What is Denial Management in Healthcare?

Optimizing your medical billing process is one of the most complex parts of running a healthcare organization. While providing high-quality patient care should always be your priority, ensuring that you get reimbursed for the services you provide is essential for your financial stability. However, although you’ve developed and implemented effective strategies to improve your claim submission process, you may still come across some issues that lead to claim denials. 

Ahead, we’ll cover the impact denials have on your healthcare organization and why collaboration with payers is crucial for resolving such disputes. Additionally, we’ll cover the most important aspects of the denial management process and how you can utilize it for optimizing revenue!

Understanding Denial Management

Denial management in healthcare is the process of identifying, analyzing, and resolving denied medical claims. At the same time, it involves the management of existing claim denials to prevent further denials from occurring. Even though denial management is utilized in the last stages of medical billing and may not prevent 100% of denials, it is the first step in the path of reducing the denial rate and helping to ensure timely reimbursement for the services offered. As with initial claim submission, in case of a claim denial, most payers specify a timely filing period for submitting and correcting any errors found.

Coding errors, duplicate claims, inaccurate patient information, and even late filing are the most common reasons for claim denial.

When an insurance payer denies a claim, it means the healthcare provider does not receive reimbursement for the services rendered, resulting in financial loss for the provider. While a few denials may not significantly impact finances, many claim denials can lead to substantial financial setbacks for a healthcare provider.

Significance of Denial Management

Even though many healthcare organizations often overlook its importance, denial management has a big significance in improving your revenue cycle. Effective denial management can help in:

  • Minimizing revenue loss– effective denial management is meant to resolve such denials, recapture the potentially lost revenue and prevent future denials by addressing the root cause of the problem.
  • Reducing reimbursement delays– implementing an effective denial management strategy ensures timely appeals and faster denial resolutions. 
  • Enhancing overall financial performance: failing to identify and address your claim denials properly will negatively impact your financial performance. Since such denials can result in write-offs, minimizing them greatly improves your financial health and opportunities. Furthermore, you can improve your overall financial metrics, such as minimizing the denial rate and improving the denial recovery rate. 

Source: freepik.com / Photo Contributor: Drazen Zigic

Types of Denials and Common Reasons

Before you implement an effective denial management strategy, you should first familiarize yourself with the types of denials and their reasons and find strategies for mitigating them.

Each type of claim denial in the healthcare industry has its own implications and characteristics. The most common medical billing denials are: 

  • Partial denials
  • Full denials

Partial denials

Partial denials occur when only a specific portion of your claim has been denied while the rest of the services have been approved for reimbursement. Most commonly, you’ll receive these denials while the claim is still being processed. When this happens, you’ll receive a payment for the services that have been approved and a detailed explanation through the EOB (Explanation of Benefits) or ERA (Electronic Remittance Advice) documents for the ones that have been denied. 

Once you’ve reviewed the explanatory documentation, you can appeal the denial by correcting the errors and submitting the revised version. However, remember that you should address the rejected claims separately from the ones that have been approved. 

Full denials

Full denials occur when the entire claim has been denied, meaning that the insurance company refuses to reimburse you for all the services you’ve offered. 

You’ll once again receive a detailed explanation for the reason behind the denial through ERA or EOB documents that you’ll need to review before making any corrections. If you believe that the denial is unjustified, you can then appeal it and provide any additional supporting documentation for your claim. 

Denial reasons

As we briefly mentioned, the most common reasons for denials your healthcare organization may be subjected to are the following:

Coding errors

One of the most common reasons why you may get a claim denial is due to the use of inaccurate codes. This happens when you appoint incorrect or incomplete codes or modifiers for diagnoses and procedures. Furthermore, insurance companies can deny your claim if they believe you’re upcoding or downcoding the services compared to the documentation.

Lack of medical necessity

If you don’t provide enough documentation to support the necessity of the services provided, you’ll most likely be met with a medical necessity denial. Insurance companies have guidelines and criteria based on which they determine if the treatments are justifiable or not, so it’s best to familiarize yourself with them before treating patients.

Incomplete documentation

Missing vital information from your paperwork is another common reason why your claim can be denied. This can include incomplete patient documentation, provider information, and medical records.

Eligibility issues

Another common reason why an insurance company may deny your claim is that the patient’s insurance policy doesn’t cover their treatment. This usually happens due to an inactive or expired insurance plan. It’s important to always verify the patient’s insurance coverage to ensure proper reimbursements for the services provided. 

