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Healthcare Claim Adjudication: Complete Step-by-Step Flow

Healthcare Claim Adjudication: Complete Step-by-Step Flow

Trey Rawles's avatar
Trey Rawles
Jul 20, 2025
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Thoughts on Healthcare Markets and Technology
Thoughts on Healthcare Markets and Technology
Healthcare Claim Adjudication: Complete Step-by-Step Flow
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Follow a single claim through every microsecond of its journey from provider submission to final payment - here's the complete technical breakdown.

Healthcare Claim Adjudication Complete Table of Contents

Phase 1 Initial Reception and Validation

  1. Step 1 The Claim Arrives

  2. Step 2 Transport Layer Security Check

  3. Step 3 Initial Payload Inspection

  4. Step 4 EDI Syntax Validation

  5. Step 5 Data Element Validation

  6. Step 6 Segment Relationship Validation

Phase 2 Business Rule Processing and Initial Screening

  1. Step 7 Business Rule Engine Initialization

  2. Step 8 Duplicate Claim Detection

  3. Step 9 Date and Time Validation

  4. Step 10 Procedure Code Validation

  5. Step 11 Diagnosis Code Validation

Phase 3 Member and Provider Verification

  1. Step 12 Member Lookup and Identity Resolution

  2. Step 13 Eligibility Verification Engine

  3. Step 14 Coverage Period Validation

  4. Step 15 Dependent Eligibility Checking

  5. Step 16 Provider Directory Validation

  6. Step 17 Provider Contract Status Verification

  7. Step 18 Network Status Determination

Phase 4 Authorization and Pre-Approval Verification

  1. Step 19 Prior Authorization Requirements Check

  2. Step 20 Authorization Database Search

  3. Step 21 Authorization Match Validation

  4. Step 22 Unit Consumption and Tracking

  5. Step 23 Referral Validation

Phase 5 Clinical Review and Medical Necessity

  1. Step 24 Medical Coding Edit Engine

  2. Step 25 Diagnosis-Procedure Relationship Analysis

  3. Step 26 Medical Necessity Determination

  4. Step 27 Experimental Investigational Screening

  5. Step 28 Frequency and Duration Analysis

Phase 6 Fraud Detection and Risk Assessment

  1. Step 29 Provider Behavior Analytics

  2. Step 30 Real-Time Fraud Scoring

  3. Step 31 Pattern Recognition Analysis

  4. Step 32 Anomaly Detection

  5. Step 33 Sanctions and Exclusions Screening

Phase 7 Benefits Calculation and Pricing

  1. Step 34 Benefit Configuration Retrieval

  2. Step 35 Covered Service Determination

  3. Step 36 Fee Schedule Assignment

  4. Step 37 Allowed Amount Calculation

  5. Step 38 Deductible Application Logic

  6. Step 39 Coinsurance and Copayment Calculation

  7. Step 40 Out-of-Pocket Maximum Processing

Phase 8 Secondary Coverage and Coordination

  1. Step 41 Other Coverage Identification

  2. Step 42 Primary Payer Determination

  3. Step 43 External Payer Communication

  4. Step 44 COB Calculation Processing

  5. Step 45 Subrogation Identification

Phase 9 Payment Authorization and Settlement

  1. Step 46 Accumulator Updates

  2. Step 47 Payment Authorization Generation

  3. Step 48 Electronic Funds Transfer Preparation

  4. Step 49 Check Processing Workflow

  5. Step 50 General Ledger Integration

Phase 10 Communication and Documentation

  1. Step 51 Explanation of Benefits Generation

  2. Step 52 Provider Remittance Processing

  3. Step 53 Member Portal Updates

  4. Step 54 Provider Communication Workflows

  5. Step 55 Regulatory Notification Requirements

Phase 11 Quality Assurance and Compliance

  1. Step 56 Statistical Sampling for Audit

  2. Step 57 Compliance Monitoring

  3. Step 58 Audit Trail Generation

  4. Step 59 Exception Reporting

  5. Step 60 Performance Metrics Collection

Phase 12 Appeals and Grievance Preparation

  1. Step 61 Appeal Documentation Preparation

  2. Step 62 Grievance Tracking Integration

  3. Step 63 Legal Hold Processing

Phase 13 Data Analytics and Machine Learning

  1. Step 64 Data Warehouse Population

  2. Step 65 Machine Learning Model Updates

  3. Step 66 Predictive Analytics Processing

  4. Step 67 Business Intelligence Integration

Phase 14 Financial Settlement and Reconciliation

  1. Step 68 Daily Settlement Processing

  2. Step 69 Bank Reconciliation

  3. Step 70 Financial Reporting Integration

Phase 15 Continuous Monitoring and Optimization

  1. Step 71 Real-Time Performance Monitoring

  2. Step 72 Capacity Planning Analytics

  3. Step 73 System Health Monitoring

  4. Step 74 Security Monitoring

  5. Step 75 Process Optimization

Summary Statistics

  • Total Steps 75

  • Total Phases 15

  • Average Processing Time 2.3 seconds for auto-adjudicated claims

  • Daily Volume 2.1 million claims processed

  • Peak Capacity 50000 transactions per second

  • System Uptime 99.97 percent

  • Auto-Adjudication Rate 87 percent of submissions

  • Microservices Involved 47

  • Databases Queried 23

  • Audit Events Generated 300 plus per claim

Phase 1: Initial Reception and Validation

Step 1: The Claim Arrives

The provider's Epic practice management system fires an EDI 837 Professional transaction containing 23 service lines into your intake API gateway at 2:47:23 PM on a Tuesday. Your F5 load balancer immediately performs SSL termination and routes this 47KB payload to one of twelve active ingestion microservices running in your primary AWS us-east-1 region, while simultaneously logging the transaction to your centralized ELK stack for audit purposes.

Step 2: Transport Layer Security Check

Your API gateway validates the provider's OAuth 2.0 bearer token against your identity management service, checking digital certificates and ensuring the submitting entity matches the billing provider NPI in the claim header. If authentication fails, the system immediately returns an HTTP 401 with a standardized error response and blocks any further processing to prevent unauthorized submissions.

Step 3: Initial Payload Inspection

The ingestion service performs rapid payload analysis, checking file size limits (50MB max), scanning for malicious content using antivirus engines, and validating the EDI envelope structure before queuing the transaction for deeper processing. Suspicious payloads get quarantined in isolated storage with immediate security team notifications.

Step 4: EDI Syntax Validation

Your custom EDI parser, built on top of Microsoft BizTalk Server libraries, rips apart the transaction into 847 individual data elements, checking each segment against the HIPAA 5010 implementation guide while a separate thread validates control numbers, interchange headers, and functional group structures. If even one loop identifier is malformed or a required segment is missing, the entire claim gets rejected with an HTTP 400 response and a detailed TA1 functional acknowledgment queued for immediate return to the provider.

Step 5: Data Element Validation

Each data element undergoes field-level validation including data type checking (numeric, alphanumeric, date formats), length verification, and enumeration validation against HIPAA code sets. The system validates 127 different data element types in parallel, using cached validation rules that are refreshed every 15 minutes from your master data management system.

Step 6: Segment Relationship Validation

The parser verifies hierarchical loop relationships, ensuring that patient loops are properly nested under subscriber loops, service lines reference valid claim headers, and all required parent-child relationships are maintained. Cross-segment validation rules check for consistency between related data elements across different segments of the transaction.

Phase 2: Business Rule Processing and Initial Screening

Step 7: Business Rule Engine Initialization

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