In this article, we’ll introduce the most effective denial management strategies and demonstrate how to take a proactive approach to decrease future denials at your medical practice or healthcare organization.
Healthcare claim rejections are an annoying, but inevitable, occurrence for physician practices throughout the United States—yet between 86 and 90% of denials are actually preventable, according to research from the Kaiser Family Foundation.
Getting claims paid is actually the biggest revenue cycle challenge for healthcare providers. High claim denial rates are a huge hindrance of claims being paid, according to a poll from the Medical Group Management Association (MGMA).
Simply put, a denial is a claim that a payer has denied to pay.
Here’s how it works.
A physician's practice must submit a claim for a patient service in order for an insurance company to pay the provider. This is simple in theory, but it’s easy to send claims with incorrect or missing information. The insurance claim must include information about the patient, their insurance coverage, the service, their provider, and anything else pertinent to the service. If anything is wrong or missing in the claim, the payer may issue a denial to the provider.
Proactively managing denials is important for reducing lost revenue and avoiding high administrative costs. When you improve claims processing and cut down on denials, you can improve patient satisfaction.
Your patients will become frustrated when they receive duplicate claims or unexpected bills. Therefore, denial management in RCM is both a revenue issue and a patient retention issue.
Often, providers will have the opportunity to correct whatever was wrong with the initial claim. These soft denials are denials that have the potential to be reversed and eventually paid.
Unfortunately, some denials will never be paid. Hard denials are final and there’s nothing a provider can do to get those claims paid. For instance, if a patient isn’t insured by a specific payer, their claim would become a hard denial from the payer.
Unfortunately, an analysis of over 441 million claim remits across 1,500 hospital systems shows that denials are on the rise, according to the Change Healthcare 2024 Denials Index.
Denial management in RCM is largely a proactive exercise. It means preventing good claims from being rejected due to avoidable errors.
According to the Michigan State Medical Society, clean claims, or claims that are accepted and paid:
Without any of the items above, a claim can be denied.
Before you can make your workflows better and streamline the appeals process, it’s important to match denial types to the team responsible.
For example, was a denial linked back to the front desk, which failed to perform the appropriate eligibility verification process? Or did your coders make coding errors?
The bottom line is that each group should be responsible for its own mistakes and workflow errors. No one wants to be cleaning up someone else’s mess. That’s where your denial management team comes in. By conducting audits, they can identify why denials are occurring and where the process failed.
MGMA found that the average cost to rework a claim is $25. One rework is $25?! That’s going to add up! Maybe not today or this month, but it might add up this quarter or this year.
Denied claims:
Reworking denials can be expensive and time-consuming, but you’re leaving thousands of dollars on the table if you don’t get your claims paid. Though you won’t always get paid in the end.
Of the denials deemed definitely avoidable, 48% cannot be recovered, according to the Change Healthcare 2020 Denials Index. Don’t get too discouraged yet: you can prevent denials by understanding why and how they’re happening.
Don’t just jump to rework denials as soon as they populate. Instead, you need to go through the following steps as part of your denial management in RCM workflow:
Without this final step, your other changes won’t have the impact that they could on your bottom line. The goal is to recover revenue now and recapture more of it by reducing the need for rework altogether. To achieve that, you need to make denial management in RCM an organizational priority, not just a billing priority.
There are many reasons for a denial to occur, so remember that examining your revenue cycle processes is the best way to understand particular patterns and problem areas.
Most frequently, denials stem from front end issues with things like insurance eligibility and registration. An MGMA stat poll conducted in December 2020 asked healthcare leaders to name the top reasons for denials within their organizations.
Here’s what they said.
Prior authorization is exactly how it sounds: prior approval from the payer before giving service to a patient. Payers use prior authorization to control costs, but many clinicians believe prior authorization can delay care and undermine treatment decisions for what is more cost-effective for the payer. In many cases, providers have people or teams dedicated to prior authorization alone.
The second-most common denial reason is demographic issues. This includes patient information that is incomplete, incorrect, or missing on the claim. Something as simple as a misspelled name or incorrect insurance ID number can result in denial. Healthcare revenue cycles that rely on manual processes without any automation are more prone to this type of error.
Timely filing can make anyone feel like a circus juggler. Each payer—and sometimes plans within the same payer—have different timely filing limits for claim submission, ranging from 90 days to a year. Filing your claim within your allotted time can be a lot of work to keep track of.
