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What Is Denial Management?

Insurance claim denials are a massive financial headache for private practices today. In essence, a denial is a threat to your income. And when denials pile up, they affect your practice’s financial health. 

Practicing denial management in healthcare can keep your business on track and help you focus more of your time on patient care. Let’s dive into the denial management process and best practices.

Understanding Denial Management

Before optimizing your denial management, it’s important to understand how the process works and what it means for your practice.

What Is Denial Management in Healthcare?

Denial management in healthcare is the process of identifying and analyzing claim denials to create new workflows that ultimately reduce your denial rate or improve reimbursements for your practice. 

While denial management may not prevent 100% of denials, it provides a path for reducing your denial rate and steps for claim reconsideration or resubmission.

Why Is Denial Management Important?

When a payer denies your claim, they will not reimburse you for the care or services you provided. That means you’re not getting paid and you’re providing care for free.

While a few denials may not break your business, you can suffer significant financial setbacks if denials pile up. Finding trends within your denials and resolving these issues can help ensure your practice receives regular reimbursement and has a consistent cash flow to operate.

Challenges of Claim Denial Management

One challenging factor to denial management is that every payer is different. They have varied rules and processes for filing claims and managing denials. What may be a breeze with one payer could be an arduous process for another. 

For example, the Kaiser Family Foundation (KFF) found in its 2021 analysis that in-network denial rates averaged 17% for Affordable Care Act (ACA) Marketplace plans. But some of those plans had denial rates as high as 49%. 

Above all else, denial management takes time. It requires tracking claim statuses and payer responses, analysis and workflow changes. And unfortunately, time is often in short supply when you’re also managing a practice or a full patient schedule. 

Common Reasons for Claim Denials

Some of the most common reasons for claim denials include:

    • Invalid insurance – Verifying a patient’s insurance is the first and most critical step of your reimbursement process. Double-checking that your patients have an active insurance plan can significantly reduce your denial rate.
    • Coding errors – Coding claims can get confusing, especially when you venture into time-based CPT codes or need to use modifiers
    • Incomplete or incorrect documentation – Sometimes, a payer may deny a claim because you haven’t provided enough information or the correct information to support the diagnosis or treatment.
    • Credentialing issues – If you or another clinician is not paneled (credentialed) with an insurer, they can’t process the claim. Staying on top of your practice’s credentialing can help avoid these issues.
    • Not filing on time – Each insurer has a timeframe in which you can file a claim (timely filing). If you file a claim outside this timeframe, the payer will deny it.
    • Payer-specific denials. Every payer has different guidelines for submitting claims and what works for one payer may not work for another. For example, Medicare claims may have local coverage determinations (LCDS) you need to follow to avoid a denial.

What Is the Denial Management Process?

The denial management process involves identifying and analyzing claim denials, correcting and resubmitting those claims, and improving workflows to avoid future denials. Let’s jump into each of these steps.

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Identifying and Analyzing the Denial Reason

When an insurer denies a claim, they send an explanation for the denial — this is the reason code or claim adjustment reason code (CARC). The code may indicate a problem with insurance eligibility, incomplete documentation, modifier errors, etc.

While these codes are essential for identifying the root cause of the denial, they can often be confusing. Working with an in-house or outsourced billing expert can help ensure you fully understand the denial reason.


Correcting Denials and Resubmission

Once you’ve identified the denial reason, you can work on correcting and resubmitting the claim. Again, an expert insurance billing and revenue cycle management (RCM) team can help here — they can route the claim to the appropriate resource to get the corrected information.

For example, an insurance error may mean contacting a patient for up-to-date coverage information. Or, if there’s insufficient documentation, you may need to work with one of your clinicians to get additional diagnosis or evaluation details for the claim. 

After collecting the required information and correcting the claim, you can resubmit it to the insurance company. 

Tracking and Process Improvement​

Denial management in healthcare doesn’t end with resubmitting the claim. You must monitor trends with claim denials and create steps to correct recurring issues. Sometimes, this may mean improving internal workflows and review processes. 

