What is Denial Management & Its Impact on Practice’s Revenue

Denial management is the process of evaluating, analyzing, and resolving issues that lead to denials. When denials happen, it’s not only about resolving them; it’s all about creating effective strategies that help to prevent future denials. But you can do it only when you know how to deal with them, and what they actually are.

You’re not submitting claims to face denials – you do it to get paid for what you deserve. In this guide, we will discuss what denial management in healthcare is, its types, and what steps you should take to improve your revenue and boost cash flow.

What is Denial Management in Medical Billing?

When the payer refuses to pay for the claims you submitted, then denials happen. And to manage those denied claims, you need to identify the root cause, categorize it, and resolve the issues to get reimbursed for the care you deliver. It’s a whole process which is known as denial management in medical billing. By doing this effectively, practices improve cash flow and strengthen the revenue cycle.

What are the Types of Claim Denials?

By understanding the types of claim denials, your billing team can make better decisions about whether to resubmit the claim or risk losing revenue entirely. Here are the two types of claim denials.

Soft Denials

When the payer refuses to pay due to medical billing errors in submitted claims, but you can resolve and fix those errors, it is known as a soft denial. Hence, you can recover your lost revenue for the rendered services.

For example, if the billing team misspells the patient’s name, forgets to enter the address, or uses incorrect medical codes, you can fix it within the timeframe and resubmit it. The payer rechecks the details and pays you for the care you deliver to the patient.

Hard Denials

If hard denials occur, you lose revenue and can’t reverse them. These denials are irreversible and unfixable, and they appear for various reasons.

For example, if provider credentialing has expired or doesn’t have any credentials with the payer, the service or treatment isn’t covered by the payer. In these cases, you can’t get your payment back, and you’ll lose revenue entirely.

How to Identify Insurance Claim Denials?

It’s so simple to identify insurance claim denials, as many health insurance companies (payers) are now using automated and systematic processes to send denials.

Once you have submitted claims, monitor and track claims within the payer-specific reimbursement timeframe, which typically ranges between 30–45 days. After these days, you will receive your payment, and if denials occur, the payer send it through EOB or ERA statements.

EOB (Explanation of Benefits) – It’s the PDF or document sent by mail or email.
ERA (Electronic Remittance Advice) – As technology evolves and payers use billing portals, it’s the digital record of denied claims.

Payers use these methods to share the denied claims. In these statements, you can see the reason why the denials appear. These reasons are specified in codes, standardized language used by the payer, also known as denial codes.

Understanding these codes is essential for effective denial management. To learn more about common denial codes and what they mean, check out our complete guide to denial codes.

What are the four steps to manage denied claims?

Managing denied claims is essential for the practice’s growth. If you don’t re-appeal rejected claims, you lose revenue, which stresses you and diverts your focus from patient care. Here, the step-by-step denial management process consists of just 4 steps. By following these steps, you will get your money back efficiently, streamlining your billing cycle and improving the reimbursement process.

Step 1: Identify & Categorize Denials

The first step your billing team should take when denials occur is to identify and categorize their type. By checking the ERA or EOB statements, find the reason for the denial claims. Whether the claim is rejected due to missing information or completely denied due to major reasons, such as incorrect codes or insurance coverage issues. Then, categorize them based on their types – soft or hard denials. If the soft denials occur, fix them and resubmit; for hard denials, create an appeal letter (if applicable) to ensure you recover the money you deserve.

Step 2: Determine the Root Cause

Once you categorize the denial, then work to know their reasons. For this, you should check the CARC (Claim Adjustment Reason Codes) on the letter. It helps you understand the exact cause of denials. Moreover, payers sometimes use RARC (Remittance Advice Remarks Codes), which provides additional detail on denials.

For example, if the payer uses CO-19, it triggers the duplicate claim submission, and uses N522, it indicates that the service is already paid.

Step 3: Fix & Resubmit Denied Claims

When you have the what and the why of denials, you can easily correct them. Make sure to fix medical billing errors and then resubmit them within the specified timeframe. If you don’t promptly reappeal those denials, you lose your money.

Step 4: Track the Claim

Never forget that you have appealed the denied claims. Make sure to track the claim status to ensure the claim is processed or denied again. If you got a denial again, then you need to change your denial management strategy if it’s not working.

Why do Medical Practices Monitor the Status of the Denied Claims They Submit?

Medical practices should track, analyze and monitor the status of the denied claims they resubmit to improve the revenue cycle. The denial follow-up process is mandatory as it prevents you from losing thousands of dollars. By doing this, your practice will enable you to:

Recover lost revenue and boost cash flow.
Save more time on administrative work.
Focus more on the patient without financial stress.

How eClaim Solution Reduces Denials Up to 15 - 20% & Helps Practices Grow

By using a proactive denial management approach, we cut off 15 – 20 denials and help practices grow. At eClaim Solution, we use advanced tools and technology that help us prevent denials before they happen.

With years of experience in healthcare billing, our denial experts know how to resolve issues before it costs you money. From small practices to the large ones, our denial management solutions help you recover every single penny you deserve. By staying updated with every payer-specific policy, we ensure a smooth medical billing process, reducing the chances of denials.

If you’re facing continuous denials, then connect with our denial experts and get a free consultation on how to prevent future denials and enhance your practice’s growth.

Frequently Asked Questions

What is denial management in healthcare?

Denial management in healthcare is a comprehensive process of identifying, analyzing, and resubmitting claims that the payer refuses to pay, ensuring that every doctor is fully paid for the care they deliver to patients.

What are the common reasons for denials?

There are various reasons for claim denials, but the most common are missing patient information, incorrect use of CPT codes or modifiers, and prior authorization issues.

How do practices train staff to avoid denials?

Whether you’re a small practice or a large healthcare organization, make sure to train your medical billing staff to prevent future denials. Here’s what you should do;

Keep them updated with current payer policies.
Make sure they follow HIPAA rules.
Help them stay up to date with every medical code.

Do practices and providers get paid for denied claims?

Yes, if they resubmit or appeal the denied claims on time and accurately, they get paid for them.

How to manage denials effectively?

To manage denials effectively, you should track and monitor denied claims, then resubmit them efficiently.

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