Strategies for Effective Denial Management in Healthcare

 When it comes to claims denials, the US has a big problem. Consider these stats published by the American Hospital Association (AHA): 

• Hospitals and health systems spent an estimated $19.7 billion in 2022 trying to overturn denied claims. 
• The average denial results in charges of $14,000 or more. 
• Nearly 15% of all claims submitted to private payers initially are denied, including many that were preapproved during the prior authorization process.  

However, denied healthcare claims are more than just a nationwide problem; they can significantly impact a healthcare provider’s revenue and cash flow. An effective denial management process is essential for reducing claim denials, streamlining operations, and improving financial health. 

This article explores denials management in healthcare, its benefits, and actionable strategies your practice can take to ensure revenue cycle success. 

What is Denial Management in Healthcare? 

Denials management in healthcare refers to identifying, managing, and resolving rejections or denials of insurance claims by payers. It is critical in revenue cycle management (RCM) to ensure providers receive proper reimbursement for medical services rendered. 

Denied claims can severely impact healthcare providers. They can slow cash flow, inflate administrative costs, delay reimbursement, and strain provider-payer relationships.  

Consider this: 

You are an independent urology specialist with a new practice. Your current billing software often produces incorrect or outdated ICD-10 and CPT codes used for complex urological procedures. Now, your practice is feeling the financial strain arising from unpaid claims stemming from denials due to inadequate coding errors. 

So, how much does it cost to fix a denial? 

For example, research shows that the average administrative cost to correct a Medicare Advantage (MA) plan denial is $47.77, and to rework a commercial denial is $63.76. With around three billion claims submitted annually, the total administrative cost has reached nearly $20 billion. 

How can practices avoid these costly mistakes? To sidestep claim denials, practices need to understand how they happen in the first place.  

Common reasons include: 

• Missing information 
• Billing and coding errors  
• Failure to meet medical necessity requirements  
• Non-compliance with payer guidelines  

Additionally, there are also payer-specific denial trends. The AHA lists the most standard ones: 

Prior authorizations: Many commercial claims are denied, including pre-approved ones.  

High-cost claims: Payors are examining high-cost claims more closely.  

Regulatory shifts: Ever-changing regulations impact claim denial trends.  

Addressing these issues systematically through a robust denial management process is key to financial sustainability. 

Mature male doctor working on laptop computer, sitting in medical office

Benefits of an Effective Denial Management Process 

Healthcare providers who implement a streamlined denial management strategy can expect several benefits: 

• Improved Cash Flow: Proper denial management ensures timely reimbursement, helping to stabilize RCM and maintain practice financial health.   
• Reduced Administrative Stress: Automating processes and using analytics can significantly lower the time and effort spent managing denials.   
• Enhanced Compliance: Adopting practices aligned with HIPAA compliance in denials management prevents legal risks and penalties.   
• Optimized Efficiency: Tracking payer-specific denial trends enables providers to address recurring issues proactively.   
• Better Patient Experience: Resolving claim denials effectively ensures patients are not unnecessarily affected by financial delays or disputes.   

Strategies for Effective Denial Management in Healthcare 

A strong denials management strategy in healthcare requires a combination of prevention, technology, and process improvement. Here are five key approaches: 

1. Thoroughly Analyze Common Reasons for Claim Denials: Start by identifying why claims are being denied. Is it due to incorrect coding, missing documentation, or eligibility issues? Understanding these problems can significantly reduce repeat denial
2. Track Payer-Specific Denial Trends: Each payer has unique guidelines and requirements. By tracking denial trends specific to each payer, providers can create targeted strategies to meet varied compliance expectations.
3. Invest in Automation: Automating denials management can reduce manual errors and improve efficiency. By automating RCM processes, practices can flag incomplete claims, highlight inconsistencies, and even generate alerts for upcoming deadlines. One survey found that using automation for RCM operations can reduce health systems’ cost-to-collect by 0.25 percent.
4. Ensure Accurate Coding and Documentation: Proper coding is critical for claim acceptance. Conduct regular training for your team on updated coding guidelines and stress the importance of thorough documentation.
5. Foster Strong Provider-Payer Collaboration: Open communication channels with payers to clarify coverage guidelines and address repeat problems. 

Accounting doctor, calculator and hands of person calculating bookkeeping finance, hospital budget or medical savings. Mockup space, healthcare and accountant working on taxes, audit or compliance.

Actionable Steps for Healthcare Providers 

Implementing effective best practices requires action. The following strategies can keep your practice several steps ahead toward minimizing and preventing claim denials: 

Leverage Fully Integrated EHR and Billing Software: Integrating electronic health records (EHR) and billing software can help increase your first pass rate while mitigating claim denial challenges by truly understanding the root cause of denials.  

For example, iSalus is an all-in-one EHR where specialists can access all the data they need in one place. Leveraging this technology can: 

• Reduce duplicate data entry. 
• Ensure accurate patient coding, data, and billing, reducing errors. This is especially helpful for a medical specialty. For example, you may need nephrology-specific EHR and billing software if you own a nephrology practice.  
• Identify denial patterns and systematically address the root causes. 
• Gain deeper insights into the billing process, identifying potential issues before they happen. 

Adopt Regular Audits and Quality Checks: 76% of revenue cycle leaders spend most of their time on denial management. Periodically auditing claims before submission reduces this number and ensures accuracy and compliance.  

MedCity News advises that establishing standard operating procedures (SOPs) that all billing staff members follow can significantly reduce the chances of denials.  

Adhering to these guidelines reduces delays caused by errors or uncertainty. Remember to review and update your SOPs to ensure all staff members are well-versed in the correct procedures.  

Consider Outsourcing Denials Management Services: By partnering with experts specializing in denials, providers can significantly ease the administrative burden while ensuring a higher success rate in securing reimbursements.  

For example, iSalus offers Medical Billing Services with certified experts who can review each claim to ensure your clean claims rate is the highest possible. They also handle troubleshooting and resubmittals to reduce staff burden. 

Ensure HIPAA Compliance: Always follow protocols to secure patient data and maintain compliance with HIPAA standards. Non-compliance can lead to denial of claims and legal ramifications. 

For example, payers may conduct audits to check for HIPAA compliance, and if significant violations are found, they may deny claims or impose penalties on the provider, impacting their reimbursement. Civil penalties for HIPAA violations start at $141 per violation (as of 2024).  

Educate Your Team: Provide ongoing training to improve awareness of payer requirements, coding accuracy, and regulatory updates. For example, if you are a nephrology practice, your staff may benefit from specialized nephrology coding and billing webinars.  

One of the best ways to create a high-performing billing and revenue cycle staff is by requiring them to achieve and maintain relevant industry certifications, including completing annual continuing education credits (CEUs). Review these websites for more information: 

AAPC – American Academy of Professional Coders  

AHIMA – American Health Information Management Association CEUs 

MGMA – Medical Group Management Association 

Managing claim denials is not just about resubmitting corrected forms; it is about understanding root causes, preventing future denials, and ensuring compliance.  

By employing our strategies and steps, healthcare providers can optimize their denial management process and enhance financial performance. 

If you are ready to discover more ways to take charge of your revenue cycle, contact iSalus today to learn about powerful solutions for denial management in healthcare.