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Denial management in medical billing
Revenue cycle management (RCM) is a foundational process in healthcare administration that handles the financial side of patient care. Denial management is a critical component of RCM that plays a direct role in maintaining a healthcare organization’s financial stability. If effective, it ensures healthcare providers are paid for their services accurately and on time, improves revenue recovery, and strengthens payer–provider relations. However, for many healthcare organizations, achieving efficient denial management remains a challenge.
Importance of denial management in RCM
$19.7 billion is spent by U.S. hospitals each year to fight denial claims
38% of U.S. healthcare providers surveyed reported that more than 10% of claims are denied
84% of U.S. medical organizations consider reducing denials a priority
Only 31% of U.S. healthcare providers surveyed use automation or artificial intelligence (AI) in claims processing (down from 62% in 2022)
Only 54% of healthcare providers in the U.S. believe their organization’s technology is adequate to address revenue cycle challenges (down from 77% in 2022)
84% of denials in the U.S. are potentially avoidable, while 22% are not recoverable
“We understand that every denied claim results in payment delay. That’s why we design systems that give healthcare organizations the visibility, automation, and control they need to get paid faster, reduce administrative burden, and define and eliminate bottlenecks in the collection process.”
Alexey Kozlovsky
Account Manager
Root causes of claim denials
Claim denial management in medical billing starts with identifying the root causes. By knowing what leads to denials, healthcare organizations can develop effective mitigation strategies. Below are some of the typical causes.
Missing or incorrect data
In a survey by Experian Health, 46% of respondents cited missing or inaccurate data as a leading cause of claim denials. Other reasons include outdated insurance information or patient demographics, incorrect policy numbers, misspellings, inaccurate identifiers, or gender mismatch. These issues cause administrative delays, higher costs, patient frustration, and legal risks.
Prior authorization issues
When healthcare services require prior approval from the insurance company, several issues can lead to claim denials. One of the most common is providing services without obtaining the required prior approval from the insurer. Other issues include invalid or expired authorization, authorization for the wrong procedure or service location, or using a provider not authorized under the plan.
Coding errors
While medical coding plays a key role in correct and timely billing and reimbursement, it is also prone to errors. Common causes of coding errors—such as human error, outdated coding systems, upcoding, and downcoding—can be mitigated through thorough documentation, advanced coding software, partial or full automation, and regular coding audits.
Eligibility issues
These issues stem from questions regarding whether the service and provider are covered by the patient’s insurance plan. The coverage could be inactive, expired, or exclude the specific service or clinic. Addressing eligibility issues requires a combination of proactive prevention, integration of real-time eligibility verification, and automated workflows for eligibility denials with reporting and analysis.
Duplicate claims
Claims submitted more than once for the same patient, service, provider, and date of service are detected as unnecessary or erroneous and denied or rejected automatically. Duplicate claims occur due to inadequate claim tracking, system errors, human errors, lack of standardized follow-up process, or insufficient communication between departments. Automation, regular claim status checks, and improved visibility can minimize these issues.
Deadline violations
Most insurers have a strict time limit for claim submission or resubmission. Failing to meet this limit leads to an automatic claim denial, regardless of the medical necessity or claim accuracy. If a patient has multiple insurance policies, errors in coordination of benefits (COB), such as failure to determine which insurer pays first, also lead to deadline violations. To deal with this issue, organizations can implement automated alerts, claims tracking systems, and more.
Custom healthcare RCM analytics
Explore our expertiseThe power of denial management in medical billing
Effective denial management is more than just a necessity. It offers healthcare organizations numerous benefits.
Improved accuracy and compliance
Through regular denial analysis, healthcare organizations can identify coding, documentation, and other errors, minimize their occurrence, and support compliance with both payer requirements and industry regulations and standards.
Increased revenue recovery
Efficient management of claim denials ensures they are resubmitted and reimbursed promptly, and that none are lost. This minimizes lost revenue by reducing the likelihood of delays or administrative oversight, accelerates cash flow, and improves financial stability.
Streamlined performance
Automation and standard processes in healthcare claims denial management not only save time and resources, they create clear workflows for staff, leading to faster turnaround times and improved coordination between departments.
Reduced resources
Standardized processes and automation reduce the need for repeated manual work. By spending less time and resources fixing denial issues, healthcare organizations can more efficiently allocate staff and budget.
Enhanced decision-making
When they know the root causes of claim denials, healthcare providers can make more informed decisions, adapt their policies and billing practices, handle system inefficiencies and payer issues, and train their staff accordingly.
