Insurance denial management process in the revenue cycle

Definition and objectives of denial management

Denials in insurance occur when an insurance company or payer refuses to reimburse or pay for a submitted healthcare claim. Denials can be frustrating for healthcare providers and patients alike, as they can lead to delayed payment, increased administrative work, and potential financial burden.

Common reasons for denials

Coverage-related Denials

  • Lack of Coverage: The insurance policy may not provide coverage for the specific service, treatment, or procedure that was performed.

  • Lapsed or Inactive Coverage: The patient’s insurance policy may have expired, been terminated, or not been active on the date of service.

  • Exclusion or Limitation: The insurance policy may have specific exclusions or limitations that apply to the service or condition in question, and therefore the claim is denied.

Coding and Documentation-related Denials

  • Incorrect or Inaccurate Coding: The submitted codes (ICD, CPT) may be incorrect, not supported by the documented services, or not in alignment with the payer’s coding guidelines.

  • Insufficient Documentation: The documentation supporting the claim may be incomplete, lacking necessary details, or not meeting the payer’s requirements for medical necessity.

  • Upcoding or Unbundling: The claim may be denied if the coding practices appear to be intentionally manipulated to obtain higher reimbursement by using higher-level codes or separately billing components that should be bundled together.

Administrative and Procedural Denials

  • Timely Filing: Claims must be submitted within a specified time frame as per the insurance company’s policies. If the claim is submitted after the deadline, it may be denied.

  • Duplicate Claims: Submitting the same claim multiple times for the same service or encounter can lead to denials.

  • Pre-authorization or Referral Requirements: Some insurance plans require pre-authorization or referral for certain services. Failure to obtain the necessary authorization or referral may result in claim denials.

  • Coordination of Benefits (COB) Issues: If the patient has multiple insurance plans, denials can occur due to coordination of benefits issues, such as incorrect or incomplete primary or secondary insurance information.

Billing and Administrative Errors

  • Inaccurate Patient Information: Denials can result from errors or discrepancies in patient demographic information, such as name, date of birth, or insurance ID.

  • Non-covered Services: The claim may include non-covered services or items, such as cosmetic procedures or experimental treatments, which are not eligible for reimbursement.

What to do about a denial

When a claim is denied, healthcare providers can take several steps to address the denial, including:

  • Reviewing the denial reason and the insurance company’s explanation.

  • Verifying the accuracy of the coding and documentation.

  • Appealing the denial with additional supporting documentation or clarifications.

  • Contacting the insurance company or payer’s customer service or provider relations department to discuss the denial and seek resolution.

  • Seeking assistance from revenue cycle management or billing experts to identify and rectify issues leading to denials.

Efficient denial management, including timely follow-up, appeals, and proactive measures to prevent denials, is crucial for optimizing reimbursement and maintaining a healthy revenue cycle for healthcare providers.

Related Posts

Reduce RCM labor dependency with workflow automation, task management, & real-time analytics to increase margin.

Outsource your medical billing to us with over 20 years of revenue cycle experience incorporating Effective Intelligence in house.

Improve patient collection rates with account resolution services: call center, mobile engagement, payment portal & counseling.

Increase productivity and visibility into front & back office processes while keeping your staff focused.​

How much could you save on RCM labor costs with improved productivity?

Take the 1 minute quiz, send us the results, & your next coffee is on us!