A lot of people suspect insurance companies systematically and fraudulently deny perfectly valid claims for some nefarious, greed-driven reason, and then blame someone else for it – e.g., missing information from physician; or your claim was never received; or hospital miscoding. Our breathless media and too-often unprincipled politicians stoke this suspicion weekly if not more often. So people who trust that our media and politicians are truth-tellers naturally come to believe these suspicions are all true.
But as we so often see with media and politicians’ stories – they’re not all true.
My opinion? Most claims submitted are valid claims. And systematic denial of valid claims is an urban legend.
Questioning the facts of a claim happens all the time. This is done to ensure the facts are known so that the correct reimbursement is made. Questioning the facts of a claim does not imply that hospitals or physicians are always trying to pass bogus claims. They aren’t. Nor does it mean the insurance companies are always deliberately engaged in wrongful denials. They aren’t. If otherwise, there would be clear evidence. If that elephant were really inside the refrigerator, we'd see her tracks in the jello. Those tracks aren’t there.
This is not to say there is no insurance fraud; of course there is. Insurance fraud is committed by insured persons; by providers of medical services; and by employees of claims administrators. Insurance fraud exists in Medicare and Medicaid; in the so-called national, single-payer plans around the world; and in private insurance schemes. Fraud blooms wherever there is lax vigilance. But it is simply wrong to cry “fraud” any time your claim is denied or your reimbursement is less than you want it to be. When those things happen, the most likely reason is (1) your policy doesn’t cover the expense submitted or (2) the reimbursement is correctly calculated and you are disappointed, or (3) someone made an error that can be corrected.
At one time I was chief of benefits for a very large organization (more than 40,000 members). I saw claims denied or "pended" when the physician's office submitted incomplete or incorrect info – a correctable error. I ALSO saw correctable processing errors made by our administrators. I saw these claims when the members contacted my office for help. In most cases, the cause was human error, which for insurance reimbursement is correctable. And for that reason, it was never helpful in resolving such matters when either party insisted on accusing the other of intent to defraud.
I can bore you with examples but here are two: (1) OP surgery performed in the surgeon's Manhattan office, but billed from the suburban Connecticut office - a different UCR area. That caused the claim to be underpaid. My office found the problem, and got it fixed. (2) female employee prescribed sildenafil acetate (Viagra), but reimbursement was denied. The denial was reversed after my office got involved. Reason? The physician had prescribed the medication for pulmonary hypertension - the very heart condition sildenafil acetate was originally developed to treat - but the administrator overlooked that fact likely because the drug had only recently completed its clinical trials for the heart condition. These examples were "typical" for my office in that they illustrate (1) how important it is to get all the relevant facts when resolving claims and (2) despite the best of intentions, people make mistakes.
There are reliable industry-wide statistics that support what I observed in my office.
According to Athenahealth the median "first pass" rate (reimbursement based on the info submitted with the original claim) is running nearly 96% of all claims for the top 10 commercial insurers in 2015. Their median denial rate for the same period is running about 4% of all claims. About the same results emerged for all of 2014. That is a LOT of data. These data certainly do not suggest that hospitals and physicians' offices are submitting mostly incomplete or incorrect claims; nor do they suggest insurers are systematically denying a suspicious number of claims. In fact, as my two examples show, some fraction of claims initially denied are eventually approved and paid on the basis of additional - or corrected - information.
The Athenahealth data is here (Athenahealth's customers are hospitals and physician offices; it is not affiliated with insurers)
Healthcare reimbursement challenges and payer responsiveness analyzed in athenahealth’s 2015 PayerView annual report.
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So I don't believe that insurers systematically deny valid claims; and I don't believe medical service providers systematically submit incomplete, incorrectly-coded, or even fraudulent claims. There is a relatively small number of such claims but that does not mean the cause is systematic or deliberate. I think it's urban legend that says otherwise. The urban legend may be popular, even deliciously conspiratorial; but it's wrong. The truth is actually quite mundane.