How to Manage Medical Billing Denials Effectively

 To manage Medical billing denials are a common and costly problem for healthcare providers. They occur when insurance companies reject or refuse to pay claims for various reasons, such as missing or incorrect information, lack of prior authorization, medical necessity issues, out-of-network providers, duplicate claims, coordination of benefits, or bundling. According to industry averages, nearly 20% of all claims are denied, and as many as 60% of returned claims are never resubmitted. This results in an average annual loss of $5 million for hospitals and up to 5% of net patient revenue. Moreover, the cost to rework or appeal denials averages $25 per claim for practices and $181 per claim for hospitals.

However, not all denials are final. In fact, as many as two-thirds of rejected claims are recoverable. The key is to have a strategic approach to denial management that aims to prevent denials from happening in the first place, and to resolve them quickly and efficiently when they do occur. Here are some steps to follow for effective denial management in medical billing:

1. Measure and track your denial rate

The first step is to measure and track your denial rate, which is the percentage of claims that are denied by payers. You can use your practice management system or billing software to generate reports that show the total number and dollar value of claims filed, denied, and paid by payer, reason, provider, specialty, and location. You can also calculate the percentage denied by dividing the number or value of denied claims by the total number or value of filed claims. This will help you identify the most common reasons and sources of denials, as well as the trends and patterns over time.

2. Analyse the root causes of denials

The next step is to analyze the root causes of denials, which are the underlying factors that lead to claim rejections or refusals. You can use the coded data on the claim submissions, such as denial codes or remark codes, to determine why each claim was denied. You can also review the payer contracts and policies to ensure that you followed the proper guidelines and requirements for each claim. Some of the most common root causes of denials are:

  • Prior authorization: The claim was denied because prior authorization was not obtained or documented before the service was performed.
  • Missing or incorrect information: The claim was denied because some information was missing or incorrect on the claim form, such as patient demographics, plan code, modifier, diagnosis code, or procedure code.
  • Medical necessity: The claim was denied because the service was deemed medically unnecessary by the payer, or because the documentation did not support the medical necessity of the service.
  • Procedure not covered: The claim was denied because the service was not covered by the payer’s policy or benefit plan.
  • Provider out of network: The claim was denied because the provider was not contracted or credentialed with the payer’s network.
  • Duplicate claims:The claim was denied because it was submitted more than once for the same service on the same date by the same provider for the same patient.
  • Coordination of benefits: The claim was denied because it involved a patient who had more than one health plan, and the coordination of benefits was not updated or communicated correctly.
  • Bundling: The claim was denied because it included two separate services that were grouped together by the payer and paid as one fee.

3. Implement preventive measures

The third step is to implement preventive measures that can reduce or eliminate denials before they happen. This involves redesigning or re-engineering your processes and workflows to ensure that you capture accurate and complete information at every stage of the revenue cycle, from scheduling to coding to billing. Some of the preventive measures that you can take are:

  1. Verify patient eligibility and benefits before each visit
  2. Obtain prior authorization for services that require it
  3. Educate patients about their financial responsibility and collect copays and deductibles upfront
  4. Use electronic claims submission and avoid manual errors
  5. Follow up on claim status and resolve any issues promptly
  6. Review payer contracts and policies regularly and stay updated on any changes
  7. Train your staff on coding and billing best practices and compliance
  8. Conduct regular audits and quality checks on your claims/

4. Resolve denials quickly and efficiently

The fourth step is to resolve denials quickly and efficiently when they do occur. This involves appealing or resubmitting the denied claims with the correct information and documentation, as well as tracking and monitoring the outcome of each appeal or resubmission. Some of the best practices for resolving denials are:

  • Assign a dedicated team or person to handle denials
  • Prioritise denials based on the amount, payer, and deadline
  • Follow the payer’s appeal process and guidelines
  • Provide clear and concise reasons and evidence for each appeal
  • Use electronic remittance advice and automated tools to streamline the process
  • Document and report the results and feedback of each appeal or resubmission


Denial management in medical billing is a crucial part of the revenue cycle management process. It involves examining each denial thoroughly, conducting root cause analysis, analysing denial trends, and redesigning or re-engineering the process to lower the chance of future denials. It also takes advantage of the coded data on the claim submissions and reviews the payer contract to ensure the proper adherence to the guidelines. By following these steps, you can improve your denial rate, increase your cash flow, and enhance your patient satisfaction.