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denial management process

What Is Denial Management Process In Healthcare & How It Works?

It is somewhat alarming how frequently insurance companies reject medical claims. A recent investigation found that the average claim denial rate rose 23% over the previous four years. For medical practices, this entails unpaid services that cause lost or delayed earnings, severely harming the practice’s financial stability. By putting a good denial management process in place, you can raise the claim acceptance rate at your company to 95% or less.

What Is Denial Management Process

The denial management process in medical billing is a tactical procedure to identify and address issues resulting in rejected medical claims. But the approach should also reduce the chance of further denials. They also ensured that practices received payments quickly and had a steady cash flow.

Denial management is one of the most crucial components of healthy revenue cycle management. Healthcare organizations must concentrate primarily on the root cause and denial to ensure a healthy cash flow at a time when insurance companies decline an average of 9% of submitted claims.

Tracking assists in locating and correcting registration, billing, and medical coding problems to prevent other denials. To make it simple to spot a deviation from the expected trend, the team also examines the payment trends for specific payers.

Types of Claim Denials

Although every denial costs your medical practice money, these are five types of denials:

1.      Soft Denial:

A brief or interim denial might be honoured if the practitioner makes the necessary corrections; no appeal is required.

2.      Hard Denial:

A denial that requires an appeal and results in lost or written-off revenue is Hard Denial.

3.      Preventable Denial:

A harsh denial brought about by a practice’s activity or inaction frequently resulting from inaccurate registration, incorrect codes, and insurance ineligibility.

4.      Clinical Denial:

Although this is another form of hard denial, it is required to file an appeal because it results from a lack of payment for a medical requirement.

5.      Administrative Denial:

An appeal is feasible with this kind of soft rejection, in which the payer informs the physician practice of why the claim was rejected.

Benefits of Claims Denial Management

Here are the benefits of healthcare claims denial management:

  • The practice’s cash flow increases so long as on the true causes of denials.
  • The underlying cause of rejection patterns may identify by collecting and evaluating data.
  • Information gathering on denial appeals, such as status and correspondence with healthcare payers, aids in raising recovery amounts.
  • By giving the administration clear reports that are easy to understand, they can make better business decisions and prevent other denials.
  • Assists you in keeping track of, concentrating on, and contesting denials supported by federal, state, and case references that favor the clinical supplier’s appeal.

How Denial Management Process Works

The IMMP technique, “Identify, Manage, Monitor, and Prevent,” is a systematic approach used in the Denial Management process.


Finding the underlying cause and explanation for the medical claims billing service is the first step in creating a successful denial management process. The true challenge is analyzing the insurer’s comments and determining the genuine reason for the denial. Given that some insurers continue to employ non-standard, excessively complicated legacy codes, interpreting the CARC, unfortunately, frequently requires expert knowledge and patience. To convince the insurer to pay your organization for the claims, your company must determine why a claim was denied and who was liable for the payment. Employ devoted denial management professionals to do this.


It’s time to address the denial, asking your insurer to pay the medical claim when you’ve successfully determined the cause of the denial. The denial management team can carry out the following procedures to achieve that goal:

Directly Routing Denials

The first step is to streamline and organize the documentation for information linked to denials. To do this, use automated techniques to route declined transactions into work lists. For your coders to respond to each item promptly and effectively, you might want to route all coding-related denials to them.

Sort out the Work 

The denial management team uses sophisticated software in this situation to categorize them and create lists according to many criteria, including quantity, timing, and rationale. Compared to using manual systems, this streamlines and improves the team’s productivity.

Making standardized work processes

Creating a standard response for each form of refusal is the third stage

  • Noting the most frequent reasons for rejection recorded by the clinic.
  • Identifying the most often used code with that denial.
  • Developing a tactical action plan for handling denials of a similar nature.

Checklist usage 

Do you want the most organized-free denial management approach possible? A checklist is beneficial! By creating a basic checklist of dos and don’ts, your team can avoid frequent errors, leading to stagnating denials or becoming uncollectible bad debts.


Maintaining accuracy and timeliness throughout the denial management process is essential to making sure you receive payment of the claim successfully this time. As a result, you should keep a record of denials by type, receipt date, appeal date, and outcome. Second, sample and assess the rejection management team’s appeals to audit their job. Lastly, ensure the team has access to the tools and technologies it needs to work quickly and effectively.

Monitoring should also be done with the insurer to give your staff a better understanding of each claim denial, but that’s not all. The time should determine the source, number, and kind of denial. With this information, your company can encourage internal discussion with the insurer about more effective methods to conduct business and lower the likelihood that they will deny future claims.


The next task is to launch a preventative campaign when the rejection management team has gathered all pertinent data regarding claims denial. You must look through the denials to find possibilities to retrain your team, modify workflows, and rewrite processes.

Additionally, you should bring together several teams that assisted in denying the claim. Suppose the denial resulted from an issue with registration, for example. In that case, you should call in the front desk staff and walk them through the preventative program to ensure that they don’t make mistakes that result in claims denial in the future.

