Healthcare Denial Management: 6 Tips to Reduce Claims

Denied claims in healthcare aren’t just billing mistakes, they often point to deeper issues in the revenue cycle. They slow down payments, add to staff workload, and interrupt cash flow. Over time, this can impact how quickly and effectively patients receive care. For providers already managing tight margins, the pressure is even greater. In today’s environment, every healthcare organization needs to do more with less, without falling out of compliance. That’s why denial management isn’t a choice anymore it’s a must. It is vital in keeping operations running smoothly and finances on track.

"Denial management remains a nagging problem for healthcare organizations, affecting cash flow and taxing administrative staff. Denial management is no longer a luxury—financial viability and operations depend on it."
— Dr. Mohammad Abdul-Hameed, seasoned RCM professional

This article discusses seven effective strategies healthcare providers can implement to minimize claim denials and improve their revenue cycle. You will discover how to correct common denial drivers, utilize automation and analytics, and institute training and workflow enhancements that yield quantifiable gains.

What is Denial Management, and Why Does it Matter in Healthcare?

A denied claim is a request for payment that an insurance company refuses to pay. Denials can happen for many reasons, such as wrong patient information, missing authorization, coding errors, or eligibility problems. While some denials are easy to fix, others take days or weeks to appeal, and some are never recovered.

“86% of denials are potentially avoidable, and 24% are not recoverable.” — Change Healthcare, 2020 Denials Index

5 Top Reasons for Healthcare Claim Denials 

Many healthcare claim denials aren’t due to complex issues, they result from avoidable errors. By identifying the most common denial triggers, healthcare providers can increase clean claim rates and improve overall revenue cycle performance.

1. Missing or Incorrect Patient Information

Mistakes like misspelled names, incorrect birthdates, or invalid insurance IDs can lead to immediate denials. Verifying and capturing accurate patient data during registration is a vital first step in avoiding such errors.

2. Insurance Eligibility Issues

Claims are often denied when coverage is inactive, expired, or doesn’t include the service. Real-time eligibility checks during patient intake can confirm active coverage and help prevent delays, rework, and lost revenue.

3. Lack of Prior Authorization

Some procedures, treatments, or medications require pre-approval. Submitting a claim without prior authorization even if the care was medically necessary can result in denial. Staying updated on payer-specific rules and submitting authorizations on time is critical.

4. Coding Errors

Incorrect or outdated medical codes (CPT, ICD-10, HCPCS) are the top reasons for denials. Accurate coding and claim scrubbing ensure compliance and improve claim acceptance rates.

5. Duplicate Claims

Claims submitted more than once, whether by mistake or due to system errors are automatically denied. Implementing tracking tools and structured submission workflows helps prevent duplication and maintain payer confidence.

This clearly shows that many healthcare claim denials are preventable with the right systems and attention in place. That’s why building a strong denial management process can help healthcare organizations:

• Receive payments faster
• Reduce administrative costs
• Improve patient experience
• Increase overall financial stability

How to Improve Denial Management in Healthcare?

Let’s examine how healthcare providers can reduce claim denials in a practical and results-driven way. By exploring proven denial management strategies supported by real data and industry best practices, organizations can identify what changes are needed in their workflows, billing procedures, and staff training. In the following sections, we’ll explain how to improve the healthcare revenue cycle by preventing avoidable denials and resolving existing ones more efficiently.

1. Automate Eligibility Verification

Eligibility errors are among the most common and most avoidable causes of claim denials in healthcare. These issues typically occur at the front end of the revenue cycle during patient registration or insurance verification. Even small mistakes, such as entering outdated insurance information or failing to confirm coverage, can result in costly delays and rejected claims. Fortunately, automation has proven to be highly effective in this area.

According to a 2021 report by the Medical Group Management Association (MGMA), eligibility and registration errors account for nearly 27% of all claim denials, making it the single largest contributor to denied claims.

Benefits of Automated Eligibility Checks

• Saves time: Staff no longer need to call insurers to verify coverage.
• ‍Reduces errors: Software catches mismatches in insurance info.
• ‍Saves money: 
  
  • Manual check cost: $10.54.
  • Automated check cost: $0.74.

By integrating eligibility verification tools with your EHR or RCM system, front-office staff can check a patient’s insurance coverage in real time before the appointment begins. This helps confirm active coverage, identify authorization needs early, and prevent denials caused by eligibility errors. Real-time checks streamline front-end processes and support a more accurate and efficient revenue cycle.

2. Use Claims Scrubbing Tools Before Submission

A claim “scrubber” is software that checks a claim for errors before it's sent to the payer. It scans for missing codes, format problems, and other payer-specific issues.

“Of the 300 sampled claims for E/M services, 42% did not meet Medicare requirements due to documentation and coding errors.” U.S. HHS OIG, Report A-06-17-02004 

This shows how common billing mistakes are in healthcare and why catching them early is essential. When errors go unnoticed before a claim is submitted, they can lead to denials, delayed payments, and extra work for staff. Spotting issues upfront helps improve claim accuracy, reduce denial rates, and keep your revenue cycle running smoothly.

What Scrubbers Can Catch

• Wrong diagnosis or procedure codes.
• Missing or incorrect modifiers.
• NPI (provider ID) mismatches.
• Payer-specific rules that can trigger rejection.

Using claim scrubbing tools helps ensure that claims are accurate and complete before they’re submitted to payers. This reduces the risk of denials, shortens payment delays, and minimizes the need for rework. Clean claims lead to faster reimbursements and a more efficient healthcare revenue cycle.