Impact of Denials on Healthcare Organizations

Next, we want to elaborate on how unaddressed denials can impact your healthcare organization. As mentioned, claim denials directly affect your revenue cycle because you won’t get paid for the services provided. Thus, failing to identify the reasons and appeal the decision can result in revenue loss, increased administrative costs, or delayed reimbursement. Unaddressed denials lead to revenue loss and financial instability. If you don’t appeal the decision, you won’t get reimbursed for your services.

Failing to identify the root issue means that you’ll continue getting frequent denials, which will eventually increase your administrative costs. Worse yet, it could result in delayed reimbursement. 

Since significant effort is required to correct and resubmit the claims, you’ll spend more time and resources managing claim denials than focusing on processing new ones. Remember that insurance companies have specified deadlines by which you can appeal their decision, so you must correct any errors within the given timeframe. Taking too long to appeal the denial to receive reimbursement can impact your cash flow and disrupt your revenue cycle.

Denial Management Process

By highlighting each step of the process, you can come up with suitable solutions for your unique circumstances and optimize your tactics. That being said, here is a step-by-step guide to the denial management process:

  • Identifying denied claims
  • Conducting thorough research on denial reasons
  • Initiating timely appeals
  • Monitoring denial trends
  • Implementing corrective actions

Identifying denied claims

The first step in denial management is identifying the denied claims. As a healthcare provider you need to identify the root cause for the claim denial. The process of interpreting the payer’s feedback and determining the actual reason for the denied claim can be time-consuming. But here’s where the help of an experienced medical billing assistant can pay off. They can easily identify and categorize the denied claims based on your findings. 

To prevent further claim denials, it’s important to monitor the claims you’ve billed and catch the denials as soon as possible. You can do so manually or through the use of automatic tracking systems.

By utilizing advanced billing software, you can use their tracking features to get real-time updates on the claim status. Furthermore, you can implement additional denial management software capable of flagging and categorizing denied claims. With this technology, it’s easier to identify denial trends and areas of improvement through detailed reports.

However, smaller practices that don’t have a large volume of documentation often opt for manual denial capture, which requires frequent communication with the insurance payers to check the claim status.

Conducting thorough research on denial reasons

After identifying the denied claims, you should focus on conducting thorough research on denial reasons. As mentioned, insurance companies are required to inform you of the reason behind the denial through EOB and ERA documentation. Reviewing their explanation will give you insights into common denial patterns, which can then be used to make data-driven decisions and optimizations.

Once you’ve identified the denial reasons, you can start categorizing the denied claims based on your findings. This will give you a clear overview of the key main points you should prioritize. For example, some categories you can use are inaccurate coding, insurance eligibility issues, and lack of medical necessity.

Initiating timely appeals

One of the most important steps in denial management is initiating timely appeals. Even after you’ve identified the claim denials and the reasons behind them, you should always implement effective tactics for quick and efficient corrections. For this reason, it’s best to have an appointed denial management team ready to update any missing information and inaccurate codes.

After reviewing the documentation and ensuring accuracy and completeness, you can resubmit the corrected claim along with an appeal if needed. However, remember that there are specified deadlines within which you can appeal the denial and address all the issues that led to it. So, it’s best to familiarize yourself with the timeframes different insurance payers have so as not to miss the deadline.

Monitoring denial trends

Even though many healthcare organizations often overlook this step, it’s important to continuously monitor denial trends. Having an insight into your denial patterns will help you develop effective RCM strategies to minimize future denial instances and improve your revenue cycle

Remember that such analysis is essential if you want to uncover the root cause behind the recurring issues. Thus, you should never overlook metrics such as denial rates and common denial reasons to further improve your business operations. 

Source: freepik.com / Photo Contributor: Drazen Zigic

Implementing corrective actions

Since denial management is a long-term process, continuous improvements are essential for minimizing revenue loss and ensuring financial stability. By identifying the areas of improvement, you can focus your attention on developing suitable strategies based on which part of the process needs the most improvement.

For example, if you notice that the most common denial reasons are inaccurate coding or incomplete documentation, you can prevent future errors by investing in staff training and automation tools. Implementing such corrective actions will also keep you updated on the latest policy and coding changes, ensuring future regulatory compliance.


By familiarizing yourself with the denial types and their impact on your medical facility, you can develop effective strategies to easily identify, analyze, resolve, and prevent them. Moreover, implementing the right denial management tactics while also maintaining open communication with the insurance payers is essential for improving your overall revenue cycle and ensuring financial stability.Since we realize that many healthcare organizations struggle with optimizing their business operation processes because they focus their attention on delivering high-quality patient care, our team at CLICKVISION BPO offers customizable revenue cycle management services. With our experience in the field, we can deliver medical billing solutions perfectly tailored to your requirements. So contact us today and discover how we can streamline your back office healthcare operations and help you achieve financial success!