Denial management is a crucial part of revenue cycle success, ensuring healthcare organizations receive the reimbursement they’ve rightfully earned for services provided. Yet managing denials is becoming increasingly difficult.
According to an MGMA Stat Poll, 60% of medical groups reported higher claim denials in 2024 compared to the previous year. Contributing factors include not only more aggressive payer behavior but also a regulatory and compliance landscape that grows more complex each year, making it harder than ever to get claims paid accurately and on time.
To help physician group finance leaders strengthen their understanding and approach, we’ve compiled answers to the top ten most frequently asked questions about denial management.
1. What is denial management, and why is it important?
Denial management refers to identifying, analyzing, and resolving denied claims from insurance companies or payers. It’s vital because denied claims directly impact a medical practice’s revenue stream. By effectively managing denials, practices can minimize revenue loss and improve cash flow.
Healthcare Finance has reported that nearly 15% of all claims submitted to private payers are initially denied, including many that were approved via prior authorization. However, the optimal industry standard is to keep your denial rate below 5%.
To calculate your practice’s denial rate, you need to add the total number of claims denied by payers within a given period and divide that by the total number of claims submitted within the given period.
2. What are the common reasons for claim denials?
Claim denials can occur for various reasons, including incorrect patient information, coding errors and lack of prior authorizations. According to Medical Economics, common reasons for denied claims, include:
- Lack of coverage
- Incomplete or inaccurate information
- Failure to meet medical necessity criteria
- Out-of-network physicians
- Prior authorization requirements
- Coordination of benefits issues
- Timely filing limitations
Understanding, and being able to address these common reasons is critical to implementing preventive measures. To prevent denials, closely review denial reports to identify trends and root cause.
3. How can medical practices prevent claim denials?
Preventing claim denials requires a proactive approach that starts with the front end of the revenue cycle. Strong processes at intake, documentation, and coding set the stage for clean claims and fewer downstream issues, making prevention far more effective than correction. Practices can implement strategies such as:
- Accurate patient registration, thorough documentation
- Regular staff training on coding and billing guidelines
- Timely submission of claims
- Conduct regular audits to identify and address potential issues before claims are submitted
Read more about this in our blog, Denial Prevention Strategies to Boost Revenue and Improve the Patient Experience.
4. What steps should be taken upon receiving a denial?
Upon receiving a denial, the first step is to thoroughly review the denial reason provided by the payer. Once identified, the practice should gather the necessary documentation to support the claim and determine if an appeal is warranted. Prompt action is crucial to meet appeal deadlines and maximize the chances of overturning the denial.
According to a Journal of AHIMA report, denials do not automatically relegate claims to the write-off bin. In fact, as many as two-thirds of rejected claims are recoverable. Therefore, success – and lower recovery costs – requires a strategic approach to ensure the process aligns with payer requirements.
5. How can technology aid in denial management?
Technology plays a significant role in streamlining denial management processes. Advanced billing software can automate claim scrubbing to catch errors before submission, track denied claims efficiently, provide real-time analytics to identify trends, and streamline the appeals process.
According to the MGMA, the use of a claims scrubbing tool and following all coding, documentation, and denials management best practices can significantly aid in improving days in A/R, but it doesn’t end there. You should also run frequent reports on these metrics to spot recurring issues, measure progress over time, and adjust workflows before problems escalate.
Above all, integrating technology into denial management can enhance efficiency and accuracy, allowing practices to spend less time chasing preventable denials and more time focusing on patient care and overall financial health.
6. What are the Key Performance Indicators (KPIs) for monitoring denial management?
Monitoring KPIs is essential for assessing the effectiveness of denial management efforts. Key indicators include:
- Denial rate
- Denial reasons
- Days in accounts receivable (AR)
- Denial resolution turnaround time
- Denial appeal success rate
At Health Prime, we recommend a weekly review of metrics so the practice can identify and monitor potential risks and identify any issues that have happened over the past week.
7. Is it beneficial to outsource denial management?
Outsourcing denial management can benefit medical practices, especially those struggling to handle denials effectively in-house. Professional medical billing companies specialize in denial management, leveraging expertise and resources to streamline processes, improve collections, and reduce administrative burden on staff.
Outsourcing your denial management and medical billing services can help you get paid faster, reduce overhead expenses, and increase patient satisfaction.
8. How can denial management contribute to revenue optimization?
Effective denial management directly impacts revenue optimization by minimizing revenue leakage and accelerating reimbursement cycles. By promptly identifying and rectifying denied claims, practices can maximize revenue potential, improve cash flow, and enhance overall financial performance.
At Health Prime, we believe practice optimization and revenue optimization are connected but not the same. Increased revenue is a byproduct of practice optimization. Optimizing your practice allows you to streamline processes, reduce costs, and maximize revenue while maintaining the highest service levels.
9. What role does staff training play in denial management?
Staff training is paramount in denial management success. Proper training ensures staff members understand coding and billing guidelines, payer policies, and denial resolution processes. Ongoing education and regular updates on industry changes empower staff to navigate denials efficiently and reduce errors.
Some reasons why training your staff is essential for your business wellbeing are:
- Increase productivity and performance
- Improve staff retention
- Enhance patient satisfaction
- Reduce/eliminate government penalties & fines
10. How can denial management support compliance with regulatory requirements?
Denial management aligns with regulatory compliance by promoting accurate claim submission and adherence to payer policies and guidelines. By staying informed of regulatory changes and ensuring compliance in denial resolution practices, medical practices can mitigate risks associated with audits and penalties.
Moreover, denial management encompasses navigating government program regulations, complying with documentation standards set forth by regulatory bodies, and following prescribed procedures during the appeals process.
At Health Prime, we can help!
At Health Prime, we understand the importance of reducing and controlling your denial rate so you can optimize your practice, increase revenue, and get paid for your work.
If you want more information about reducing your denial rate, increasing revenue, and optimizing your medical practice, email us at [email protected]. Our team will schedule a meeting to discuss how we can optimize your workflows by cutting costs and saving you time!