Improved patient satisfaction
In medical billing, effective denial management means patients are less likely to receive unexpected bills. It also ensures that any issues are resolved promptly, without delays in coverage and care access.
Denial management challenges and how we solve them
Establishing a comprehensive denial management system requires more than just skills and knowledge—it demands the expertise and tools to handle challenges of any complexity.
Coding and billing complexity
One of the most labor-intensive and error-prone processes in RCM is medical coding. Regular coding updates, code mismatches, and entry mistakes all contribute to denied claims.
Applying our deep knowledge of key medical coding systems like ICD-10 and CPT, we create intelligent coding assistance tools. Our experts integrate advanced technologies like AI that can suggest codes and flag common coding errors or unbundling issues. Real-time coding validation ensures the provided services are billed according to payer-specific rules, minimizing the chance of claim denial.
Documentation inefficiency
Medical records contain crucial information for denial management, supporting medical necessity for a particular service. However, maintaining these records and ensuring their completeness and accuracy is a difficult task.
To address the challenge of inefficient documentation, EffectiveSoft builds structured documentation templates, ensuring the right fields are completed with precision and accuracy. We integrate real-time documentation quality checks and alerts for missing or incomplete information, enabling healthcare organizations to promptly resolve issues. Seamless electronic health record (EHR) integration for automated filling of necessary clinical and administrative data also helps reduce errors and denials related to inefficient documentation.
Compliance and requirement complexity
When submitting claims, healthcare organizations should follow both payer-specific requirements and regulatory standards. Each insurer has its own timelines and procedures, which can be complicated to work through. At the same time, legal regulations can shift, increasing the risk of claim denials.
We integrate APIs directly at the point of care to automate eligibility and authorization checks. Our denial analytics dashboards provide visibility into trends by denial type, payer, and other key aspects. Alert systems for policy updates and regulation changes help healthcare organizations stay compliant, streamline claims processing, and improve reimbursement rates.
Outdated RCM and denial management systems
Outdated software and manual processes fail to comply with payer and regulatory obligations and meet the demands of healthcare organizations. As a result, more time and resources are consumed in addressing claims and denials.
To modernize denial management systems, we start by creating automated denial workflow engines with claim routes, prioritization, and progress tracking. Our AI experts implement predictive models for claim denials with recommended preventive actions. We design real-time dashboards and reporting to help healthcare organizations monitor denial rates, appeal success, turnaround time, and recovery rates.
Are you a healthcare provider feeling overwhelmed by inaccurate data, compliance risks, claims rejections and denials, and reimbursement delays? Overcome these problems with our custom medical claims management software services. The top-quality claims management solutions we build enable our healthcare clients to effectively manage claims between patients and insurance agencies, improving administrative efficiency and overall financial health.
Our approach to denial management
EffectiveSoft enables denial management services through advanced software systems, taking a holistic approach to system design and implementation. Our goal is not just to create a functional tool, but to address the underlying pain points and challenges that healthcare providers face.
IT infrastructure analysis
Our team evaluates the existing architecture and systems to ensure compatibility, scalability, and seamless integration.
Data quality analysis
We identify gaps, inconsistencies, and inaccuracies in current datasets for more accurate reporting and root-cause analysis.
Design and prototyping
Based on the insights we uncover, our specialists create a user-centric prototype of the system, ensuring intuitive navigation and compliance.
Data preparation
Our engineers clean and organize historical and real-time data to support predictive analytics and denial pattern recognition powered by AI and machine learning (ML).
Technology selection and development
We choose the tech stack that aligns with your security and performance requirements, as well as regulatory standards.
Deployment and testing
Our team implements the denial management system and performs functional and usability testing, ensuring reliability and accuracy.
Ongoing support and refinement
Post-deployment, we provide continuous monitoring, updates, and enhancements based on user feedback, evolving needs, and changing regulatory requirements.
