Top Challenges of Denial Management in Medical Billing

Did you know, the average claim denial rate across the healthcare industry is between 5 percent and 10 percent, according to an American Academy of Family Physicians report? What would be the common claim denial management challenges for healthcare professionals? Denial management in medical billing is always a tricky task. When you find the right solution, you might seem to have a better revenue generation process. Yet, few fail to optimize their denial management in medical billing due to various reasons. There’s no specific proof that every medical billing process was successful without facing denials.

Main obstacles for providers include quantifying denial rates, using manual processes, receiving preventable denials, and appealing claims. Healthcare professionals and organizations are well used to the term “denial management” as they have confronted many denials in their billing process. Few may say that their denial rates are zero, but others accept the consequences they have faced due to denials in their business. You must aim to keep your denial rate under 5% to experience maximum reimbursements.

This article reveals various challenges of denial management in medical billing and how to overcome them. Let’s get started!

Various Insurance Policies challenge Claim Denial Calculations:

  • Denial itself is a challenge. You may also face multiple obstacles with adopting an appropriate claims denial management in medical billing.
  • The initial step to better claims denial management is identifying the denial reasons behind them.
  • Moreover, it’s not that easy to retrieve meaningful denial statistics by plugging numbers into a formula.
  • You might not have any access to denials data from insurance companies. It’s because insurance companies often hesitate to release the data related to denials or any others for that matter.
  • They always prefer to keep the information confidential or restricted to prevent potential customers from passing them up for a payer with a lower denial rate.
  • Apparently, the industry averages for claim denial rates usually vary from one report to another. For instance, If AAFP had reported an industry average between 5 percent and 10 percent, the Government Accountability Office (GAO) would find that up to one-quarter of claims are denied.
  • Secondly, each insurance company develops its policies or regulations to deny claims and communicate claim denials to providers.
  • So, the industry does not have any strategy for the healthcare professionals to follow and analyze the claim denials data.
  • The AMA in 2013 had stated, “The wide variation in how often health insurers deny claims, and the reasons used to explain the denials indicates a serious lack of standardization in the health insurance industry.”
  • Lacking standardization, you might find it harder to decipher the insurance payer’s language while facing claim denials.
  • There is a chance where the same claim is denied by two payers or insurance companies. But, both of them might use different codes and communication methods to let professionals know the reason for denials.
  • Luckily, the AAFP had released a guide on how a healthcare practice can quantify its claim denials.
  • To determine a denial rate, you must take the total dollar amount of claims denied by payers within a set period and divide it by the total dollar amount of claims submitted within the same period.
  • The smallest number is an example of healthy business growth and financial flow.

Manual Claims Denial Management in Medical Billing delay Timely Reimbursement:

  • You are given an option to choose from a long list of healthcare IT tools to manage everything from patient care to business operations.
  • Even then, almost 31% of healthcare professionals still use manual claim processes, as revealed by a survey a few years back.
  • Brendan FitzGerald, HIMSS Analytics Director of Research, said, “Given the complexities around submitting claims and the labor associated with managing denials, it came as a surprise that more organizations have not automated the denial management process through a vendor-provided solution.”
  • Teams from denial management in medical billing draw the data across healthcare organizations and engage in managing multiple payer rules and codes.
  • The manual process could eventually slow down productivity given the plethora of data needed to manage denials successfully.
  • You must try to automate the process to avoid denials. Michelle Tohill, Director of Revenue Cycle Management at Bonafide Management Systems, stated, “Keeping up with all the diagnostic codes and different insurance policies can be exhausting, but there are many software providers that will automatically update codes and requirements.”
  • She also added, “This cuts down on your research time, allowing your billing team to spend more time double-checking claims to make sure they meet every single requirement.”
  • By automating claim denial management in medical billing, you can identify errors before claim submission.
  • She also stated, “This means that your whole team can become aware of what needs to happen in order to get reimbursed, cutting down on the time the billing team needs to spend figuring out what is missing and tracking down the necessary parties.”
  • Whether you outsource or in-house, denial management is still a question mark. But HIMSS revealed a report that stated 44% of healthcare professionals preferred outsourcing such as a clearinghouse, EHR, or revenue cycle management, whereas 18% implemented an in-house automated system.

90% of Denials can be prevented but still occur:

  • As it says, 90% of claim denials can be truly prevented, and the most common claim denial reasons demonstrate the same.
  • The reasons for claim denials are:
  1. Missing information or absent and incorrect information
  2. Duplicate claims
  3. Services already claimed
  4. Services not under an insurance policy
  5. Crossing timely filing limits
  • A key factor for more proactive denial management in medical billing is making sure the patient and insurance information is accurately filled.
  • Medical billing staff must have a keen check on these to understand patient and insurance data requirements and whether they are covered under the insurance plan.
  • As a part of the denial management strategy, you must also implement a no-tolerance policy for late claim submissions.


However, denials do not stand a chance if the policies and information are all accurate. But, it is not so practical in the manual process. Human errors are so common and can occur while studying hundreds of claims. Outsource your denial management in medical billing to experience hassle-free reimbursements.

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