How Insurance Peer Review Can Impact Claim Denial

Reports suggest that nearly 10 percent of medical claims hospitals submit to payers are rejected or denied – resulting in revenue loss up to $5 million for the average hospital annually (2022 statistics). It is estimated that only 63 percent of denied claims are recoverable and the administrative cost of following up on a claim denied by an insurer averages to $188 per claim. However, medical claim denials could be unavoidable. Peer reviews can have a major impact on the outcome of a medical claim. In fact, insurance peer reviewhas becomean important strategy that is used to avoid or reduce claim denials.Regarded as one of the most important medical review solutions, peer review reports have become a recognized practice in insurance appeal resolution and medical cost control.

What Is an Insurance Peer Review?

As per reports published by a revenue cycle management company, hospital claim denials increased 23 percent in 2020. Nearly half of the denials were caused not by medical necessity but by administrative revenue cycle issues such as – registration/eligibility, authorization/precertification and non-coverage of services. Healthcare organizations or physicians can request  insurance peer-to-peer review if their requests for prior authorization are denied for lack of medical necessity or other reasons by an insurer.

Insurance peer review and clinical or medical peer review are two completelydifferent processes. A prominent quality control mechanism seen in hospitals and large private practice groups, medical/clinical peer review involves professional assessment or evaluations of the physicians’ clinical performances by their peers.Performed by a team of multiple physicians, by administrative committees and ethics committees, this process involves a detailed evaluation of the clinical performances – ranging from medical charts of the patients to medical notes to the medical billing procedures. In short, medical peer review aims to enhance the treatment standards through patient safety and quality of care.

On the other hand, an insurance peer review is a type of appeals process that occurs by request after a payer denies a request for services. Often, the denials are not only made for medical orders, services, and inpatient status but also for medications or medical devices.The insurance peer-to-peer review is typically a scheduled phone conversation during which an ordering physician discusses the necessityof a procedure or drug with the insurance company’s medical director to obtain a prior authorization approval, or appeal a previously denied prior authorization.Typically, this phone conversation lasts just five to ten minutes and is usually required within 72, 48, or even 24 hours – right from the time when the request was made. Or else, the case will be closed and the claim will be denied.

Types of Claim Denials that Affect Reimbursement

In most cases, insurance peer-to-peer conversations focus on four types of denials –

• Medical necessity – The term “medical necessity” is related to the healthcare services that a physician, exercising prudent clinical judgment, would provide to a patient. The services must be for the purpose of evaluating, diagnosing, or treating an illness, injury, disease, or its symptoms – in accordance with the generally accepted standards of medical practice. Generally, insurers will not provide reimbursement for treatments, prescriptions or procedures that do not fully meet the above-mentioned criteria of medical necessity. If the clinical information provided does not sufficiently support the need for a particular treatment, procedure, or course of action, the request for prior authorization or the claim will be denied.
• Clinical validation – Payers perform a detailed clinical validation audit to evaluate whether the medical records validate the billed diagnoses and conditions. In certain cases, the payer may try to deny the validity of the principal or secondary diagnosis to lower the diagnostic related group (DRG) and the hospital’s reimbursement. For instance, the auditor may determine that a diagnosis of pneumonia is invalid as the patient’s chest X-ray did not show evidence of pneumonia. The auditor may change a diagnosis to something else (such as bronchitis) or may completely remove the diagnosis with no replacement. The denied diagnosis makes a significant difference in the DRG or the severity of illness (SOI) - usually to a lesser SOI, or a DRG with a lesser relative weight than that of the billed DRG. This can help reduce reimbursement.
• Timely notification – If the notification to authorize treatment was not received within the stipulated time period, the medical claim will be denied.
• Post-acute care – In this type of claim denial, an insurer expresses disagreements regarding the admission of a patient in a skilled nursing, long-term care, or inpatient rehabilitation facility, even when the physician recommends that the patient’s condition warrants it at the time of discharge.

Peer reviews hold immense significance when it comes to making the right decision regarding the medical care provided to a patient.To have a comprehensive clinical understanding of the case, peer reviewers need to carefully evaluate a large number of medical records. A thorough preparation for the insurance peer-to-peer review by understanding all the key aspects, it is possible to obtain prior authorization approval or successfully reverse a denied authorization. This in turn benefits the patient and the health system’s bottom line.Given the importance of the peer review report as a decision-making tool when processing medical insurance claims, availing the services of professional medical review companies could be a better option. Such companies can provide the services of trained and expert reviewers to assist busy peer review physicians. Furthermore, the final report will be cross-verified by experts to ensure accuracy and reliability.