How Can You Improve Denial Management Process 

When you use the appropriate strategy, vendor partner, and services, you can achieve “clean claims” (claims approved after their initial submission) up to 99 percent of the time. The reimbursement of clean claims is quicker, and there is less risk of nonpayment for providers. You should adhere to these five steps to establish a denial management strategy that enhances your denial management process. The following are five steps to improve the denial management process.

Tracking Denied Claims 

Tracking denied claims in real-time could be difficult without adequate claims monitoring. Claims tracking tools and services are essential to any rejection management process since they enable providers to follow a claim through.

Identify Causative Factors

A critical initial step in your denial management strategy is pinpointing the most frequent causes of denials at your clinic. Implementing dependable denial management software from a reputed vendor does this. The program can help automate processes that quickly identify common denial causes and give your team solutions. By monitoring their practice billing process, clinicians can identify the root of any issues by better understanding why their claims go with rejection. The number of clean claims providers submit can increase by swiftly addressing common reasons for denials.

Comprehensive Claim Scrubbing

Claim scrubbing for identifying potential denials promotes more accurate claims and timely payments. Medical billing code mistakes frequently result in denied claims. Providers can quickly fix coding errors and submit new claims by stopping processing pending claims before denials.

Automated Verification of Insurance 

Lack of coverage is the second most frequent reason for rejecting claims. Lack of coverage can occur when patients change insurance plans without informing their doctor, when their policy expires, or when it excludes particular procedures—verifying coverage for services before their delivery is a crucial step in streamlining your denial management process. With the help of good denial management software, we can now automate insurance verification. Your front-line employees may quickly confirm coverage before services are provided, safeguarding your payment and your doctor’s time. Providers run the risk of losing out on significant revenue without insurance verification.

Denial Management Process Outsourcing

The most important step in optimizing your denial process is using services from a reputable RCM services vendor. Providers can complete these steps without using their resources by contracting out their denial management process. With the help of a knowledgeable denial management software and services supplier, your clinic can raise clean claims to 99 percent while preserving patient attention and avoiding staff burnout. Medical billing professionals will keep an eye on your claims and tidy them up while providing top-notch software that permits quick and precise insurance verification and the identification of usual denials within your boundaries.

Common Medical Billing Denial Codes and Reasons 

You may combat unfair denials, resolve billing issues at your office, and receive more service payments, knowing the specific medical billing denial codes and reasons.

Lack of Information

A claim that is not full will nearly always be rejected. However, a claim form could still be incomplete even if it is filled out. Insurers create complicated requirements for their insured and the physicians who treat them. Without comprehensive paperwork proving that the treatment is medically essential, you might need to document the patient’s referral for a service, the treatment performed before it, or the fact that the patient underwent testing for a particular medical concern. They may refuse it under the plan.

Errors in transcription

A typo can be very expensive. Since doctors’ handwriting is infamously unreliable, the information recorded in a medical claim may be inaccurate. The claim may be rejected if there is any typo error in patient’s name, date of birth or the billing code.

Contractual commitment

Providers and health insurance providers have separate contracts with each other. You agree to comply with specific billing criteria when you accept these conditions. A medical billing denial based on a contractual requirement indicates that you haven’t cleared one of the insurer’s hurdles. Typical problems include:

  • Not submitting the claim in time.
  • The claim has already been settled.
  • The patient’s deductible has not been reached.
  • When rendered the covered service, the provider lacked the necessary certifications.

Multiple Billing

The prevalence of duplicate billing is alarmingly high, particularly as more medical practitioners use automated billing services for payments. For instance, duplicate billing prevents you from getting paid if your billing software automatically produces a consultation fee for a service you rendered after seeing a patient for a consultation. Sometimes, a bill could seem to be a duplicate even when it isn’t. When there is any dispute, insurers reject bills because these billing problems can be difficult to resolve.

Conflicting Claims

When the service time for two claims seems to overlap, it is considered an overlapping claim. When a patient receives care from many providers, these denials may occur, which are different from duplicate billing. For example, the claim may be denied if a patient has dementia consultations with two doctors without asking for a referral for a second opinion. The denial should make it crystal apparent why there is an overlap. Perhaps you can defeat it.

Charges Not Covered or Excluded

The majority of insurance specifically mention some procedures. For instance, treatment for sleep disturbances is frequently excluded. The Affordable Care Act, however, has reduced the frequency of these denials. Insurers, who cannot refuse to provide the care, must cover certain fundamental treatments. Therefore, if one of the Affordable Care Act’s ten essential health benefits is denied, you can appeal.

Coding Problem

If a bill does not have the proper coding, it will be impossible to pay it. However, it switches between long numerical sequences. Think about how code 87621, which signifies an abnormal pap smear that indicates the need for additional testing, might turn nonsense if the numbers change. Among other code difficulties are:

Absence of a code.

  • Using the incorrect code.
  • Misusing the insurer’s coding system.
  • Not adhering to the standard of care implied by the relevant codes.


However, take a step back and examine your denial management process before you accuse insurers of rejecting your claims. The truth is that most denials result from your claims’ erroneous or missing information, which causes the insurer to cease paying you. More perplexing is that some companies fail to follow up on claim denials, which leads to a negative resolution and, ultimately recognized as bad debt.

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