Understanding the Healthcare Claims Adjudication Process

Posted by Brinna Hanson on August 22nd, 2022
Brinna Hanson
Brinna is a marketing professional and graduate of the University of Minnesota. Brinna joined Smart Data Solutions in 2019 to assist the marketing department reach new heights with a focus on the HubSpot inbound process. From her time at Smart Data as well as at previous internships, Brinna has been able to gain knowledge in many different aspects of marketing as a whole.

Every industry adjudicates to some degree. While adjudication is a common phrase in insurance circles, the term ultimately means “to determine.” 

Depending on the circumstances and context, adjudication can follow a distinct process that results in unique outcomes, but at the core of the determination, the logic is simply “yes/no” and “if/then.” For example, if my car is in an accident, then my insurance will pay me for the damages.

Simply put, the claim adjudication process checks for accuracy and relevancy, with consideration of a member’s benefits, before the claim is covered by the Payer.

Claim Adjudication Process

The claim adjudication process in healthcare follows a thorough review workflow from all parties involved, including Payers and Providers, to determine one of three outcomes for the claim: paid, denied, or pending.

Over the last few decades, this process has moved more toward automation and auto-adjudication with the help of advanced technology and the expert teams behind it.

However, when Payers don’t have in-house technology to standardize files for auto-adjudication, the process can be hindered, leaving manual review as the only option. Smart Data Solutions (SDS) has 22+ years of experience working with Payers to use technology solutions to help create processes that improve auto-adjudication rates, reduce overhead and increase the speed of workflows.

Claims Adjudication Workflow


Understanding the Healthcare Claims Adjudication Process 1

The claims adjudication workflow is a simple progression of logic and generally adheres to a path like this:

  1. The claim is accepted into the system. Then it’s given a basic information check that ensures it’s not a duplicate, the patient’s personal information, including plan ID number, is correct, and there are no omissions or errors on the claim.
  2. The claim then moves on to the detailed information check, which will look for diagnosis and procedure codes, and match patient ID to patient DOB, which is verified by Payer internal records. In this stage, the patient is confirmed to be a participating member of the insurance plan, and their member number is cross-referenced to determine coverage. 
  3. Finally, a decision is made: paid, pending, or denied. Once the decision is made, claim adjudication results in an Explanation of Benefits (EOB) or Electronic Remittance Advice that explains how the Payer came to that decision.

While this process seems simple enough, the lack of standardization across the industry means execution can be drastically different from Payer to Payer. This video from the IPS Learning Institute walks through the claims adjudication process in healthcare to break down each step for a better understanding of adjudication. 

Why Do Claims Get Denied? 

Of the three categories — paid, pending, or denied — only one needs further explanation. 

Denied claims fall into three categories: administrative, clinical, and policy. The vast majority of claim denials come from administrative errors or unclean data streams that feed auto-adjudication. Denials can happen for a number of reasons including patient eligibility, missing or invalid Payer ID, duplicate claims, missing or invalid diagnosis codes, and more.

When a claim is denied, it’s most often appealed, which then triggers a review and the rectification of any errors. However, this extra step extends the time it takes to process a claim — plus each Payer has their own standards for when claims need to be submitted or resubmitted. Automation can catch these errors earlier upstream allowing for an accurate EOB the first time or a faster review of an appealed denial. 

Optimize the Claim Adjudication Process in Healthcare with Advanced Automation

By using proprietary intelligent automation, SDS excels at analyzing current workflows, technology, and processes to identify where automation can create a smarter approach and make pre-adjudication easier.

We use validation checks over a number of criteria that allow claims to pass through systems quickly and accurately. By partnering with SDS, Payers have the ability to utilize and maintain state-of-the-art technology without the expensive workforce on the payroll. 

Claim processing doesn’t have to be a headache. By utilizing SDS technology, both Payers and Patients can benefit. Simplified workflows, fewer errors, and ultimately lower expenses are possible by preparing claims for auto-adjudication.

Learn more about SDS’ approach to Medical Claims Management or reach out for a consultation today!

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