This denial is from the principal with the health insurance company or Medicare, who denies the reimbursement request for its services from a healthcare provider. Irrespective of the reason, a claim denial can mean either a delay or a loss of revenue to a hospital, diagnostic centre, or other types of providers, restricting cash flow, which hampers the provider’s ability to efficiently operate. Hence, denial management forms a critical aspect of health administration and ensures the importance of accuracy in medical billing and coding.

What is denial management?

Denial management in medical billing is a plain definition of identifying and resolving problems associated with the cause of denial on medical claims. Denial management includes preserving the current claim denials for the prevention of future denial because the optimum cash flow of the provider will be profitable to such a denial management system. At one end of the effectiveness view, it could even produce something so clear-cut as fixing a coding error; at the other end, it could be as nebulous as the fostering of a better understanding between provider and payers. 

Role of denial management

According to it, the IMMP benefits with respect to systematic management of claim denials, which stands for Identify, Manage, Monitor, and Prevent in that it relates to denial management:

1. Identify 

This is the step of this denial management process where the provider selects the reason behind the claim denial. Claim Adjustment Reason Codes (CARC) are usually given by the payer in the accompanying explanation of payment, but it can be confusing. Now, it was a bit confusing, but basically, the task at this stage is to sort through what the payer has told you and determine the true basis for the denial. It’s time-consuming, but that’s where the stick-to-itiveness of a seasoned medical billing specialist or other medical billing and coding professional really pays off here. 

2. Manage 

Here is the next step once the why has been determined through the exact reason why the claim has been rejected. The next step will be determined by the process that the IMMP prescribes for the next action.

1. Route denials directly: Any and all denials due to coding should be routed directly to the coder for action on the item. Denied transactions can be routed directly into worklists through automated tools to organise and streamline paperwork.
2. Sort Work: The Denial Management Team can take all those worklists and use software tools to sort them by amount, time, reason for denial, and other qualifiers as opposed to manual systems. 
3. Create Standardised Workflows: By breaking down the most common type of denial that a facility gets and finding the most frequently used codes that correspond to that type of denial, an action plan for working with such denials could be developed.

3. Monitor

The processes in the monitor phase should keep detailed records of denial types, received date, appealed date and what happened. The denial management team of the provider should be audited through the appeals process and provided with appropriate resources and tools to perform their role effectively and quickly.

Another critical aim in this monitoring phase is to understand a little better the why, when, where, how many, and types of denial per claim. This data can then give a picture of denial trends for the provider organisation, thus allowing it to establish a better relationship with insurers and reduce future denials.

4. Prevent

After securing all information related to claims denial as part of the denial management exercise, the last preventive measure would be prevention. It could involve retraining staff, changing workflows, or revising processes.

Several team members within the practice may be responsible for a claim denial; therefore, the provider may wish to get these team members together and let them know what has been done in mitigating claim denials so that they may understand how practices should be altered to prevent errors that lead to future claim denials due to issues such as registration, authorisation deficiencies, or medical necessity.

Types of Denials for Healthcare 

Hundreds of extremely different brutes lurk around every corner and twist and turn the cause for claim denial from clinical-related to business office-related causes in the provider’s world. Some of these include:

1. Missing or incorrect patient information: Sometimes this is just as minor as a date of birth or the date on which the treatment was provided.
2. Coding errors: Denial of claims occurs when there is an incorrect code with regard to a treatment, such as billing a procedure performed on an infant for an adult patient. That is the main reason why accurate medical billing and coding should be stressed in health care.
3. Filing late: There are deadlines established by the payer to which claims must be submitted; otherwise, it will also be subject to denial of claims.
4. Duplicate claims: To begin with, claims billed for events or services performed several times may be viewed as duplicates if a modifier is not attached to indicate that the claim is not duplicated.
5. Missing authorisation: Pre-authorisation is usually needed by insurers before providing a payment for surgical and other medical procedures. Claims normally will be denied for procedures that were non-authorised if the patient did not obtain prior approval.
6. Dual coverage issues: Claims become tricky when two health insurances are available, as in the case of an injured patient having primary health coverage in addition to Workers’ Compensation coverage. Then arises the complication of filing claims, especially if there is any disagreement with one of the insurers or both of them.

Strategies for effective healthcare denial management

Two main strategies for effective healthcare denial management are:

1. Prevent denials upstream with accurate patient access.

There are many denial strategies, and in any denial reduction strategy, the first step should be targeting patient access because it affects early revenue cycle denials. This application uses data capture technology powered by AI to collect and verify patient information in seconds. Eligibility verification, coordination of benefits (COB), Medicare Beneficiary Identifiers (MBI), coverage discovery, and financial information from those items are all contained within how quickly and accurately a patient will pay. Staff can rest assured that their claims are built on the correct data without running multiple queries.

2. Process denials more efficiently with workflow automation.

It could also be noted as a second strategy to streamline the denial workflow in order to lessen the administrative burden on employees as well as expedite appeals. Denial Workflow Manager automatically identifies denials, holds, suspends, zero pays and appeal status so that the staff members can very quickly follow up without the need to go through a manual review process for each case. Employees now have the time and intelligence to rework those denials which have the best chance of being overturned, resulting in maximum cash inflow. Additionally, by using ClaimSource®, all these activities can be performed through standardised protocols such that claim and denial information appears on the same screen.

Denial Workflow Manager provides ANSI reason and payer codes and descriptions so that staff are clear as to why claims were denied. Reports and responses can be shared with health information and practice management systems to ensure better coordination. This tool also contains advanced analytics to recognise trends and define tactics for further enhancement. This drastically reduces the overall time and cost in managing denials.

Why is it more essential to manage denied claims?

According to a report by health professionals, the number of claims that were denied has been increasing. The report cites limited staff training and insufficient employees as some reasons contributing to submission problems. Respondents have cited authorisations, provider eligibility, and coding inaccuracies as the top reasons for claim denials. An upheaval in the industry caused by the pandemic has led to increased denials.

Revenue cycle decision-makers have deemed denials their biggest challenge based on the Experian report. According to a HealthLeaders article, 2023 is the year for reducing denials since the rate of denial increases is high. Denying a claim can be a worrisome thing among many healthcare organisations and can be considered a concern, as it makes up about 11% of all claims in 2022 or up almost 8% from the previous year, according to the article. The cost of denial rose by 67% between January 2021 and August 2022 due to prior authorisation denials regarding inpatient accounts. However, most of the health systems are not maintaining good denial management strategies since denials are avoidable.

The future of denial management in healthcare

While automation has lifted healthcare denial management out of inefficient manual processes, AI takes predicting and preventing denials a step further. London’s Premier Hub of Training and Consulting offers healthcare courses and actionable strategies to help you lead with confidence and skill. Join us to shape the future of healthcare. AI AdvantageTM enhances the denial management toolkit with two new offerings:

Predictive Denials uses the provider’s own claims data from within ClaimSource to identify claims that are most likely to be denied so staff can step in to take corrective action before submitting the claim. Denial Triage analyses and segments denials that do occur so staff can focus on reworking claims with the highest potential for reimbursement.

With these tools, providers can eliminate guesswork, reduce denials and minimise financial losses. But it’s not just about finding more innovative ways of working: payers have already made huge strides in using AI to deny claims at speed and scale. The future of denial management in healthcare will hinge on technology, and providers will need to adapt to keep up with the fierce competition.