What Is Claim Adjudication in Healthcare?

What Is Claim Adjudication in Healthcare

Efficiently handling medical claims is a fundamental aspect for anyone running a healthcare institution, as it directly impacts the financial viability and operation of the facility. They ensure timely reimbursement for provided services, allowing providers to sustain operations and deliver quality patient care. However, the claim adjudication process plays a vital role as a key stage that occurs after a claim is submitted to an insurance company or government payer. But what is claim adjudication in healthcare?

In this article, you’ll discover the intricate complexities of claim adjudication and the significance it has in the healthcare claims process. Explore the step-by-step procedures involved in claim adjudication and gain a thorough understanding of the process for efficient revenue cycle management in healthcare.

What Is Claim Adjudication in Healthcare

Medical claims adjudication, simply known as claims adjudication, is the complex process through which insurance payers evaluate and determine the reimbursement eligibility of healthcare claims submitted by providers. Upon receiving a claim from a healthcare organization, insurers carefully and meticulously review the details to ascertain their responsibility in paying a medical provider the appropriate amount owed for rendered services.

The adjudication process is a complex task that could take time, generally up to two weeks. However, CLICKVISION BPO can help you streamline back-office operations by effectively identifying potential errors or discrepancies in claims, reducing denials, and accelerating the reimbursement eligibility phase. Insurers, along with our specialized teams, can enhance accuracy and efficiently review and process claims, ultimately improving the overall reimbursement experience for both providers and payers.

During the review process, for every claim submitted, the insurers must make one of three decisions:

  • Pay the total amount listed on the claim
  • Pay a part of the amount listed on the claim
  • Deny the claim

Ideally, providers hope for total compensation, but often, payers may only reimburse part of the claimed amount if they deem certain services or procedures to be inappropriate. The worst-case scenario occurs when a claim is denied due to errors or inaccuracies, necessitating resubmission after correction and appeal, resulting in delays until the issue is resolved.

Key Players in Claim Adjudication

In the medical billing landscape, various stakeholders collaborate to ensure accurate and timely adjudication of claims submitted. Each party plays an integral role in this process, working together to navigate the intricacies and complications of claim submission, review, and reimbursement. This includes key players such as:

  • Healthcare providers, physicians, hospitals, clinics, and other medical facilities are responsible for submitting claims to insurance companies on behalf of patients for services rendered, including essential patient data and medical documentation.
  • Insurance payers, including private insurers, government programs, and self-insured employers, receive and process claims and determine reimbursement eligibility based on policy coverage.
  • Third-party administrators often facilitate adjudication by acting as intermediaries between healthcare providers and insurers, managing claim submissions, resolving errors or discrepancies, and ensuring efficient communication.
Key Players in Claim Adjudication

Source: freepik.com

Steps in the Claim Adjudication Process

1. Claim processing

In the initial phase, claim adjudication begins with a processing review intended by the provider who submits medical claims to their corresponding insurer. Once received, the insurance company examines the patient’s details, including their name, status, and diagnosis.

2. Claim verification

Following this scrutiny, the insurer proceeds to verify the submitted information by reviewing the patient’s eligibility, coverage parameter details, and payment policy benefits before adjudication. 

This step entails assessing the patient’s coverage period, the scope of illness covered by the plan, and adherence to claim submission deadlines. Insurers process claim verification either through manual review procedures or specialized claims adjudication software for enhanced accuracy and efficiency.

3. Claim validation

The next step in claim adjudication is claim validation, which includes thorough scrutiny to ensure accuracy, completeness, and compliance with coding and documentation standards.

Firstly, insurers assess the accuracy of the information provided, ensuring that details such as patient demographics, procedural codes, and treatment dates and locations align with established standards and regulations. Next, to ensure completeness, insurance companies verify that all necessary data, documents, and evidence are included to support the billed service. Lastly, rigorous adherence to coding standards is evaluated, ensuring compliance with industry-specific regulations such as CMS and CPT.

4. Claim adjudication

Upon finalizing the review and validation process, the insurance company decides whether the claim will be paid, reduced, or denied. During claim adjudication, insurers thoroughly evaluate and review each claim, determining reimbursement eligibility based on established guidelines and regulations.

Furthermore, insurers proceed with payment processing or issue explanations for claim denials, facilitating prompt reimbursement for healthcare services rendered. This streamlined procedure ensures efficient financial transactions between insurers and providers, enhancing the overall claims adjudication workflow.

5. Payment and remittance

After the adjudication process, the insurance company proceeds with the final payment, tailoring it according to the patient’s preferred method. This step involves a thorough audit of the approved payment coverage, the patient’s financial responsibilities, and the adjudication date. Subsequently, the payment is sent to the medical office via either electronic remittance advice or an explanation of payment, contingent on the adjudication decision outcomes.

This streamlined procedure, coupled with an efficient claims adjudication workflow, ensures prompt reimbursement for healthcare services rendered, facilitating seamless financial transactions between insurers and providers.

Reasons for Claim Denials

Insurance companies have many reasons to deny medical claims, including:

  • Coding errors – misspellings, mistyped numerals, and other coding errors could cause initial rejection, leading to denials or resubmission requirements;
  • Lack of medical necessity – when billed services fail to align with diagnosis or treatments deemed appropriate by the insurer, based on established guidelines and coverage policies, it could potentially lead to a claim denia;l
  • Eligibility issues – expired insurance coverage, discrepancies in policy coverage, or terminated insurance policy can also result in rejected claims;
  • Policy limitations – when the submitted services exceed the coverage scope or limitations outlined in the patient’s insurance plan, it will lead to a claim denial.

Regulatory Considerations in Claim Adjudication

Claims adjudication operates within a complex web of regulations and guidelines set forth by governing bodies, such as HIPAA, CMS guidelines, and payer-specific requirements. Navigating these complexities requires complete adherence to ensure fair and accurate claims processing.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) sets robust standards for protecting sensitive patient data during claim adjudication. Compliance with these regulations ensures patient privacy is handled confidentially and securely throughout the claims processing workflow, safeguarding against unauthorized access or disclosure of private health data.

CMS guidelines and regulations govern the adjudication of medical claims, outlining standardized procedures for processing claims and ensuring consistency and accuracy in reimbursement decisions across providers and insurers participating in federal health programs.

Lastly, payer-specific requirements represent the unique demands and policies of individual insuring companies, tailored to their organizational practices and coverage plans. Compliance with these requirements is essential to navigate a smooth claim adjudication process, facilitating seamless reimbursement for services rendered while mitigating risks of denials or delays.

Regulatory Considerations in Claim Adjudication

Source: freepik


In conclusion, defining what is claim adjudication in healthcare entails a tedious revenue cycle process where an insurance payer determines whether or not to reimburse a medical claim.

Through each step of claim processing, verification, validation, adjudication, and payment and remittance, insurers ensure accuracy, completeness, and compliance with coding and documentation standards to provide fair and accurate claims management.

Furthermore, compliance with regulatory considerations, including adherence to HIPAA regulations, CMS guidelines, and payer-specific recommendations, is paramount for safeguarding patient privacy and facilitating a seamless reimbursement process. Overall, claim adjudication serves as a vital phase in the industry, demanding a thorough understanding of the process for efficient revenue cycle management in healthcare. Essentially, partnering with a reputable outsourcing company, like CLICKVISION BPO, helps streamline back-office processes and provides valuable insights into each claim’s status.

With a strong background in the marketing industry and healthcare leadership roles, Filip is responsible for CLICKVISIONBPO's sales strategies and onboarding new clients. With a passion for sharing insights gained from his experience, he also shares valuable knowledge through industry related articles.

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