What Is Claim Adjudication? A Critical Phrase In Medical Billing

The process of submitting a patient’s claim to their insurance provider and receiving reimbursement after the provider performs a manual review of it may appear straightforward, but it’s not that simple.

There’s significant information, billing codes, clinical data, and much more involved in the claims submission process that makes it complicated. Every medical claim, whether it gets accepted or denied, undergoes adjudication once received by the insurance provider.

Although, as a healthcare professional, you might not have much control over how the adjudication process unfolds after claim submissions, you can keep reading to gain insights that increase your chances of getting quick reimbursement for the next claim submitted by your organization.

Here is what you should know about adjudication in medical billing.

Adjudication Process In Medical Billing

The claim adjudication process in medical billing is when the insurance payer reviews a claim submitted by the healthcare organization and determines the extent of their responsibility to pay for the medical services by comparing the claim to any benefit requirements, reference files, or coverage.

Doing so enables them to adjust the amount they will pay to the healthcare provider if required. The adjudication process could also lead to a significant reduction of the billed amount or denial of the claim altogether. For example, if a claim is invalid or contains billing and coding errors, the payer has the authority to deny paying for it. The overall adjudication process involves five steps:

1.     The Initial Processing Review

Did you know that the majority of medical claims submitted to insurance companies are denied at the initial stage of the adjudication process? The reason behind this is claims are reviewed initially to detect simple errors including, grammatical mistakes, spelling errors, incorrect place or date of service code, invalid diagnosis code, and incorrect subscriber identification number. At this stage, the healthcare provider can recheck a denied claim, make necessary amendments, and resubmit it. While denials may not prevent the provider from resubmitting the claim, it does cost the organization resources and time. This is why many healthcare professionals now use all-inclusive medical billing services to minimize the risk of simple errors in claims.

2.     Mass Adjudication or Automated Review

The automated review of a claim is more detailed and complicated because the claim is checked against the payer’s payment policies, including any copayments, fee schedules, relevant contracts, and service groups. Patient eligibility, duplicate claims, unbundling, down coding, pre-certification issues, expired filing deadlines, and issues with the level of patient care are identified at this stage of the adjudication process.

3.     Manual Review

If a claim is tagged in edits and does not pass the automated review stage, it will be pending for the manual review, which is done by a medical claim examiner. At this stage, the medical claim examiner requests medical records to manually compare them with the claim. In some cases, a nurse or physician may also be involved, typically if there is an unlisted procedure.

4.     Post Adjudication Process

In some cases, even if claims do not get rejected throughout the adjudication process, the insurance payer may conduct secondary auditing of your claims. This ensures that the claims are in compliance with any state or federal regulations, coding combinations, editing, and other guidelines.

5.     Payment Determination

At this stage of the process, the payer determines whether the claim is reimbursable or not. They can also decide to downcode the billed amount to an appropriate level if it is too high and does not match the level of service provided or the final diagnosis.

6.     Payment

The payment provided by the payer after adjudicating a claim is either called the explanation of payment or remittance advice. That is because other than the funds, the payer also provides the healthcare facility with reasons for denial, reasons for the payment itself and any reduction, and details of uncovered charges.


What Is Adjudication In Healthcare?

Adjudication in healthcare is the process of insurance payers reviewing claims submitted by healthcare providers and comparing these claims with coverage requirements and other contracts to either pay or deny them. Some insurance providers process medical claims through software for adjudication purposes. This is also known as auto-adjudication.

How Does Claim Adjudication Differ from Claim Submission?

To get reimbursement for the services provided, healthcare professionals submit claims to the insurance providers of the patients. The process of gathering patient information and clinical data, coding the diagnosis and services rendered, and billing the insurance provider is known as claim submission. Whereas claim adjudication is the review of the medical claim performed by the insurance company through which it determines whether a claim is reimbursable or not.

How Long Does the Claim Adjudication Process Typically Take?

While there can be distinct circumstances surrounding every medical claim submitted, and each insurance payer’s adjudication process may also differ, typically a claim adjudication process can take up to two weeks before the insurance payer makes a decision to pay the claim in full, down code the billed amount, or deny the claim.

What Is the Impact of Claim Adjudication On Healthcare Providers?

Healthcare organizations utilize the data gathered from claim adjudication processes to accelerate their go-to marketing strategy and trace referral patterns. Claim adjudication system in medical billing also helps ensure that the medical claims are valid and accurate.

What are the Five Steps In the Adjudication Process?

The adjudication process in medical billing includes five steps: the initial processing review, the automated review where the claim is compared with policy documentation, a manual review performed by a medical claim examiner, payment determination, and payment.

How Do Errors In Medical Billing Affect Claim Adjudication?

Errors in medical billing can be identified in the initial stage of the process or after the automated or manual review is conducted, and these errors can cause payment delays, claim denials, and even lead to legal liabilities. Some common medical billing errors that affect adjudication include upcoding, downcoding, lack of documentation, and incorrect selection of the level of services rendered.