Most of the hospitals have elaborate denials management programs, and yet as many as one in five claims for services generated by these healthcare organizations are being denied or rejected.

To put this in statistical terms these denials are eating into the healthcare organization’s bottom line and resulting in the permanent loss of an estimated 3% of net revenue. Add to this the cost of reworking on individual claims, which hovers around $25 per each denied claims, as well as the opportunity cost of resources that could be focused on other business critical activities and the loss is mind-boggling.

That’s the bad news. But the good news is that approximately two-thirds of the claims that are denied are recoverable, and nearly 90% are preventable. However, the problem lies in the fact that many practices continue to view denial management as a back-office problem, although numerous studies have from time to time showed that as many as 30% to 40% of denials are caused due to front-end flaws such as registration errors. Another nagging issue is that often denials are addressed as administrative issues when there are clinical factors involved.

As per experts, if providers can get their focus right and polish the several grey areas which have propped up in their denial management programs over time, they can easily close the gap on those 90% of preventable denials.

To understand how that approach can be implemented, let’s look at some of the most prevalent denial causes and then explore avenues for action to stem them.

Reducing Denials at the Source

The most common reasons for claims denials and their frequencies is as follows:

Let’s take a closer look at these denial management reasons and see how doing a more focused job on the front-end can help eliminate denials and ensure that claims are paid on first submission-

Eligibility and Authorization

Billing for an ineligible or non-covered service is one of the common reasons for claims denials and so is not realizing prior authorization was required. In fact, as per recent survey ineligibility alone is responsible for nearly 75% of denials and rejections. One of the main reasons for this is the complex rules associated with individual payers. Add to this the fact hospitals and health systems often work with a multitude of payers and plans — each with their its own set of clauses, medical billing and billing nuances, and carve-outs— and you have a perfect recipe of disaster. Many a times procedures covered under one plan may not be covered under another and also depending on the nature of service delivered, there may even be more granular differences, which can add up to the woes.

But the good news is nearly all eligibility-related denials can be completely eliminated by using effective patient eligibility and insurance verification solutions.

Even if all the underlying information is not completely verified before the patient arrives, it can be swiftly and effectively ascertained as part of the check-in process once the patient presents on the day of service. And this arrangement paves way for a better-informed patient who knows exactly what to expect and a more assured provider who can pass on the most accurate and up-to-date information heading upstream to documentation, medical billing and coding, other specialists involved in RCM process.

Incomplete/Inaccurate Demographic Information

Simple mistakes often give rise the biggest headache and incomplete or inaccurate demographic information is the prime example to this. Something, small mistakes as simple as a typo in a name or capturing the wrong address can cause claim denials and cause huge back-log of work and punishing delays in the back end. And this is the reason why experts advise healthcare providers to submit claims electronically through revenue cycle management software with built-in scrubs, automation and edits. This kind of automation tools will swiftly and accurately auto-populate key information, eradicating duplication of work and reducing the instances of human error. If you capture or key-in the correct the information in the database, the same will on the form and in case of discrepancies, the tool will automatically red-flag and correct the outdated information. Such kind of intelligent solutions can also highlight missing information and prevent claims from being submitted until corrective actions are taken.

Further advances in these tools will enable you to compare your claims to a vast database of similar claims that have been denied and help you stay clear of roadblocks by suggesting better alternatives to receive full reimbursements.

Lack of Demonstrated Medical Necessity

While few services may appear to be covered at first glance, there could be a veiled clause that limits coverage solely to cases where there is a demonstrated medical necessity. Or there could be a requirement for specific clinical documentation or requirement of documented attempt of more conservative therapy first or coverage only under limited clinical scenarios. There could also be cap on the frequency or number of times a service can be rendered. This is an important admonition that must be clearly understood along with the detailed terms or conditions that qualify the service as a medical necessity and approved course of care.

Usage of the right kind of technology can alert the staff and/or provider about the existence of this conditional approval and also get them acquainted about the details about what qualifies as medical necessity, facilitating a determination made ahead of time on whether it will be covered.

Service Covered by Another Plan/Payer

This has been a growing area of concern of late. Medicare and Medicaid dual-eligibles, patients with supplemental health insurance, and differences in payer response time are some of the main causative factors for the raise of this concern.

Just like in the above case, utilization of the right kind of technology can help determine not only which patients have more than one form of coverage, but also highlight the appropriate order providers should follow to submit their claims and receive maximum reimbursements.

Claim Already Included as Part of a Bundled Payment of Managed Care Program

The day when most of the hospital and healthcare services are reimbursed in the form of bundled payments, managed care, or other shared-risk models, this won’t be much an issue, but we’re not quite there yet.

For time being, as a provider you much be well acquainted with the kind of shared-risk agreements you are dealing with and how they will affect your billing and reimbursement process. Since no two contracts are the same, the process of verifying this information one contract and one patient at a time can be intricate and time-consuming. However, much of the pain associated with this process can be overcome by using continuously improving claims-management technology, which automatically compares the services and coverage to determine whether they are included in one of the organization’s contracts or should be submitted separately.

Conclusion: Focus on Prevention

Remember that 90% of all denials are preventable. By taking a page from your back-end and moving your efforts to upstream, you can prevent rather than treat the ‘disease,’ which in this case are claims denials.


Clean Claims On First Submission




HIPAA Compliance


Increase in Collections

Get a Quick Quote

Our Software Expertise

Software Tools We Use for Medical Billing and Coding Solutions