Skip to main content

Denial management for hospitals: Win by engaging every revenue cycle department

Revenue isn’t revenue unless it’s collected. A strong denial management strategy is essential to collect all of the revenue you’ve earned, and every department within the revenue cycle should play a part in that strategy.

We’ll explore how various departments impact revenue and explain how to tailor your denial management approach for different roles in your organization.

What is denial management in healthcare?

Denial management in medical billing refers to the strategic process of analyzing, correcting, and preventing claim denials. A claim denial occurs when a payer, like Medicare or a commercial health insurance company, declines to honor a provider’s request to be reimbursed for medical care.

Claims denial management involves monitoring performance metrics, analyzing billers and payers, looking for denial trends, identifying underlying causes, improving workflows, and taking proactive steps to prevent denials from occurring.

Why is denial management important?

Denials are a direct block to revenue. They delay incoming payments, consume labor hours, and in the worst-case scenario, result in uncompensated care. Denials have been on the rise in recent history, increasing by 20% industry wide over the past five years.1

A proactive approach to denial management is critical for maintaining a sustainable financial position, especially in the ongoing wake of the COVID-19 pandemic. Denial management can reveal the root cause of denied claims, which empowers organizations to take corrective measures that may permanently prevent them from happening in the future.

What are the types of denials?

Claim denials can be tied to the clinical side of care, like a procedure being deemed not medically necessary or being performed by an out-of-network physician.

Claim denials can also originate in the business office, stemming from any of the many departments involved in creating, managing and submitting claims.

There are hundreds of technical reasons a claim could be denied, but here are a few of the most common types of denials:

    • Missing or incorrect patient information, like date of birth or date of care
    • Billing and coding errors, like a procedure for infants being billed for an adult patient
    • Non-timely filing, a.k.a. missing a payer’s deadline for submitting a claim
    • Lack of prior authorization
    • Duplicate claims
    • Dual coverage issues, like when a patient has both primary insurance and worker’s compensation

As you can see, with proper preventative measures, most of the non-medical causes for denials could be avoided entirely. This is why we can greatly benefit from engaging every revenue cycle department in adopting a denial-management mindset.

Engaging patient access in denial prevention

The front end of the claim life cycle offers perhaps the greatest opportunity for denial prevention. By gathering all of the necessary data – and making sure that data is accurate – before the patient ever sees a physician, we can greatly reduce the incidence of downstream denials.

Equip patient access staff with tools that automate the process of identity validation and eligibility verification. Not only do these tools proactively catch denial-causing errors like typos and outdated insurance information, they save staff time and speed up the intake process, improving patient satisfaction.

Deploy a financial clearance tool to assess a patient’s propensity to pay, which can inform the best collection strategy to use. Ensure you’re offering a simple, versatile payment collection solution via which patients can settle any up-front balances.

Engaging HIM and medical records in denial prevention

Don’t underestimate the impact you can make on denials with improvements at the middle stage of the revenue cycle.

Health information management and medical records staff play a key role in bridging the gap between the clinical and business sides of the organization. For example, obtaining the proper clinical documentation is necessary to complete accurate coding, which in turn contributes to cleaner claims.

Assess your coding software and claim scrubbing tools to ensure they’re effective for all payers, including Medicare. Assess denials by coder to identify opportunities for further training and engage coders responsible for denials in the appeals process.

Strategies for all staff to improve first pass payment rate

Analyzing denials by root cause and individual

Use scorecards to assess not only the department where denials originate, but the exact reason for denial and the individual employees responsible. The idea isn’t to place blame, but rather to figure out the cause behind any disproportionate denial rates so the appropriate action can be taken.

Denial prevention training

All revenue cycle staff — regardless of department — can benefit from additional education on insurance basics and denial prevention strategies. Employees are more likely to take ownership of their role in preventing denials when they have a better understanding of how it impacts overall cash flow.

Workflows that eliminate touchpoints

When it comes to denial management in healthcare, technology is your greatest ally. The more you can automate processes and minimize touchpoints, the fewer opportunities there are for manual errors. Consolidating vendors and integrating data sources also aids in optimizing first pass payment rates.

Denial management shouldn’t be limited to a single department or set of employees. Instead, making it an all-hands-on-deck endeavor promotes higher engagement, attention to detail and accountability, which ultimately contribute to a higher first pass yield and stronger revenue.


1 “Over Third of Hospital Execs Report Claim Denial Rates Nearing 10%, Jill McKeon, RevCycle Intelligence, June 7, 2021, https://revcycleintelligence.com/news/over-third-of-hospital-execs-report-claim-denial-rates-nearing-10

By Inovalon