Submitting the same claim more than once can trigger payer mechanisms designed to detect duplicate billing, which can result in both claims being denied automatically.
This error typically happens when staff resubmits claims without confirming the status of the original claim. Even correct claims can be flagged if your team does not properly adjust them.
To prevent this issue, implement a strong claim tracking workflow. Automated systems can help you effectively track, mark, and account for corrected claims. Centralized reporting and audit trails help your team avoid unnecessary duplication while maintaining clean, accurate submission practices.
Software for denial management in RCM is meant to make the entire workflow healthier and more efficient.
When services are provided outside a payer’s network, reimbursement may be reduced or denied altogether. The outcome largely depends on the patient’s plan.
In many cases, patients bear a higher financial responsibility. If you do not make them aware of their financial obligations up front, patients will become frustrated and dissatisfied.
Many of these denials stem from gaps in eligibility or a failure to verify whether your system is in network. Your team should verify network status before booking an appointment or delivering care.
Determining if a patient has an out-of-pocket obligation and informing them of that responsibility up front can also help with denial management in RCM.
Coordination of benefits errors occur when multiple insurance plans are not billed in the correct order, which will result in denials or delayed payments. Payers require you to designate primary and secondary coverage.
Mistakes in sequencing can cause claims to be rejected or returned for correction. These errors are entirely avoidable, and they are resource-intensive to correct after the fact. The best approach is to make proper coordination a priority up front so that you can reduce delays and improve cash flow.
Claims for services not included in a patient’s benefit plan are typically denied, leaving providers unable to collect reimbursement from the payer.
Without proper verification, these denials can also create unexpected financial responsibility for patients. This often occurs when coverage details are not reviewed in advance or when there is a misunderstanding regarding benefit limitations.
Effective denial management in RCM means identifying trends of non-covered services among different payer groups. That way, you can revisit them when it’s time to build new contracts.
Finally, payers evaluate whether a service meets medical necessity requirements. If a treatment or service is not deemed to be clinically appropriate, the claim will be denied.
Typically, you can remedy these types of denials by providing additional details about the services the patient received or correcting diagnostic and procedure codes. Aligning your internal documentation requirements with the payer’s standards will drastically reduce denials and promote better revenue capture.
It’s sad to say it out loud, but even the best billing and coding departments can expect to encounter some denials. Fortunately, strong revenue cycle management (RCM) practices can keep your denial rate very low. While the industry average rate of denial is 5 to 10%, the recommended rate of denial is below 5%, according to the American Academy of Family Physicians.
Examine and identify the specific revenue cycle processes that allowed the mistake to slip through the cracks. For example, if verifying patient eligibility and coverage isn’t part of your registration staff’s process, your physician practice might frequently run into a large number of eligibility-based denials.
Though two-thirds of healthcare organizations’ denied claims are recoverable, according to Advisory Board, the MGMA estimates 50–65% of denials are never reworked. Often, physician practices don’t have the technology in place to properly assist in the denials process, per the Change Healthcare 2020 Denials Index.
But there is a solution.
Rivet is a reimbursement software that gives you the big picture of what’s going on in your practice with payer contracts, fee schedules, denial prevention, and claim payment variance. You can also check eligibility and provide accurate up-front patient cost estimates before services are rendered. The Rivet team will help you aggregate your fee schedules and input your claims data to enable you to increase revenue and decrease patient A/R days.
For more information about the tools Rivet provides, schedule a Rivet demo.
The denial management process is designed to identify, correct, and prevent denied claims. It helps your healthcare organization recover lost revenue while improving processes to reduce the likelihood of future denials.
Denial management represents one of the most important aspects of medical billing, as denials are inevitable. How you respond to them makes all the difference for your financial stability.
The core steps include identifying when denials occur and categorizing them. You also need to trace denials back to their root cause, so you can correct them and resubmit claims for a second look from payers. When necessary, you will need to file an appeal.
You will also find that some denials are not worth the time and resources necessary to appeal them, due to the low likelihood that they will be overturned.
Claims may be denied by payers due to missing prior authorization requirements or providing incorrect patient information. Coding errors or questions about medical necessity are other common issues. You must also file claims in a timely manner and address coverage limitations.
The specific appeal timeline that you will be subject to will vary from payer to payer. Typically, these windows range from 30 to 180 days.
You must identify how long each payer provides you so that your denial management team can prioritize claims accordingly. Otherwise, there is an even higher risk of missing out on revenue due to avoidable late submissions.
