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How to Manage Denied Claims Effectively in Healthcare

The first thing healthcare providers need to understand in denied claims management is what denial management is and how important it is for revenue cycle management. In medical billing, denial management services consist of preventing, investigating, analyzing, and then resolving denied insurance claims. The benefits for insurance claims that are accurate and timely include timely reimbursement and a reduction in money spent on reworking the claims. Physicians lose a noticeable amount of money each year owing to claim denials –denials that are preventable through strong denial management processes.

Need for Effective Denied Claims Management

The change healthcare revenue cycle denial index states that the average cost for reworking a claim falls between $25 and $117. If you chase 100 denials per month, your practice must invest anywhere from $2,500 to 11,700. It is precisely where outsourcing medical billing services comes into view. With proactive denial management, healthcare practices can save money and refocus their time on patient care.

Denied Claims Management for Healthcare Practices

Effectively managing denied claims is essential for the financial stability of any healthcare organization. The way the processes of handling claim denials can significantly impact revenue, collections rates, and patient satisfaction. It all also depends on what you expect from a perfect anatomy of a clean claim. To enhance denial management, consider these key fundamentals:

Key Fundamentals of Effective Denied Claims Management

Denial management plays a pivotal role in the success of healthcare service providers. Understanding and implementing the following three key fundamentals can make a substantial difference:

1. Prevention

The initial step in effective denial management is prevention. Taking proactive measures during pre-admit, scheduling, registration, or billing can help prevent healthcare claim denials. It is essential for denial management experts to consistently track progress and provide clients with periodic updates on the process and any implemented changes.

2. Analysis

Analyzing and grouping similar denials is an important aspect of denial management. Categorizing and examining denials helps healthcare providers identify the root causes, offering valuable insights for preventing future denials. The data collected by the denial management team facilitates informed business decisions, contributing to practical approaches to avoiding claim denials.

3. Monitoring and Trend Management

Tracking healthcare claim payment patterns across various payers is vital. Establishing a system to alert when slipups from the normal trend are detected is essential for understanding the causes of claim denials. This approach enhances long-term efficiency and reduces revenue losses associated with claim denials.
Effective denial management involves a strategic combination of prevention, analysis, and tracking. By following these fundamentals, healthcare organizations can optimize their revenue, improve collection rates, and ensure greater financial stability.

Best Practices for Healthcare Denied Claims Management

With healthcare reimbursement and coding operations, effective denied claims management demands collective efforts from concerned teams. Increasingly, teams are also turning to software solutions for valuable support.
Below are some tips that can streamline your denied claims management process, including:

1. Understanding the Reason for Claim Denials

The primary strategy in effective denied claims management is understanding the reason behind the denial. Insurance companies can reject claims for varying reasons, including:

  • Incorrect coding
  • Missing documentation
  • Apparent lack of medical necessity.

Before taking any action, it’s essential to pinpoint the cause of the denial and pre-plan the necessary steps to resolve the issue.

2. Appeals for Denied Claims

Initiating appeals for denied claims is another important step in effective denial management. Understanding the appeal process and following the submission deadlines is important. When appealing a denied claim, supplement it with additional documentation supporting medical necessity, ensuring all coding is accurate. Regularly follow up with the insurance company to track the progress of the appeals, escalating if needed

3. Monitor Performance Metrics

Identifying trends and addressing basic issues that contribute to claim denials is important and also an essential step in monitoring performance metrics. Establish a system to track denials, analyze data to uncover patterns, and address the root causes. This information identifies areas for improvement and guides process changes to prevent future denials.

4. Educate Staff

Successful denied claims management calls for a collaborative team effort. Educating your staff on the importance of accurate documentation, accurate coding, and timely billing can help reduce the number of denied claims. Ongoing training and support ensure that staff stays current to the latest industry standards and best practices.

5. Utilize Technology

Technology is a powerful support in reforming denied claims management and reducing administrative burdens. Consider integrating denial management software systems capable of tracking and managing appeals, offering real-time analytics, and automating workflows. This technological approach facilitates quicker and more efficient identification and resolution of denials.

Benefits of Effectively Managing Denied Claims in Healthcare Organizations

Effective denied claims management for your healthcare organization offers numerous advantages. Some benefits include:

1. Higher Clean Claims Rate

According to HFMA, aiming for a clean claims rate of 98 percent is advisable for physician groups and management services organizations. As mentioned earlier, denied claims result in added administrative costs, increased staff working hours, and delays in payment processing.

2. Better Net Revenue Collection

Effective and timely management of denials also presents the potential for an increase in net revenue. Healthcare organizations can ensure a healthier financial bottom line by addressing and resolving denied claims efficiently.

3. Enhanced Patient Experience and Loyalty

Beyond financial gains, managing denials contributes to an improved patient experience and increased loyalty. Denied claims can be a source of frustration for patients eager to receive necessary care. Satisfied patients are essential for positive word-of-mouth referrals and are a helpful factor in expanding your patient base.
The benefits of managing denials extend beyond financial considerations and further impact the overall efficiency of your healthcare organization. Achieving a high clean claims rate, optimizing net revenue collection, and increasing patient satisfaction is integral to a successful denied claims management strategy.


It is clear that effective denied claims management is vital for optimizing revenue and maintaining a robust bottom line in medical billing. By understanding the reasons for denial, initiating appeals for denied claims, keeping an eye on performance metrics, educating staff, and leveraging technology, healthcare practices can efficiently handle denials and enhance overall revenue cycle performance. Adding these tips to your denial management process can simplify operations and improve the bottom line.