does not match the type of service

When a claim is rejected in case of the above-mentioned reasons, it can simply be rectified and resubmitted for payment.

The Automatic Review

In the automatic review, claims are checked for more detailed items that apply to the insurance payers’ payment policies. Problems identified during the automatic review includes:

  • The patient is not eligible on the date of service.  
  • Pre-certification or authorization is not present.
  • Pre-certification or authorization is not valid.
  • The claim submitted is a duplicate or the claim has already been submitted for the same date or procedure.
  • The timely filing deadline has passed.
  • The diagnosis or procedure code is invalid.
  • The services performed are not medically necessary.

The Manual Review

In the manual review, medical claim examiners checked the claims.  It is not uncommon for nurses or physicians to also manually review these claims during this process.  Medical records may be requested to compare the claim with the medical documentation.  This can be conducted for any type of procedure but most commonly with an unlisted procedure to determine medical necessity.

The Payment Determination

There are three types of payment determinations:

  1. Paid: When the claim is viewed paid, the payer determines that the claim is reimbursable
  2. Denied: When the claim is viewed denied, the payer determines that the claim is not reimbursable
  3. Reduced: When it is determined that the service level billed is too high based on the diagnosis, the procedure code can be downcoded to a lower level considered appropriate by the claims examiner

The Payment

The payment submitted to the medical office supplied by the insurance payer is called remittance advice or explanation of payment.  It details the notice of and explanation reasons for payment, reduction of payment, adjustment, denial, and/or uncovered charges of a medical claim.

The following information is included in the remittance advice:

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

ZEE Medical Billing worked in the healthcare industry specializing in improving billing and collections efforts, increasing revenue cycle performance, and incorporating current industry trends into revenue cycle policies and procedures. In order to maximize collections and reach the financial goals

Get a free no sting attached billing services quote from ZEE Medical Billing for your practice.

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