Why do Payment Denials Commonly Happen?

When an agency provides home health services for a patient, a claim is submitted to Medicare to earn financial reimbursement. However, Medicare can deny these claims, meaning agencies may not get paid for services already rendered. Understanding what a payment denial is and why it happens minimizes the risk of future denials and improves agency efficiency.

At K&K Healthcare Solutions, we understand how dealing with a payment denial can be frustrating and disruptive. In this guide, we’ll go over the basics of what a denial is, why a claim is often denied, and what you can do to prevent or resolve a claim denial.

Understanding What Payment Denial Is

For home health agencies and their clinicians to continue providing high-quality patient care, they need payment for their services. In order for agencies to receive this financial reimbursement, they must first file a claim with Medicare to request payment for their services.

What is a denial in medical billing? A payment denial occurs when Medicare rejects an agency’s request to pay for a home health service. Claim denial rates often fall around 15 percent, and a denied claim can contribute to increased administrative costs and revenue loss.

Audits Leading to Payment Denial

Why do insurance companies deny claims? An insurance claim is often denied due to documentation errors caught during external audits. Medicare often contracts with third parties to review submitted claims and make sure they’re compliant with Medicare billing and coverage policies. 

More often than not, these audits are random and involuntary. The objective is to make sure that the billed services are medically necessary, properly documented, and compliant with Medicare policies.

There are a handful of audits an agency can be subjected to. Common audit types include:

• Additional Documentation Requests (ADRs)
• Targeted Probe and Educate (TPE)
• Zone Program Integrity Contractors (ZPICs).

Additional Documentation Requests (ADRs)

An Additional Documentation Request (ADR) occurs when Medicare asks a home health agency to submit supporting documentation for a payment request. This additional paperwork validates that the billed services were medically necessary for the patient. It also ensures that the claim is compliant with Medicare’s coverage, payment, and billing policies.

Timeframe to Respond to Different Types of ADRs

The timeframe to respond to an ADR depends on the auditor requesting the paperwork:

• Medicare Administrative Contractors (MACs), Recovery Audit Contractors (RACs), and Supplemental Medical Review Contractors (SMRCs) typically allow 45 calendar days to respond.
• Unified Program Integrity Contractors (UPICs) require a faster turnaround, usually within 30 calendar days.

Missing these deadlines may result in an automatic payment denial, which means prompt action is crucial for receiving payment.

 

Targeted Probe and Educate (TPE)

The Targeted Probe and Educate (TPE) program is a proactive approach to reducing claim errors. A Medicare Administrative Contractor (MAC) will work with an agency one-on-one to go over their claim filing process and audit for any frequent errors. This helps reduce the number of future claim denials and ensures compliant billing practices. 

Not every agency will go through a TPE program. MACs analyze certain agency data to note potential red flags that require additional education. They look for warning signs such as:

• High denial rates
• Frequent billing errors
• Utilization trends outside of national guidelines or norms

Common Claim Errors Addressed in TPE

• Missing Clinician Signature: A clinician must sign and date all documentation to validate its authenticity. A missing signature can lead to a claim denial.
• Insufficient Encounter Notes: The encounter notes for each visit need to support eligibility criteria, such as homebound status and skilled needs. Otherwise, Medicare can reject the claim.
• Documents Don’t Meet Medical Necessity: The documentation needs to prove that the treatment interventions are medically necessary for the overall health and well-being of the patient. 
• Improper Initial Certifications or Recertifications: Proper certifications are required for Medicare to approve a claim.

Zone Program Integrity Contractors (ZPICs)

Medicare insurance companies hire Zone Program Integrity Contractors (ZPICs) to audit a home health agency’s payment requests. Oftentimes, these contractors are called in when there is suspected fraud, abuse, or waste in the Medicare program. 

ZPICs play a crucial role in improving patient care and the claim-filing process. If Medicare suspects that a home health agency is improperly filing a payment claim or partaking in questionable acts, ZPICs will audit the agency for any discrepancies. A ZPIC investigation can lead to payment suspensions, referrals for prosecution, or exclusion from Medicare programs.

Red Flags that ZPICs Look For

ZPICs look for more than just a missing signature or insufficient encounter notes. These contractors audit serious cases of potential fraud or abuse of the system. For this reason, they often look for substantial red flags in an agency that can point towards suspicious activity, including: 

• Inconsistent or altered documentation
• Incomplete or missing patient records
• Excessive or duplicate billing
• Patterns that deviate significantly from clinical norms

Managing Denied Claims

Many payment denials stem from a preventable clerical error during the claim submission process in medical billing. These errors are avoidable with proper training and education on compliance and defensible documentation from third parties such as K&K Healthcare Solutions.

Claim denial management can be tedious, but following the proper procedures can turn things around. If you’re wondering how to successfully appeal a payment denial, start by reviewing the reason for the denial. From there, you can follow the proper steps for Medicare’s appeal protocol.

Prevent Payment Denial with K&K Healthcare Solutions

At K&K Healthcare Solutions, we believe prevention is the best strategy for managing payment denials. That’s why we offer educational training, documentation reviews, and third-party auditing tailored specifically for home health agencies. We understand that documentation regulations are not everybody’s favorite topic, and our team will make sure your clinicians are set up for success. 

Our goal is to take the burden off your clinicians by ensuring that your documentation is audit-ready and fully compliant. Whether you’re looking for outsourced coding support or proactive claim reviews, our experienced team is ready to help you stay ahead of health insurance denials and focus on what matters most—delivering exceptional patient care.

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