4 Ways that Healthcare Systems can Manage Denied Claims



July 10, 2020

Provider healthcare technology has progressed rapidly to advance clinical care. Despite the leaps forward in provider technology, innovation has been comparatively slow for most providers’ financial processes.

Smarter management of insurance accounts receivable (A/R) is an area urgently needing renewed focus to augment healthcare’s drive towards improved cash as well as stringent cost control.

Left unattended, insurance A/R indicators show that, in some instances, gross charges denied by payers have doubled to 15 – 20% of all claims submitted, with the potential for 40 – 60% of those denials recoverable on appeal. Recoveries like that should be incentive enough to find ways to move forward quickly with new processes and new technologies to manage these denied claims.

Revenue cycle management (RCM) issues and inefficiencies have many root causes, from weak clerical skills to outdated or abused technology.

It’s a fact that some health systems have complex, poorly integrated and often outdated technology. Many legacy accounting and patient billing systems are 10 – 25 years old and not capable of meeting the needs of a rapidly changing healthcare reimbursement environment. It is quite possible that a junior revenue cycle professional may be working in a billing system that is older than they are.

Many of today’s revenue cycle organizations are reluctant to adopt disruptive processes and technologies, simply from a natural inclination toward protecting the system’s assets.

A recent Black Book CFO survey stated that few provider organizations are widely engaging in hospital financial automation. Only 20% of the 1,600 hospital and health system CFOs surveyed said even a small part of their organization’s financial and revenue cycle operations were fully digitized or automated. Amazingly, those who digitized more of their financial process said the ROI was substantial.


Healthcare organizations can significantly improve what they capture from payers (known as their contractual payment ratio), as well as accelerate recoveries by focusing on these four key areas:

  1. Invest in your front office. Recruit, onboard, and train your best people to optimize operations. At the front of the house, capture good information and give your patients a clear view of their financial obligations; this will pay big dividends in patient satisfaction.
  2. Ensure accurate coding and supplemental clinical documentation supported by optimized processes and technologies. The latest hospital coding compliance technology will help to identify and correct processes that lead to claim denials. Robust coding processes and contract compliance automation systems help hospitals to get ahead of coding and medical necessity denials, with the added benefit of educating coders, financial analysts, and providers on how to submit clean claims the first time.
  3. Maintain a fast focus on denials. Today’s payment variance reporting can identify underpayment and overpayment trends for analysis with broad-reaching, sustainable return. Highly effective tools, such as chargemaster assessment tools and concurrent charge integrity tools, are not currently being widely used. Prevention is key but, at the same time, addressing denied claims within 24 hours of receipt is critical to optimizing appeals success
  4. Understand the difference between denials and rejections and know what workflows must happen for each. Rejections can cause a great deal of wasted effort. It may help to think of rejections as the end of the story, with payment a lost hope unless the account is reworked from the beginning. Denials, on the other hand, are an opportunity to identify the probability of payment whether the payer’s request is for authorization, coding, or additional information. Denials need immediate response from a trained group who can quickly:
  • Define the needs raised by the payer
  • Address shortfalls according to payer protocols
  • Prepare root-cause analytics to address internal issues and errors made by technologists, technicians, and physicians in the revenue cycle’s process


Once the areas above are addressed, healthcare organizations can focus on scalability, optimizing the quality of data reporting to payers and regulators, and navigating the reimbursement structure of covered charges, provider liabilities, and growing out-of-pocket expenses for their patient-consumers.

The answer is a team approach to denials management: Determine the sources of the health system’s denied claims and address them head-on.

Claims denials will never fall to 0%. However, health systems find benefits from being equipped with trained and motivated staff, aggressive processes, and innovation necessary to recoup the dollars denied by payers and thereby contribute to the organization’s financial sustainability.