A Complete Guide on Denial Management in Healthcare

Understanding denial management in the healthcare industry is the main focus of this article.

Denials of medical claims happen when an insurance company refuses to cover medical care that a patient has obtained from a licensed healthcare professional.

Here is a brief overview of the topics covered in this extensive denial management guide before we get into the specifics.

The importance of denial management, the distinction between claim rejection and denial, and denial codes will all be covered in this tutorial. Additionally, we’ll guide you through the denial management procedure and offer some essential tips for improving its effectiveness. 

How Does Denial Management Work?

Denial management in the healthcare sector refers to the process of identifying and assessing claim denials to create new workflows that ultimately reduce the denial rate or increase practice reimbursements.

Although effective denial management may not be able to prevent all denials, it does give a means of reducing the denial rate and opens avenues for claim reconsideration or resubmission.

The Difference Between Claim Denial and Claim Rejection

You must comprehend the distinction between denial and claim rejection before beginning the complex denial management procedure.

Claim Rejection

When the insurance company is unable to handle a claim because of one or more mistakes, the claim is rejected. 

Claim Denial

Claim denial occurs upon receipt and processing of the claim by the insurance company. 

Rejection occurs prior to claims being received and processed by insurance companies at the clearinghouse, which is the main difference between it and claim denial. However, denial happens after claims have been submitted and processed by insurance companies.

Claims that are rejected or denied can typically be revised and resubmitted. Managing rejected and denied claims must be your biller’s top priority in order to avoid unnecessary write-offs. 

Denial Management’s Significance in Healthcare

If your claim is rejected, a payer will not reimburse you for the care or services you provided. It suggests that you are providing care for no payment.

Your practice will not be destroyed by a few denials. If they build up, though, you can run into major financial issues. By identifying trends in your denials and addressing these issues, you can make sure that your practice receives payments on schedule and has a consistent flow of income to function efficiently.

It’s time to examine the various kinds of denials now that you know why denial management is crucial.

Multiple Kinds of Denials

Hard and gentle denials are the two main categories into which denials generally fall. Determining whether or not you can start the denial management process depends on your understanding of the type of denial.

When a patient’s insurer immediately refuses to pay the claim, it’s known as a “hard denial.” This usually occurs when a claim for services that were not covered is filed.

It will be useless to appeal a denial of this kind to your practice. Hard denials mean you won’t be paid since the insurance company won’t pay you for treating an ineligible patient. In short, these denials are typically regarded as losses.

Soft denial is what happens when there is a possibility of reimbursement. To put it another way, a patient is qualified for a claim if the insurance company reviews it and rejects it because of insufficient details or paperwork.

Soft denials only last a short time. In this case, medical professionals have the right to appeal to the payer, reverse the initial ruling, and get the money back. In this case, the provider is required to make the required changes to the soft denied claim and submit it to the insurance company again.

You may be asking yourself, “What category do the majority of denied claims fall under?” at this point. You’ll be happy to hear that there are more soft denials than forceful ones.

Frequent Denial Codes

Your team’s familiarity with denial code is another essential component for effective denial management. When insurance companies reject your claims, it might be frustrating, but it’s important to know why to file an appeal.

Fortunately, insurance companies include “reason codes” with claim denials.

These reason codes are referred to in the industry as Claim Adjustment Reason Codes (CARC). X12 makes the formal decisions and distributes the CARCs. The fact that there are hundreds of them is the only problem.

Process of Denial Management

By identifying, dealing with, and avoiding denials, you can manage them. The following is a detailed procedure for efficient denial management:

Step 1: Submission of the Claim

For the care services they have provided, the provider submits a claim to the insurance company. Each patient has signed up for insurance. You must submit claims in accordance with the guidelines set forth by the regulatory bodies. Claims can be submitted electronically or on paper.

Step 2: Identification of Denials

In the event of a rejection or denial, the insurance companies inform the providers along with the reason for the denial. The team determines the cause of the denial based on this.

Step 3: Classification of Denials

Each refusal is categorized according to its type. You can come across denials that are administrative, technical, or clinical. After conducting a comprehensive study, the billing team ascertains the primary cause of the denials.

Step 4: Resolving Denials

If their claim is denied, providers may choose to appeal. To bolster the case for the healthcare professional, a few more documents are included. The codes, supporting paperwork, and other materials must be submitted by a certain date. Following up on the appeal and determining its current status after a while is essential.

