What is adjudication in medical billing?
It is the process through which insurance companies evaluate and determine payment for medical services across all healthcare claims submitted by providers.
Fortunately, digital transformation is revolutionizing this traditionally complex, paper-laden process, bringing unprecedented efficiency, accuracy, and transparency to healthcare organizations.
Medical Claims Adjudication Processes: The Journey from Manual to Digital
In 2023, hospitals and clinics spent $25.7 billion on claims adjudication—a 23% increase from the previous year, according to a Premier study. This administrative burden has historically included:
- Manual completion and submission of paper claim forms
- Time-consuming eligibility and benefits verification by phone
- Limited visibility into claim status throughout the process
- Lengthy appeals processes for denied claims
The first steps toward digitization introduced electronic claims submission and standardized coding systems. By 2023, the CAQH Index reported that 98% of all provider claims were submitted electronically, with electronic eligibility checks reaching 94% adoption.
Despite these advances, the adjudication decision-making process—determining whether a claim should be paid, denied, or requires additional review—remained challenging until recent technological breakthroughs.
Let’s take a closer look.
AI-Powered Medical Claims Adjudication Technologies Transforming Healthcare
Artificial intelligence and machine learning have fundamentally changed what's possible in claims processing:
Predictive Analytics and Fraud Detection
Today's AI systems detect patterns associated with potentially fraudulent claims while expediting legitimate ones. They can predict which claims are likely to be denied based on historical patterns, allowing providers to address issues before submission.
Natural Language Processing
NLP technology extracts relevant clinical information from medical documentation, supporting automated coding and medical necessity verification. This ensures submitted claims have proper documentation to support the services provided.
Intelligent Denial Management
A recent HFMA/AKASA survey found that 46% of hospitals now use AI in their revenue cycle operations. These systems generate appeal letters for denied claims in seconds, analyze denial patterns to identify root causes, and prioritize which denials to appeal.
On another note, McKinsey reports that AI-powered automation can reduce claims processing costs by approximately 30% while minimizing costly errors or rework.
Innovative Medical Claims Adjudication Automation Through RPA and Blockchain
Beyond AI, other technologies are reshaping claims adjudication:
Robotic Process Automation (RPA)
RPA software "bots" perform repetitive tasks like extracting data from multiple sources, verifying eligibility in real-time, checking for duplicate claims, and updating claim status across systems.
A survey of 450 hospital finance leaders found 74% of U.S. hospitals and health systems use some form of RCM automation, with 43% specifically utilizing RPA for billing tasks.
Blockchain for Transparency
Blockchain technology is beginning to address transparency and trust challenges in adjudication.
For example, Change Healthcare, which handles approximately 40% of U.S. claims, has extended its network with a blockchain-based system that provides real-time claim status visibility, creating a tamper-proof record of each step in the claims process.
Cloud-Based Platforms
Modern cloud platforms facilitate real-time data exchange between providers and payers, allowing for immediate feedback on claim status and requirements.
Benefits of Modern Medical Claims Adjudication Systems
The digital transformation of adjudication in medical billing delivers substantial benefits:
Faster Reimbursements
While manual claims may take weeks to process, automated systems can reduce that to days or even hours.
Lower Administrative Costs
The average cost to process a "simple" claim is about $7–$10 versus up to $35–$40 for complex claims. By automating simpler cases, organizations save staff time for more complex claims.
Even more significantly, eliminating unnecessary claim denials has huge potential—in 2023, about $18 billion was wasted on ultimately overturned denials. Smarter systems aim to get claims approved on first submission, avoiding the expense of appeals.
Higher Accuracy and Fewer Denials
Automated edits and AI validation catch mistakes before submission, leading to cleaner claims and fewer initial denials. Approximately 51% of denied claims are eventually paid after manual review, suggesting they were improperly denied or filed incorrectly initially.
Implementing Advanced Medical Claims Adjudication Solutions: Challenges and Best Practices
Despite the advantages, implementing advanced adjudication in medical billing presents several challenges:
Integration with Legacy Systems
Connecting new digital tools with existing systems remains a top technical barrier. Claims data often resides in disparate silos, and each payer has unique submission requirements.
Balancing Automation and Human Expertise
While automation improves efficiency, human expertise remains invaluable for complex cases and appeals management. The goal should be augmenting human capabilities rather than replacing staff entirely.
Data Security and Compliance
As processes become digitized, protecting sensitive health and financial data becomes paramount. The CAQH Index reported that cybersecurity challenges are driving higher administrative costs. Any system handling PHI must meet strict HIPAA security standards.
Advanced Claims Adjudication Solutions: Some Best Practices for Implementation
Here are some suggested steps you can follow:
- Start with a thorough workflow assessment before selecting technologies or solutions
- The notion that incremental changes always trump complete system overhauls doesn't hold true universally. A balanced evaluation of the pros and cons of each strategy is essential.
- Invest in comprehensive training for staff
- Establish clear metrics to measure performance improvements
- Maintain open communication with technology partners for ongoing optimization
How HOM Helps with Medical Claims Adjudication
As adjudication in medical billing technology continues to evolve, healthcare organizations need partners who can help them navigate this complex landscape. HOMoffers an integrated approach to claims adjudication that addresses the challenges healthcare providers face today.
Our claims adjudication services, blended with human expertise, achieve up to 99% adjudication quality and payment accuracy. This dual approach ensures that routine claims are processed efficiently while complex cases receive the specialized attention they require.
Our systems integrate seamlessly with existing healthcare IT infrastructure, minimizing disruption during implementation while providing the benefits of modern digital adjudication:
- Reduced processing times with a 24-hour turnaround for most claims
- Automated eligibility verification and prior authorization
- Real-time dashboards for monitoring claim status and performance metrics
- Robust denial management to recover potential lost revenue
Beyond technology, our approach also includes a structured implementation methodology that guides healthcare organizations from initial assessment through optimization.
The Bottom Line
The evolution of medical claims adjudication from paper-based processes to intelligent digital systems represents one of healthcare's most significant operational transformations.
Organizations that embrace these technologies stand to gain considerable advantages, leading to lower administrative costs, allowing for more time for staff to focus on high-value activities and patient care, resulting in fewer denials, and ultimately enabling faster payments.
As administrative costs continue to rise and staffing challenges persist, modernizing claims adjudication isn't just a technological upgrade—it's a strategic imperative for healthcare organizations.
Bring a change to your Healthcare Operations
A partnership with HOM gives you an inherent:
Adherence towards federal, state, and organizational compliances, as well as safeguarding patient data.
Sense of ownership and commitment towards providing value.
Focus on speed, accuracy, efficiency, and optimal outcomes.
Sense of security and transparency through periodic reporting and actionable insights.
Connect with our experts for a quick analysis and possibilities.
