Denial Management in Healthcare RCM

Denial Management in Healthcare RCM

What is Denial Management?

The Denial Management process uncovers and resolves the problem leading to denials and shorten the accounts receivables cycle. When a patient’s insurance claim is denied, not only can your cash flow be affected, the relationship with your patient can be damaged as well. Understanding common reasons for claim denials is key to preventing them.

The purpose of a Denial Management Process is to investigate every unpaid claim, uncover a trend by one or several insurance carriers, and appeal the rejection appropriately as per the appeals process in the provider contract.

In many cases, the rejection code used on a claim, and the actual reason for rejection is not related. The Denial Management Process seeks the root cause for the denial as well as the coded cause.

Key Features of a Denial Management Process

While it’s easy to throw up your hands in frustration, it is business-critical to develop and optimize proven techniques that get claims paid. Claim denials are highly variable by an insurer, necessitating a carefully constructed process to optimize revenue for a medical practice. Below are the techniques if followed, will help you get your claim paid.


The first step in a successful claims resolution approach is to identify not only that a claim has been denied, but also the reason for the denial. identifying the type of denial is the critical first step in getting claims paid successfully.

The remittances from many insurers will not provide sufficient detail to answer that question. The insurer will indicate the reason on the accompanying explanation of payment. These indicators, known as claims adjustment reason codes. By reviewing these codes, you can easily identify the denial of the claim.


Once the denial is identified, which may occur manually or automatically, an action plan to resolve the denial is getting the claim paid instead of rejected. To manage a denial, you should follow Checklist method.

  • Don’t delay – After you identified the problem, begin working immediately. Research the denial code and, even, call the patient if necessary, but don’t delay working that denial because most insurers impose time limits on resubmitting claims. You may need every bit of that time
  • Avoid automatic rebilling – It was standard industry practice to re-transmit claims to insurers every 30 to 60 days. This phenomenon of re-billing is a common problem in a business office. or compliance, as well as in-office efficiency, avoid the automatic re-billing of claims.
  • Choose your priority – If your research reveals that you filed the claim incorrectly, correct it and resubmit it. Don’t, however, fight for a claim that should have never been submitted in the first place, such as a service that was never documented.
  • Request an expert – When you write an appeal letter, demand that a specialist in your area of expertise review your appeal for payment. If the denial is upheld, this request gives you a better shot at securing a second round of review.
  • Engage the patient – Send a copy of your request for denial reconsideration to the guarantor on the account, too. A patient notified of a denial may be concerned that he or she could become financially responsible. This may spur the patient to contact the insurer directly to discuss the situation.
  • Inform the authorities – Sometimes, it’s just as effective to simply advise the insurer in advance that you plan to communicate with the insurance commissioner’s office if your appeal is not taken seriously.
  • Watch calculations closely – From an administrative perspective, it’s important to ensure that your employees are indeed managing denials. Even good employees can make mistakes. Whether through lack of training, overwork or just a bit of slacking off, some employees may write off denied claims as uncollectable bad debt rather than pursuing payment for them. An inspection of this will ensure that you will be aware if denials are being written off instead of worked.


To monitor the work of denial management:

  • First, maintain a log of denials — by date received, type of denial, date appealed and disposition — to ensure that your denial management processes are effective.
  • Second, audit the work of employees by selecting a sample of their appeals. Evaluate the steps taken for the appeal, the timeliness of appeal, and the strength of the case submitted to the insurer.
  • Third, make sure your employees have the tools, technology and resources to get the job done.

These three actions will give you the data you need to hold employees accountable for denial management and provide education or take corrective action to improve their performance.

The development of an effective denial management program takes more than just assigning an employee to “work” denials and resubmit claims. They monitor the denial as well as the employee.


As health expert we always say prevention is better than cure. This strategy is also applicable here. Armed with data regarding denials, the next step is to launch a prevention campaign. Sort denials by category to determine the potential opportunities to revise processes, adjust workflows or re-train employees, physicians and providers.

Manage your denial prevention program at the practice level, however. Developing a cross-functional approach prevents the common problem of one team “fixing” an issue, while another team “corrects” it — teams working in parallel on the same problem may end up working at cross-purposes, duplicating others’ work or failing to root out the problem altogether.

Check below some common reasons for a claim denied for better prevention.

Common Reasons for a Claim Denial

A key feature of the process is to investigate every instance where no pay or lower than expected pay occurs. An important goal for a Denial Management Process is to lessen the number of denials. Therefore, the process begins at the reception desk.

Pre-Certification or Authorization Was Required, but Not Obtained

Neglecting to get pre-certification can cost your practice and your patients money and can seriously decrease patient satisfaction. Knowing which insurers require pre-authorization and for what is essential.

In some cases your medical billing software can assist by flagging certain procedures and insurers so you’ll know what to do. Additionally, it’s better to get pre-authorization for a procedure that isn’t ultimately done, rather than to do a procedure and try to get retroactive authorization for it.

Claim Form Errors: Patient Data or Diagnosis / Procedure Codes

Claim rejections are often due to simple clerical errors, such as a patient’s name being misspelled, or digits in an ID number being transposed. These are quick fixes, but they do prolong the revenue cycle, so you want to avoid them at all costs.

Incorrect diagnosis and/or procedure codes can result in claim denials. While these situations can often be successfully appealed, again prevention is better. There’s no substitute for well-trained coders and the use of powerful medical billing software.

Claim Was Filed After Insurer’s Deadline

Different insurers impose different deadlines for claims submissions, and they have different policies about what you can do when you miss a deadline. In some cases, you can clear things up with a phone call, but in others, you may have to fill out more paperwork.

You may be able to use your medical billing software to notify you of claims submission deadlines and procedures to follow when you miss one. In general, however, it’s best to submit claims as soon as possible after services are rendered so your revenue cycle doesn’t slow down.

Insufficient Medical Necessity

Sometimes an insurer won’t pay for a procedure it believes to be medically unnecessary. These can be difficult situations for all parties, but you may be able to avoid them. In any case where medical necessity isn’t clear-cut, good communications among clinicians, medical billing staff, insurers, and patients is essential so everyone makes informed decisions.

When a claim is denied due to medical necessity, your practice could be forced to either absorb the cost of the services or attempt to collect the entire payment from the patient, neither of which are good options.

Use of Out-of-Network Provider

Insurer networks can change from year to year, and patients may not realize this, or that changing insurance companies may change which medical providers they can see and receive full benefits.

Ascertaining patient insurer information at the first opportunity can allow your billing staff to determine whether your practice belongs to a patient’s insurer network, and if not, what sort of benefits (if any) the patient can expect.

What is Denial Codes?

Since insurance companies and providers have a common purpose when it comes to claims payment, the electronic exchange of information, where all the parties understand billing codes, diagnostic codes, modifiers, and basic demographics is efficient. But, when an insurer denies a claim, billing specialists are not as familiar with the codes used, or at least the reasons for a particular code applied to a claim.


While claim denials are a chief source of frustration for your billing staff, they also put a damper on your practice’s cash flow. By proactively striving to Identify, Monitor, Manage and Prevent denials, you can educate your employees, streamline your work, improve internal processes, and get paid what you deserve.

If you find this helpful or have any other questions on this, you can tell you using our comments section.

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