What is Denial Management in Medical Billing?

Denial management in medical billing is the strategic process of identifying, addressing, and preventing claim denials from insurance companies. As a critical part of revenue cycle management, effective denial management can significantly improve the financial health and cash flow of healthcare providers. In fact, a recent industry analysis revealed a 20% increase in claim denials over the past five years, with approximately 65% of denied claims never being resubmitted—leading to millions in lost revenue for healthcare organizations.

With each denied claim costing between $30 and $117 to rework, these financial losses can quickly add up, especially when considering the labor and time spent on appeals and corrections. On average, healthcare organizations lose 5-7% of their potential revenue due to unresolved denials. Fortunately, by implementing the following best practices, you can reduce the number of denials your organization receives and ensure that denials have minimal impact on your revenue cycle.

By following these best practices you can work to reduce the number of denials your organization receives, and minimize their impact on your revenue.

1. Identification of Denied Claims

Claims that are rejected or denied by insurance companies are flagged and categorized. Common reasons for denials include:

• Incorrect patient information

• Coding errors (e.g., wrong or missing diagnosis/procedure codes)

• Lack of pre-authorization

• Failure to establish medical necessity

• Timely filing issues

Athenahealth will assign each denial a specific kickcode. These kickcodes allow you to group your denials by category and work through them systematically. This also makes it easier to analyze the reasons for your denials.

2. Analysis of Denial Reasons

Understanding why a claim was denied is essential for preventing future issues. This requires a detailed review of the denial reason codes, insurance policies, and any documentation related to the claim. In the 'Other' tab of the Report Library within athenaNet, you can run the denials report to identify trends within your organization. Is there a specific denial from a particular payer that occurs more frequently than others? What steps can you take to address the denial before it happens? Could a simple workflow adjustment resolve the issue?

At Ignite, our team of experts is ready to assist with analyzing denial reasons and helping your organization develop an effective action plan for denial resolution.

3. Appeals and Resubmission

Once the reasons for the denial are understood, the billing team will work on correcting the claim. This may involve submitting additional documentation, correcting coding errors, or appealing the decision with supporting medical records.

Although 67% of denied claims are recoverable, many providers lack the necessary resources to efficiently manage and appeal these claims. As a result, high denial rates can lead to delayed cash flow and increased operational burdens. To minimize these issues, healthcare organizations are encouraged to adopt strategies such as improved documentation, tracking denial trends, automating claims management, and engaging in proactive denial prevention practices.

Following athena’s best practice of always scanning a patient’s driver’s license and insurance card allows you to take full advantage of the co-sourcing model. When an insurance card is present, athena’s CBO team can take a first pass at resolving many denials, especially those related to insurance issues like invalid insurance or coordination of benefits. Athena will also submit an appeal on your behalf when additional documentation or supporting medical records are provided. At Ignite, we recommend creating worklists within athenaNet to route denials to the appropriate team members. Lastly, ensure that your team regularly runs the Zero Pay Review and Fully Worked Receivables reports.

4. Tracking and Monitoring

All denied claims are tracked to ensure they are resubmitted or appealed promptly. Most insurance companies provide a limited window for resubmitting or appealing a claim, so it is crucial to address all denials in a timely manner to avoid losing revenue due to missed deadlines. The status of each resubmission and its outcome are closely monitored until the claim is fully resolved.

5. Root Cause Analysis and Prevention

The old adage, "an ounce of prevention is worth a pound of cure," perfectly applies to denial management. To prevent recurring issues, effective denial management focuses on identifying and addressing the root causes of denials. The goal is to implement process improvements—such as improving documentation practices, training staff on coding accuracy, and ensuring timely submissions—that reduce the risk of future denials.

Staff training is often a top priority for organizations. Ensuring that staff members correctly enter insurance information, verify benefits, and obtain proper authorizations can significantly reduce the number of denials.

Many organizations struggle with the authorization process, whether it’s for medications, in-clinic procedures, or surgeries performed at other facilities. It’s common for add-on appointments to be missed or changes in procedures to be overlooked. Implementing a robust process to verify that authorizations are obtained before services are performed is essential.

Additionally, providers should be trained on the specific documentation required for payment of certain services. Having to ask providers to retroactively update or add documentation is frustrating for everyone involved and often results in lost reimbursement.

If your organization needs assistance, Ignite is here to help. Our team of experts can assist in establishing policies and procedures to reduce the most common denials.

Importance of Denial Management

In summary, effective denial management helps healthcare organizations:

• Improve cash flow and reduce the risk of lost revenue.

• Optimize operational efficiency by minimizing the rework required for denied claims.

• Enhance payer relationships through accurate and timely submissions.

References:

https://kms-healthcare.com/blog/denial-management-in-healthcare/

https://gebbs.com/blog/the-true-cost-of-denials-to-healthcare-providers/

https://www.rxnt.com/the-financial-impact-of-denied-claims-in-medical-billing/