3. Improve the Prior Authorization Process

Some medical services and prescription drugs require prior approval from insurance providers before being delivered to the patient. If this authorization is not secured, the claim will often be denied, even when the service is medically necessary and time-sensitive.

Delays caused by prior authorization can have real consequences for patient care. In fact, according to the AMA’s 2024 Prior Authorization Physician Survey, 93% of physicians said the process causes care delays, and 29% reported that prior authorization has directly resulted in a serious adverse event for a patient, including hospitalization, permanent impairment, or even death.

This shows that prior authorization isn’t just a bureaucratic task; it can seriously affect patient safety, treatment outcomes, and provider liability.

Ways to Make PA More Efficient

• Keep an up-to-date list of what services require PA by each payer.
• Use electronic submission portals or APIs to send PA requests.
• Train staff on how to complete and track authorizations correctly.

So, implementing digital solutions to manage the prior authorization process allows healthcare providers to minimize delays and reduce the risk of claim denials. Automation improves accuracy in documentation and ensures timely submissions, leading to faster payer approvals and a more efficient healthcare revenue cycle. 

4. Track Denial Trends and Metrics

Tracking denials one by one isn’t enough. To truly improve claim outcomes and strengthen the revenue cycle, healthcare providers need to step back and analyze overall denial trends over time. Looking at patterns across departments, services, or payer types can reveal where breakdowns are happening and where long-term fixes are needed.

According to the HFMA and MARI Revenue Cycle Overview (October 2022), more than half of all claim denials come from just five key issues: eligibility errors (18%), missing authorizations (12%), medical necessity denials (11%), timely filing problems (8%), and duplicate claim submissions (7%). These are mostly preventable, which makes tracking them even more valuable.

The same report highlights the importance of maintaining a first-pass resolution rate of 90% to 95%. When claims are clean and complete the first time, there are fewer delays, fewer rework cycles, and faster payments. Monitoring this metric consistently gives providers an early warning when denial risks are growing and helps them fix issues before they affect revenue.

Key Metrics to Monitor 

• Denial rate by payer.
• Top denial reasons by procedure type.
• Time to appeal the resolution.
• First-pass claim success rate.

As a result, using reports or dashboards can help teams identify which departments or services need process improvement.

5. Create a Dedicated Denial Resolution Team

When denied claims are passed between different staff members, it often leads to delays, inconsistency, and missed appeal deadlines. Creating a dedicated denial management team helps streamline the process, improve follow-up, and boost recovery rates. Healthcare organizations can reduce revenue loss and strengthen their claims management workflow with a focused approach.

Advantages of a Denial Team 

• Clear roles and responsibilities 
• Better communication with payers 
• Faster appeal turnaround 
• Centralized documentation 

Improving denial management doesn’t always require a large team or complex systems. Even in smaller practices, assigning just one or two dedicated staff members to handle appeals and follow up on denied claims can lead to measurable improvements. With the right focus and consistency, healthcare providers can reduce denials, speed up reimbursements, and build a more reliable revenue cycle process.

6. Train Staff on Coding and Compliance

Medical billing and coding is a constantly evolving, with frequent updates to payer rules, ICD-10 and CPT code sets, and documentation requirements. Without regular training, it's easy for staff to fall behind and make costly mistakes that result in claim denials. Staying current through ongoing education is key to maintaining billing accuracy and protecting revenue.

Topics for Training

• Correct use of procedure and diagnosis codes
• Payer-specific billing requirements
• Prior authorization and documentation
• Compliance with Medicare and Medicaid rules 

Trains and significantly boosts team confidence, empowering staff to navigate complex billing processes more accurately. This proactive approach reduces costly errors, minimizes claim denials, and accelerates reimbursement. Investing in continuous education is a key strategy for improving revenue cycle performance and ensuring long-term success in healthcare billing operations. 

Final Thoughts

Constructing a wiser, more durable revenue cycle from the ground up. By addressing typical errors, optimizing processes, and allocating resources towards superior tools and education, organizations see positive effects resonate throughout departments: quicker payments, reduced admin burden, and improved financial consistency. 

However, internal changes are not always practical for most healthcare workers. Bandwidth on staff, system constraints, and payer issues all can get in the way of real progress. 

That's where a trusted business-outsourcing partner can step in. 

Invensis has extensive denial management expertise ranging from eligibility verification and coding audits to real-time claims monitoring and appeals processing. We enable healthcare providers to minimize denials at their source and accelerate recovery, freeing internal teams from doing so. Contact us if. 

If your company is prepared to leverage denial management as a strategic tool. We're here to help you achieve your objectives with flexible solutions that deliver.

Frequently Asked Questions (FAQs)

1. What is a claim denial in healthcare?

A claim denial happens when a payer (like an insurance company) refuses to pay for a medical service. It can be due to errors in the claim, missing information, or coverage issues. 

2. What is the difference between a rejection and a denial? 

• Rejection: This happens before the claim is processed, usually due to format or submission errors. It can be fixed and resubmitted quickly. ‍
• Denial: This happens after the claim is reviewed. It means the insurer has decided not to pay, and an appeal is needed. 

3. How can I find out why a claim was denied?

Check the payer's Explanation of Benefits (EOB) or Remittance Advice (RA). These documents include reason codes and descriptions for each denial. 

4. What are the most common reasons for denials?

• Incomplete patient data
• Eligibility issues
• Missing prior authorization
• Coding or documentation errors
• Duplicate or late submissions

5. How often should denial data be reviewed?

It is best to review denial trends at least monthly. Larger organizations should track them weekly for faster improvements.