Step 5: Monitoring and Tracking

By efficiently monitoring and tracking the denial management process, healthcare practices can obtain important insights to enhance claim accuracy, expedite the resolution of denials, and optimize income.

4 Crucial Techniques for Successful Denial Management

You must put in place an efficient rejection management approach if you want to lower the denial rate and enhance the overall financial health of your business.

To help you succeed financially, we will outline important denial management techniques in this part that you can utilise all at once or sporadically.

Now let’s get started without wasting any time!

Approach #1: Pay Attention to Monitoring and Managing Denials

The average increase in claim denial rates over the past five years has been over 20%. Most healthcare systems require a clear procedure for handling denial tracking.

We recommend that you incorporate the following into your rejection management procedure to effectively handle refused claims:

Create a concise list of CARCs and group them based on how similar their next steps are.

• Within the rejections A/R bucket, create distinct sub-buckets for relevant issues.
• Determine which member of your team is best suited to handle a specific kind of rejection, then give them ownership of that bucket or sub-bucket.
• Create a denial dashboard to track each claim denial you receive, along with the date it was addressed, the next review date, and the expected outcomes of your follow-up actions.
• Many providers still process claim denials by hand, even in the face of technological advancements. Invest in some technology or collaborate with a suitable billing provider if you don’t already have it, to effectively monitor and manage denials.

Approach #2: Give Denial Management Priority

Your refund is delayed by 21 to 45 days when a claim is denied. Cash flow is essential to all businesses, including yours. Therefore, regular payment collection is essential to giving patients high-quality care.

You can prioritise denial management by using the following advice:

• After you receive the notification, you have 48 hours to process any denials.
• Detailed notes outlining a plan and the next review date should be included with every follow-up.
• Create a list of consistent action codes for each scenario and assign a review date to each task.
• Make sure the team talks about this and that everyone understands the precise purpose of each code.
• To guarantee that the problems are fixed and results are guaranteed, stay on course. 

Approach #3: Clearly State Your Claim Dispute Plan

Not every denial necessitates an appeal, despite popular perception. Be prudent and use a clear dispute procedure to decide which denials should be accepted and which should be contested. It is important since it costs about $25 to process each denial.

The following are crucial elements of an effective denial management strategy:

• Create a process to decide which denials need to be disputed and the best manner to defend oneself.
• Set up your CARCs to use a specific code to indicate what happens to a rejection once it is posted.
• While denials that need to be contested should go into a dispute bucket, others should be written off or carried over to the next level. At the time of publishing, your CARCs should be able to manage this automatically if they are properly set up and supported by technology.
• The success rate of the appeal is significantly influenced by its substance. As a result, you ought to have approved standard language in your appeal templates.
• Monitor the success rate of each type of appeal and make necessary adjustments to your appeals process for continuous improvement.
• Clinical denials should be handled by employees who are exposed to the clinical side.
• Not all denials necessitate a written appeal or phone call. Examining the Explanation of Benefits (EOB) is the recommended course of action. It might only need a basic refile after the demographic problem has been resolved.

Approach #4: Conduct Preventive Denial Analysis

The best course of action is to avoid denial of claims. The fundamental denial management tactic is preventive denial analysis.

Thus, we recommend that you look at the following:

• Why was the denial made? Was there a problem with the patient’s eligibility, billing, coding, payer, etc.?
• This denial—could it be avoided?
• What, if anything, might have prevented the denial? If eligibility were an issue, consider whether your eligibility verification process needs to be optimised.
• Determine the issues that affected you the most and how to address them by applying the 80:20 rule to your denial analysis.
• Refrain from trying to improve each process simultaneously. You will achieve better results if you take things one step at a time.

Conclusion

Denial management is important for clinic profits. Insurers will not reimburse without this process, clearly. Your practice’s financial stability would deteriorate fast. That is just terrible business, obviously.

However, denial management takes too much time. It is time-consuming and difficult to focus on patient care. You should alleviate this big workload immediately. Hire a qualified billing team for help now. They make sure your practice gets paid quickly.

Whether you decide to go with a third-party billing business or handle everything internally, your practice’s longevity will rely on your capacity to monitor denial patterns and create effective denial management procedures.