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Medical Insurance Claim Reviews - A Primer

Updated: May 24, 2023

Policies concerning proper filing and claim payment processes vary greatly between federal and state governments and the medical insurance providers. Having an efficient strategy for reducing and minimizing the errors in the payments of claims can help any Medical Service Provider or Medical Insurance Entity to save money and to move past any identified billing problems.

Submitted claims may be reviewed at two stages:

- Pre-Payment Review: Here, claims for the services provided are reviewed before or prior to the payment. In this review, both the actual services provided and the actual charges are determined.

- Post-Payment Review: Under this process, the claims are reviewed after the payment or the services offered have been rendered. This process may result in repayment to either the Insurance Entity or the Service Provider depending on the situations if there has been overpayment or underpayment of a claim under the treatment plan of the patient. The postpayment review process involves the payer reviewing the claims and identifies that the medical records and billing patterns for the service provided to uncover overpayment or underpayment of the claims.

Prepayment review is not applied to the majority of claims – generally only a few claims may be sampled to validate the claims process. However, for service providers that are flagged for a pattern of inappropriate or defective billing, they may be flagged for mandated prepayment review – where all their claims will be subjected to prepayment review.

The review of the claims for the payment of services provided under a prepayment review process can result in denial of full payment or part payment of the claim. Different insurance payers have different automatic systems including several computer algorithms. These algorithms review the entire history of services offered and the coding system used – looking for patterns of improper billing.

The automated system for the review of claims generates the medical records and the past reviews of the Providers. Usually, the claims for the treatment which comes under review are segregated by the payer (Medical Insurance Entities). The review of a claim is initiated when the automated system finds an error in the treatment codes, billing patterns, payment – underpayment or overpayment etc. The payer then sends a letter to the Medical Service Providers, requesting an explanation for the identified errors in the treatment plans. Generally, the first letter asking the explanation does not require the medical records and other supporting documentation from the providers – though this should not be taken as a certainty for any specific case. On receiving the response and scrutinising it, the payer either accepts the explanation or asks the Service Providers to send the medical records, treatment plans, relevant documents and the like. After receiving the response, the medical records and billing details of the treatment provided to the patient is reviewed by the Investigation Units of the payer. Once the review is done, either the claim for the payment is denied or approved depending on the findings of the review. The past history of the service providers in generating bills and providing services under a treatment plan also plays a significant role in the review of a claim.


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