Key trends
Healthcare organizations are already choosing more effective and sustainable solutions to enhance their denial management strategies. Here are the key trends:
- 01
Shift from reactive to proactive management
A rapidly growing trend in medical claims denial management is a proactive, technology-driven approach. Powered by AI, automation, and predictive analytics, this approach focuses on denial prevention, real-time resolution, and root-cause tracking. Advanced analytics techniques detect patterns, flag potential denial triggers, and offer end-to-end visibility into medical billing. - 02
Increased use of AI and automation
AI and automation do more than drive a proactive denial management approach. Automation streamlines status checks and record updates, while AI algorithms improve denial categorization, root cause analysis, and other processes. Additionally, AI and virtual agents can deliver real-time information to patients and medical staff about claims, payments, and more. - 03
Value-based care integration
The transition to value-based care (VBC) is driven by an emphasis on delivering high-quality care and better patient outcomes. In VBC, an organization’s revenue depends on quality metrics and cost efficiency. Medical billing that becomes a strategic function, supporting VBC and proactive denial management, is key to improving financial performance. - 04
Outsourcing denial management
RCM and denial management partnerships mitigate internal workload and provide access to advanced technology and specialized expertise. Outsourced technology teams have the necessary tools, skills, and predictive capabilities to implement efficient denial workflows with reduced denial rates, faster claim resolution, and improved revenue recovery.
See also:
Revenue cycle management system
We developed a management system for enhanced medical billing and insurance claim submission and processing.
Real-world examples
While some healthcare organizations are only beginning their journey to efficient denial management, others have already solved some claim denial challenges.
Example A: Reduced denials through automation
Over the past decade, MetroHealth, a U.S. nonprofit healthcare system, experienced a rise in payer denials caused by sources across the revenue cycle. The organization also had difficulty identifying the root causes of denials and maintaining transparency across departments.
To address these challenges, MetroHealth partnered with a major RCM solution provider. Through automation, they established efficient workflows to identify root causes and track and investigate unresolved claims. The solution also enabled the organization to analyze any stage of the revenue cycle, improve processes, and prevent denials.
The combined effort cut denials by 30%, unlocking $13 million in revenue over one year, and improved productivity by 8% through automation.
Example B: Increased revenue through advanced data analytics
Another large U.S. nonprofit health system, Intermountain Health, sought to reduce medical insurance claim denials while improving patient care. The organization integrated advanced technology and healthcare data analytics into its review process, which reduced manual tracking and enhanced cross-department collaboration.
By implementing a claim denial monitoring tool and strengthening its peer-to-peer review process, Intermountain Health overturned more than $20 million in denials over two years and projected an additional $35 million in revenue.
Custom revenue cycle management
See what we offerFinal word
For healthcare organizations, efficient denial management is more than simply recovering lost revenue; it involves creating a proactive system to prevent claim denials, streamline reimbursement, improve cash flow, and establish sustainable financial performance. With an experienced tech partner and strategic use of advanced technology, providers can turn their financial management from reactive turmoil into a well-balanced, secure process. Contact the EffectiveSoft team to discover how we handle RCM inefficiencies, and let’s strengthen your revenue cycle performance.
F.A.Q. about healthcare denials management
Denial management encompasses the detection, analysis, and resolution of denied insurance claims to guarantee reimbursement for provided services. This process influences the entire revenue cycle and involves not only handling existing denials but also preventing future denials.
Preventing medical claim denials involves a multistep process, beginning with root-cause analysis. By understanding why their claims get denied, healthcare companies can better adjust their processes. Key strategies also include enhancing coding accuracy through staff training and technology assistance, creating standardized processes and documentation, automating eligibility verification, and improving the prior authorization process. Integrating technologies like AI is a key step toward more efficient denial prevention.
Outsourcing denial management can be beneficial for medical companies aiming to strengthen their revenue cycle and reduce claim denials. By partnering with a specialized technology service provider, healthcare organizations can achieve faster and more effective denial resolution through industry expertise, proven best practices, and advanced data analytics. This also helps reduce administrative burden, enhance compliance with payer policies and industry regulations, and cut costs associated with hiring, training, and maintaining an in-house denial management team.
A revenue cycle management system deals with analyzing, preventing, and resolving insurance claims denials. To support its optimal performance, we start with a thorough assessment of each client’s IT infrastructure and requirements to identify the most suitable technologies and tools. To enhance automation and intelligence, we integrate AI, ML, robotic process automation (RPA), and other advanced solutions. For analyzing and reporting, our experts rely on powerful business intelligence platforms like Power BI and Tableau. We also ensure full compliance with industry regulations and healthcare data exchange standards, including HL7 and FHIR, while building secure, compliant infrastructures tailored to our client’s needs.
Effective denial management in healthcare ensures that documentation and claim handling align with industry standards and regulatory requirements, such as HIPAA or GDPR. By tracking, reviewing, and analyzing denials, healthcare organizations can identify systemic issues, implement process improvements, meet documentation standards, and ensure audit readiness. This approach promotes compliance and minimizes the risk of regulatory penalties.
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