Connections for Success



Harnessing Best Practices in Claim Denial Management

Claim denials are a huge financial drain on physician practices. If nothing is done to reverse a denial, the revenue that it represents is lost to the practice. Attempts to manage and resolve the denial can cost an average of $25 to $30 per claim, according to the Medical Group Management Association (MGMA). Fortunately, there are some best practices you can employ to help manage claims denied by payers.

Strive for Clean Claims

The goal should be for your practice to have its claims accepted on the first submission. However, this requires taking steps much earlier in the revenue cycle.

To begin the process, identify and record the exact reason for every claim denial. This can be done quickly and easily by using a denial management module that is built into the overall practice management system.

A variety of reasons will come up: The payer may insist that the stated diagnosis does not support the medical necessity of the services, or there may be missing paperwork in the documentation for the claim. The claim may be denied if the patient is not a covered beneficiary of the payer to whom the claim was submitted.

The various reasons that emerge should guide your practice to take two types of actions:

  1. Make immediate efforts to correct the errors and reverse the denial; and
  2. Modify your practice processes to prevent the errors from occurring in the future.

How to Respond to a Claim Denial

There are several possible responses to a claim denial:

  • Correction
    Once the root cause of the denial is established, try to correct and resubmit the claim. First, find any missing paperwork and add it to the claim. Change inaccurate codes to the right ones, or determine the patient’s correct insurer and submit the claim to it.
  • Write-Off
    If you cannot fix the reason for the denial, or the payer refuses to accept the correction, you need to decide if you want to appeal or to drop the matter and write off the charge. A write-off will likely be necessary if you cannot locate the documentation to support the claimed service or if it turns out that the service was really part of a bundle that already has been paid separately and never should have been claimed in the first place.  Nonetheless, this should be the last resort to a denial.
  • Appeal
    In the event that your practice makes what it believes to be appropriate corrections, but the payer still rejects them, the last option is to appeal the decision. You will need to contact the payer to learn its reasoning on the matter. Then, you must prepare persuasive arguments in support of the claim. As appropriate, gather additional relevant documentation, or obtain more expansive statements of medical necessity from your clinicians. Finally, file the appeal and follow up with the payer every two weeks until the matter is resolved.

Before undertaking any of these steps, you will want to consider the cost of pursuing the claim against the potential revenue of getting the denial reversed.

Prevent Future Claim Denials

Your practice’s goal should be to avoid claim denials, so you will need to make systemic changes for the future. For instance, problems with incomplete documentation or improper coding may require retraining staff and clinicians. The people may be fine, but the processes they perform may need to be re-engineered. In that case, your focus should be on three objectives:

  1. Getting all the right patient information before or during registration;
  2. Capturing and entering the correct charge codes in a timely manner; and
  3. Correcting pre-adjudication edits returned by the claims clearinghouse on a daily basis.

If you feel unable to provide the necessary training in-house, you can also consider contracting with a billing firm to either provide the training or actually take over the billing function.  Obviously, there is a cost associated with this, so you will need to evaluate the cost versus the potential benefits.

By following the above objectives, your practice will be well on its way to clean claims.

It’s All in the Details

No practice wants to lose money due to claim denials. Your financial advisor can help you beef up your processes to help ensure clean claims in the future.

Sidebar: Understanding Your Claim Denials

It is important to understand the causes of claim denials in your practice. This starts with reporting denials at the claim level and on a line-item basis, and then projecting trends over time. Careful analysis of good data will reveal root causes. Denials should be categorized and assigned to departments or individuals best suited to correct them. And, corrective actions should be discussed at interdepartmental meetings to allow for cross-functional inputs.

For more information, contact Larry Sophian at 312.670.7444. Visit to learn more about our Health Care Group.

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