Denials often result in delayed or lost revenue, increased staff workload, and reduced productivity. To avoid these issues, health systems must take steps to establish an effective denials-prevention and management infrastructure.

Insurance denials occur when a payer rejects a medical claim submitted by a healthcare provider. When a claim is denied, healthcare providers do not receive payment for the services they provide to a patient, and patients are often left with unexpected medical bills. Healthcare providers must then spend time and resources appealing denials or resubmitting claims, which can be a time-consuming and frustrating process for all involved parties.

There are two main types of denials: administrative and clinical. Most claims that are denied are the result of an administrative error, such as incorrect coding or incomplete or inaccurate information on a claim form.¹  While this type of denial is generally easier to correct, it is still important to prevent administrative denials to avoid an excess of claims that must be resubmitted or appealed.

Clinical denials, which are often tied to things like medical necessity and the level or place of service, are more complex and can be more difficult to prevent and correct. Several examples of clinical denials include patient status (observation vs. inpatient), level of care, and medical necessity.  Each of these denials requires a close partnership with the clinical staff to resolve.

The role of preventing and managing denials does not fall to only one individual or team. Within a health system, CFOs, chief revenue officers, patient financial service (PFS) directors, and revenue integrity directors can all play a key role in creating and implementing a denials strategy. Once a strategy is in place, staff throughout the entire organization must work to prevent denials — from leadership to clinical staff to administrative staff at all levels.

While an effective denials strategy may not be able to produce a truly "denials-free" health system, it should aim to help organizations limit the number of denials as much as possible. Organizations shouldn't just aim to manage denials — they need to take steps to prevent them and manage the ones they can't prevent. 

Denials can have a significant impact on a health system’s financial stability. Even when denials don't result in lost revenue, they cause delays in getting cash in the door for services rendered.

However, it's not just about cash delays and potential revenue loss, but also all the rework that goes into working the denials. When a claim gets denied, staff must try to overturn it. This creates more work for staff and takes them away from other more important tasks at a time when burnout rates are already incredibly high.

Denials take a lot of work on both the provider side and the payer side — and everyone is trying to collect more while reducing their cost to collect. Ultimately, denials prevention is an administrative spend that must reduce an organization's overall cost to collect.

Denials prevention plays a crucial part in revenue cycle management. Organizations must establish a denials prevention strategy before they can implement a denials management infrastructure.

A big part of denials prevention is ensuring that the claims going out the door meet payer requirements. For instance, if a payer requires an attachment showing prior authorization and the provider sends the claim without it, the claim will get denied. Prioritizing upfront work like attaching the authorization and meeting payer requirements before submitting a claim can go a long way in preventing denials.

To establish an effective denials-prevention and management infrastructure, organizations should form an interdisciplinary denials task force that will analyze the denials, identify the root cause of the denials, and implement improvements upfront that will prevent denials from occurring, while also following up on the denials that have occurred.

Here's our three-step approach to denials prevention and management:

Before an organization can effectively prevent denials, they need to understand why their claims are being denied. Then they can focus on addressing these issues to reduce the number of denials and minimize the need for rework.

Organizations can use best-in-class payment assurance tools to flag potential errors before a claim is even submitted. While automation is still in its early stages, industry leaders are increasingly looking for opportunities to automate pre-submission corrections.

To get to the root reasons for denials, denial leadership should work to establish a multidisciplinary team that evaluates denials and manages prevention efforts. In many cases, this team will include patient access leaders, clinical leaders, PFS leaders, and sometimes managed care leaders.

Once established, this multidisciplinary team should conduct a root-cause analysis to identify the issues that lead to denials and report on areas of improvement. After they identify the key issues, this team must drive stakeholders within the organization to correct denials at the source.

Collaboration is a key part of establishing an effective denials prevention and management infrastructure.

When an organization receives a denial, staff in the PFS department typically triage and work it. Since their team handles most of the denials, PFS leaders are often eager to collaborate with other stakeholders to drive denials prevention and management.

However, staff outside of the PFS department are sometimes less eager to drive denials prevention and management because many feel that once they have completed their work, the incoming denials should belong to the billing or business offices.

To foster a culture of collaboration, organizations should create a dedicated appeals team and establish processes to help different departments partner to resolve claim issues. In addition, providers should establish processes to help staff work with payers to resolve issues related to contract variance and payment disputes.

Integrating accountability into the denial prevention and management process is a critical step toward achieving long-term success. This involves establishing rejection and denials performance goals for all critical points in the claims process. By setting specific goals for each stage of the process, leaders can track progress and identify ongoing issues.

Another key part of integrating accountability is leveraging technology to ensure consistent and automated reporting. This can help ensure that all stakeholders have access to accurate data to quickly identify potential issues and take corrective action.

It's essential to instill accountability into an organization's technology, policies, and procedures. By creating a culture of accountability, you can ensure that everyone is working toward a common goal — maintaining a best-in-class denials prevention and management infrastructure.

Ultimately, organizations must focus on continuous improvement to drive long-term success in denials prevention and management. If they don't implement a sustainable program — and monitor their progress — they'll be back where they started.