If it feels overwhelming to track and resolve claim denial trends, remember that you can lean on an RCM or billing partner to manage this process on your behalf. A good partner will keep you in the loop about denial trends and what they’re doing to improve the denial management process.

How to Improve Your Denial Management Workflow

If you’re seeing your denial rate climb, it’s time to review your denial management process and look for ways to improve. Here are a few places you can start.

Take Steps to Ensure Accurate Coding

    • Stay up to date with coding guidelines. This includes changes to CPT/HCPCS codes (such as E/M codes) and ICD codes.
    • Use certified professional coders (CPCs) within your in-house billing team. If you use an outsourced billing provider, ensure they have CPCs on staff. CPCs pass rigorous coding certification exams administered by the American Academy of Professional Coders (AAPC).
    • Conduct coding audits. Work with your billing team or administrative staff to analyze denials and find trends in coding errors. Identifying the trend is the first step in resolving future denials, whether it’s a payer quirk or an internal issue.
    • Train administrative staff and providers on coding best practices and updates. This is especially important if you have limited billing resources.

Create a Thorough Documentation Process

  • Educate clinical staff on best practices. Denial management isn’t only for billers, coders and administrative staff. Providers must understand best practices for submitting claims to reduce denials and avoid excess administrative work.
  • Create templates and checklists for the claim process and distribute them to your team. This may include actions clinicians need to take to create an accurate claim. The checklist can also feature necessary review steps for billers or administrators submitting the claims to insurers.

Establish Strong Payer Communication

  • Stay up to date on policies. Payers are constantly changing their claim submission policies. It’s critical to stay up-to-date on these requirements to avoid denials and payment delays.
  • Know the best way to resubmit or ask about a denial. Establishing an effective communication process with payers will help you and your team quickly get the information you need. This will help ensure you can resubmit claims successfully and promptly, which will ultimately help your practice’s bottom line.

Don’t Go Straight to Write-Off

  • Know the appeals process. Aside from good payer communication, it’s also critical to know the denial resubmission process for each payer. Documenting and reviewing this process with your team can help ensure more denied claims are eventually accepted.
  • Submit appeals on time. Each payer has a time limit on when you can submit a claim (timely filing), including corrected or resubmitted claims. Ensure you have these timelines documented and have a process in place to avoid missing a filing deadline.
  • Track the progress of appeals/resubmissions. Once you submit a corrected claim, don’t forget about it! As with other parts of the denial management process, staying on top of your claims can help you identify trends that inform improvements to your claim workflow. Keeping track of the claim journey will also help you stay on top of your practice’s financials, giving you a better idea of your practice’s insurance collection volume and accounts receivable.

Use Technology and Automation

  • Use automatic claim editing tools. The claim scrubbing process can be tedious and time-consuming. Billing and RCM software can offload this work by creating rules that edit claims automatically, saving you time and reducing errors that cause denials.
  • Employ software that can learn from denials. Although artificial intelligence (AI) may feel like a buzzword today, it can be a powerful resource for denial management in healthcare. With machine learning, some billing and RCM software can spot denial trends for your practice and make adjustments — saving time spent on manual analysis.

Claim Denial Management: An Essential Step in Your RCM

Claim denial management is a critical part of running a successful private practice. Without it, you won’t see adequate payment from insurers and your practice’s bottom line may suffer.

But denial management can be time-consuming and frustrating — it likely won’t be your favorite part of running a practice. Using an expert billing team will offload that work and help ensure your practice gets reimbursed as fast as possible. 

Whether you hire a biller or want to handle everything in-house, monitoring denial trends and creating effective denial management workflows will be crucial to your practice’s longevity.

Get paid by insurance without the hassle. Gentem will handle the heavy lifting for you, from calling payers to claim resubmissions. And with our automated claim edit software, you’ll see fewer rejections and denials, which means faster payment for your practice. Want to learn more? Book an intro call with our team today.

WATCH: Revenue Cycle Tips for Staying Independent

Many physicians are leaving private practice due to rising costs, lower reimbursement rates and staffing shortages. But staying independent is possible with a healthy revenue cycle.

Learn how to run a successful private practice with tips from this 20-minute webinar session.

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