What is Denial Management in Healthcare and How Does It Work?

Denial management in medical billing is the process of identifying and resolving problems that lead to medical claim denials. This encompasses management of existing claim denials and prevention of future denials to optimize providers’ cash flow. The dividends of an effective denial management strategy may be fixes to clearcut issues like coding errors, or something much less specific, like the cultivation of a better understanding between providers and payers. 

A technique used in denial management called the IMMP process, which stands for Identify, Manage, Monitor and Prevent, can be used to help providers manage claim denials systematically. Here’s a breakdown of the process:

In the first step of this denial management process, the provider identifies the reason for the claim denial. Claim adjustment reason codes (CARC) are usually given by the payer in the accompanying explanation of payment, but they can be confusing. The task at hand during this phase of the IMMP process is to interpret the payer’s feedback and determine the actual reason for the denial. It’s time consuming, but this is where the diligence of an experienced medical billing specialist or other medical billing and coding professional can pay off.

Once the reason for the denial has been identified, the next step is to appeal the denial and get the claim paid by the insurer. According to the IMMP process, the following actions can be taken to accomplish this:

In the monitoring phase of the process, an accurate record of denials should be kept by type, date received, date appealed and disposition. The provider’s denial management team’s work should be audited by evaluating their appeals and the team should have the necessary resources and tools to get the job done swiftly and efficiently.

Another important goal in the monitoring phase is to gain a better understanding of each claim denial, determining the time, source, number and type of denial. With this data, the provider organization can identify denial trends and establish a better rapport with insurers and reduce the number of future denials.

The final step is prevention. After the denial management team has gathered all relevant data regarding claims denial, a prevention campaign can be an effective way to reduce future denials by taking steps that could include retraining staff, adjusting workflows or revising processes.

Multiple teams within the practice may have played a role in a claim denial, so the provider may want to gather the personnel from those teams to familiarize them with claims denial mitigation efforts and reduce the errors that can cause future claims denials in areas like registration, lack of authorization or medical necessity.

There are hundreds of reasons for claims to be denied, with causes stemming from either the clinical or business office side of a provider’s operations. Here are some common types of denials:

Effective prevention strategies can eliminate revenue cycle bottlenecks and cut down on staff time lost to reworking, correcting and resubmitting claims. Providers can improve their claims processing through the use of digital technology and traditional methods like employee training.

According to the results of a June 2022 survey of 200 healthcare revenue cycle decisionmakers, the leading strategy for reducing claim denials is upgrading claims technology, with many providers embracing automation and streamlining workflows. Maintaining safe and secure patient access strategies, like patient portals and digitizing the patient registration process, were also mentioned as effective claims denial prevention strategies. By automating processes and minimizing touchpoints, provider organizations can minimize the manual errors that can result in denials.

Among the low-tech solutions for reducing claims denials are a couple of common-sense strategies. Analyzing the root cause of denials begins with breaking down interdepartmental divides in provider organizations by building a core denial management team consisting of leadership from several departments, including coding, managed care, revenue cycle, health information management and others.

Staff training and additional education on insurance basics and denial prevention can help employees better understand their role in the process and grasp the devastating impact of claim denials on overall cash flow. 

Medical billing and coding professionals help providers like hospitals, group medical practices, skilled nursing facilities and others contribute to the overall improvement of healthcare delivery. You can prepare to pursue a medical billing and coding career as a medical coding specialist, medical records analyst, certified coding specialist or medical records technician with an Undergraduate Certificate in Medical Billing and Coding here at DeVry.

Our 6 academic sessions per year allow you to start when you’re ready and learn at your own pace, finishing on a regular or accelerated schedule that meets your personal and professional goals.