Life Cycle of a Medical Claim

medical claim

Most people believe that a medical claim begins and ends with reimbursement. While reimbursement is undoubtedly a vital component, it is not the only piece in the lifecycle of a medical claim. Understanding and distinguishing the different stages in the life of a medical claim is critical to decreasing errors and improving collections.

To be eligible for payment, a claim goes through a number of processes. These processes are designed to weed out ineligible claims. Here are the vital steps that comprise the lifecycle of a medical claim.

Data Entry Phase

The first phase in the life of a medical claim is the manual or electronic entry of data. Electronic claims are submitted via a web portal or data interchange. During this step, data is entered, verified, and classified. The Medicaid Information Technology System (MITS) validates the provider’s contract, the recipient’s benefit plan, and the reference code information. The data is checked for accuracy in terms of both demographic and insurance information. Possible causes of denial at this early stage include recipient ineligibility, provider ineligibility, wrong procedure or diagnosis codes, provider contract ineligibility, and discordance with bill processing agency (BPA) rules.

Editing Phase

Once the data has been entered and validated, it moves forward in the editing or suspended claims phase. In this step, MITS edits the claim against business rules and may suspend or deny it. If passed, the claim moves into the cost avoidance phase, which is the first step towards reimbursement. During this phase, claims can be denied if MITS detects third-party responsibility. Professional coders are critical to ensuring that the claim passes this phase.

Pricing Phase

During this phase, MITS uses the rate and price indicator to calculate the final payment amount in accordance with any prior authorization rates. Claims that require manual pricing enter the suspended claims phase.

Audit Phase

During this phase of the lifecycle of a medical claim, the service data is cross-checked against prior claims by the same recipient and other details for the same claim. At this stage, denials can be on account of duplicate services, service conflicts, or limitations on services.

Disposition Phase

Once a claim passes the audit phase, it enters the next stage where it is given a status of paid, suspended, or denied. Suspended claims undergo further review and are then either paid after data correction or denied. It should be noted that following data correction, a claim must go through all the processes of the claim lifecycle again. Suspended claims may be denied on account of compliance, timeliness, or errors. If a claim is denied during the disposition phase, it is finalized and moved to the denied history record of the recipient.

Reimbursement Phase

This phase constitutes the distribution of payment to providers. After successful processing by MITS, if a claim achieves paid status, payment is released to the provider. The final steps in the lifecycle of a medical claim are updating scanned and paper-based claims in MITS and posting the payment to the account of the provider.

It is evident that a medical claim goes through several complicated and time-consuming phases before it is finally reimbursed by the insurance company. Accurate collection of patient data and tracking of the lifecycle of a medical claim is thus vital in achieving efficient revenue cycle management.



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