When a healthcare provider’s claim gets denied, it can be frustrating, time-consuming, and costly. Each denial not only delays reimbursement but often requires the provider to dedicate valuable staff time to investigating the reason, gathering additional documentation, and navigating the complex appeals process. However, an experienced healthcare law attorney can help providers navigate the complex appeals process, protect their rights, and fight for the reimbursement they deserve. Read on to learn about the top reasons that claims are denied, as well as strategies for challenging denied claims. 

Why Insurance Companies Deny Claims and Payments

Insurance companies can deny claims for a variety of reasons, including legitimate and illegitimate ones. Sometimes, claims are denied for illegitimate reasons, also known as “bad faith.” This occurs when an insurance company unfairly refuses to pay a valid claim. They might demand unnecessary documentation, purposefully misinterpret contractual language, or delay processing of the claim. 

There are also several legitimate reasons for claims denial. Now, it is important to note that while these can be legitimate reasons for a denial, they can be used to deny legitimate claims, or they could be mistakenly offered as reasons for denial. This is why, just because an insurance company has offered one of these reasons for denial, physicians should not automatically accept the denial.

Reasons include:

  • Billing errors 
  • Coverage deficiency 
  • Exceeding coverage limit 
  • Failure to obtain prior authorization 
  • Incorrect or incomplete information 
  • Lack of medical necessity 
  • Out-of-network providers 
  • Policy exclusions 
  • Pre-existing conditions 
  • Timely filing 

Of these, there are two main reasons for denied claims: that they were not medically necessary or that there was no prior authorization. Here is a deep dive on these specific reasons: 

“Not Medically Necessary” 

“Medically necessary” services are those a physician, using sound clinical judgment, provides to prevent, evaluate, diagnose, or treat an illness, injury, disease, or its symptoms. The care must follow accepted medical standards, be clinically appropriate in type, frequency, and duration, and not be primarily for the convenience of the patient or provider. It must also not be more costly than an alternative that is likely to produce the same results. Accepted standards are based on credible science and medical community consensus.

Claims that are denied for not being medically necessary will receive codes CO 50 or N115. Denial code 50 is applied when the payer decides that the services provided are not medically necessary. Remark code N115 means the claim decision was based on a Local Coverage Determination (LCD), or a Medicare contractor policy that outlines when a service or item is considered medically necessary and covered. A common reason for this denial code is that the billed service or item doesn’t meet the LCD’s medical necessity requirements for that contractor or region.

“No Prior Authorization”

Certain treatments or medications under medical and prescription drug plans may require approval from the health insurance carrier before care is provided. This is referred to as “prior authorization.” Prior authorization is often needed for complex services, and coverage won’t be granted without it. Terms like preauthorization, preapproval, and precertification all refer to the same requirement.

Denial code 197 indicates that the required precertification, authorization, notification, or pre-treatment approval was missing or incomplete. This means the necessary approval or notification was not secured from the insurance company or relevant parties before the service or treatment was delivered, resulting in the claim being denied.

Common causes of denial code 197 include failing to obtain pre-certification or authorization before treatment, not notifying the insurance company in advance, and missing or inadequate pre-treatment documentation. Other reasons are not following insurer guidelines, such as obtaining a second opinion, or delays in securing approval within required timeframes. 

Physicians Can Fight Back

Claims denied for lack of prior authorization or for services deemed not medically necessary are frequent obstacles faced by physicians; however, such denials are not always justified. Often, these denials result from administrative errors, misinterpretations, or insurer oversights. Physicians have the right and the means to challenge these decisions and pursue the reimbursement to which they are entitled.

Responding To “Not Medically Necessary” Denial

Physicians might be told by their billing department that they have exhausted the appeal options. Often, we find that this is not the case and our team goes beyond the EOB and provider manual to fight for money rightly owed to physician practices.

To respond to denial code CO 50, a healthcare business should:

  • Review medical records to ensure documentation supports the medical necessity of services
  • Understand the payer’s specific medical necessity criteria found in provider manuals or websites
  • Identify missing or incomplete information, like diagnosis or procedure codes, that may have led to denial
  • Gather additional supporting documents such as progress notes or test results as needed
  • Submit a detailed appeal letter citing relevant guidelines and explaining why services are medically necessary
  • Follow up regularly on the appeal and keep thorough records
  • If denied, consider alternative payment options or secondary insurance

To address remark code N115, providers can review the Local Coverage Determination (LCD) for the denied service or item. Verify that the service meets the LCD criteria and that the submitted documentation supports medical necessity as defined by the LCD. If documentation is insufficient, update and resubmit the claim with proper support. If the service does not meet LCD requirements, confirm if an Advance Beneficiary Notice (ABN) was obtained and bill the patient accordingly. If the denial still seems incorrect, submit a detailed written appeal with additional evidence to challenge the decision.

Responding To “No Prior Authorization” Denial 

Payers often say, ‘a prior authorization does not guarantee payment;’ however, that is not the case.” Denials for no prior authorizations are far too frequent and often payers get the claim determination wrong.

To address denial code 197, a medical practice should:

  • Review the patient’s medical records to confirm whether precertification, authorization, notification, or pre-treatment documentation is missing
  • Identify the cause of the missing documentation, such as intake errors, miscommunication, or administrative oversight
  • Contact the insurance company to clarify precertification and authorization requirements and address any unclear guidelines
  • Gather the necessary missing documentation promptly, including medical records, forms, or required signatures
  • Submit an appeal or corrected claim with the complete documentation, explaining the initial denial and how it has been resolved
  • Keep detailed records of all communications and follow up regularly to ensure the appeal or corrected claim is processed

It is also worth noting that many states have laws that are very specific which are provider friendly. Under some circumstances, a prior authorization may not even be needed under state law, despite what the payer says. 

Contact An Experienced Healthcare Attorney 

Denied claims can drain time, energy, and revenue from your practice, but you don’t have to face these challenges alone. An experienced healthcare attorney can help you understand the reasons behind denials, identify patterns of improper payment practices, and build strong appeals to recover what is rightfully owed. We fight for these lost dollars and will work to protect your right to fair reimbursement.

We Look Forward to Working With You

We Look Forward to Working With You