Denial Management Strategies in Medical Billing

One revenue cycle area that is cause for concern throughout all medical practices is claims denial. Denied claims not only add days to the revenue cycle and therefore disrupt cash-flow, but can also rob you of potential revenue if not resolved in a timely manner. Additionally, the cost of working each denied claim adds to this burden.

The best option is to prevent claims from being denied. According to KK Goel, Vice President of Medical Coding at Cosentus, up to 90% of all denials can be prevented. Therefore, it is a good idea to optimize your healthcare revenue cycle and adopt the industry’s best practices for Medical Billing and AR Management to reduce the future denial rate. However, you have denials today and they need to be tackled to ensure you do not lose out on your well-deserved reimbursement.

In our constant effort to help the community optimize Medical Billing and maximize practice revenue,Cosentus has put together 4 real-world key strategies to manage your current denials, as well as reduce future denials.

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Strategy#1: Denial Tracking And Management

Here are some facts about denials: Almost 50-60% denials are not worked in a timely manner, which results in 5-7% of lost revenue. Most healthcare systems do not have a clearly defined workflow for denial tracking management.

Cosentus is a leading provider of optimizedmedical billing services and we recommend you incorporate these in your denial management workflow to effectively resolve denied claims:

Create a well-defined list of CARC (claim adjustment reason code) group them by similarity of further follow up actions.
Create a separate AR bucket for denials, and within this bucket, create sub-buckets for similar issues.

Determine who your best suited employees are to work a certain kind of denial and give them the ownership of that bucket/sub-bucket.
Maintain a denial dashboard to keep track of every denial received, when it was worked, when the next review date is, and what the expected outcome of the follow up being done is.
31% physicians still rely on a manual claims denial management system. If you do not have the correct technology available to track and work denials effectively, invest in some or partner with the right billing service.

Strategy#2: Work Denials On Priority

According to Roger Brown, VP of accounts receivable at Cosentus, the moment a claim gets denied, your reimbursement gets pushed back by an additional 21-45 days. Cash flow is the life line of any business and your practice is no exception– you need sustained cash flow to ensure that exceptional care to patients may continue.

We recommend the following:

All denials must be worked within 48 hours of being received.
Every follow-up should be followed by detailed notes a pre-defined follow-up action with the next review date.
Create a standard list of action codes to be used in each scenario, and define the next review date for each action.
Make sure this is discussed with the team and that every employee possesses the same understanding of how each code is supposed to work.

Stick to the follow-up promises to ensure the loop is closed on the case and resolutions are guaranteed.

Strategy#3: Clearly Define Dispute Strategy

Contrary to popular belief, not all denials need to be disputed. A well-defined dispute strategy will tell you which denials are to be accepted versus which ones need to be disputed. This is important because these is a cost to work each denial, and some industry sources put this at approximately $25 each.

Key elements of an effective dispute strategy:

Set up a standard of which denials to dispute, as well as the most effective medium of disputing them.

Set up your CARCs to determine what will happen to a denial after it gets posted with a certain code.
The denials that need disputing should go to a dispute bucket, while others should be either written off or rolled over to the next level. If set up properly and technology permits, your CARCs should be able to take care of this at the time of posting itself.
The appeal success rate is highly dependent on the content of the appeal. This is where having standard appeal templates with approved standard verbiage is a must.
Track the success rate for each type of appeal and calibrate your appeal process for continued improvement.
Clinical denials should be worked by employees who have exposure to the clinical side.

Not all denials need written or telephonic appeal. Review the EOB closely to follow the next best step. It can be a simple refile after the demographic error is fixed.

Strategy#4: Preventive Denial Analysis

The best way to handle claims denial is to prevent it from happening in the first place. According to industry sources, the general denial rate for practices is anywhere between 7-10%, while it should be definitely less than 4% and should improve to no more than 2%.Preventive denial analysisis the root case study of all denials received is aimed at reducing the future denial rate.

It is recommended to analyze the following:

What caused the denial? Was it a billing error, an issue related to coding, patient eligibility, or the wrong payer being billed, etc.?

Could this denial have been prevented?
If so, how could the denial have been prevented? If it was an eligibility issue, review your eligibility verification process and see if it needs to be fine-tuned.
Do an 80:20 analysis of your denials to see which issues are affecting you the most and how they can be resolved.
Do not try to improve every process at the same time. One step at a time will give your better results.

Conclusion:

At the heart of a proactive denial management initiative is a sustainable, technology driven workflow supported by data inputs and staff expertise. To stay on top of the current situation and eventually reduce the future denial rate, your organization must involve and educate parties from each revenue cycle function on how to most effectively do so. Effective AR management collection optimization must start with the submission of clean claims.

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FAQ's

What is denial management in healthcare?

Denial management is the process of identifying, analysing, and correcting denied insurance claims to improve revenue cycle performance and reduce financial losses.

Why is effective denial management important for medical practices?

Effective denial management helps practices recover lost revenue, streamline workflows, reduce administrative burden, and improve overall financial performance.

What are the most common reasons insurance claims are denied?

Claims may be denied due to coding errors, incomplete documentation, eligibility issues, incorrect patient information, or missing prior authorisation.

How does tracking denial trends improve revenue cycle performance?

Tracking denial trends helps identify recurring issues, root causes, and patterns so practices can implement corrective action and prevent similar denials in the future.

What role does staff training play in denial management?

Proper staff training ensures that team members understand documentation requirements, coding guidelines, and payer rules, reducing errors and preventing avoidable denials.

How can healthcare technology support denial management?

Technology solutions like denial tracking software, automated workflows, and analytics tools can help streamline the denial management process, improve accuracy, and speed up resolution times.

What should a practice do after a claim is denied?

After a denial, practices should quickly determine the denial reason, gather necessary documentation, correct any errors, and resubmit the claim according to payer guidelines.

Can denial management strategies reduce future denials?

Yes. By analysing denial data and implementing targeted improvements (such as better documentation and coding practices), practices can significantly reduce the likelihood of future denials.

Who should be responsible for denial management within a practice?

A dedicated team or individual—such as a billing manager or revenue cycle specialist—should oversee denial management to ensure timely analysis, follow-up, and process improvements.

How does effective denial management impact patient satisfaction?

Reducing claim denials decreases billing delays and patient confusion, leading to a smoother revenue cycle and higher patient satisfaction.