What Are The Claims Denial Challenges And Insights For Healthcare Providers? 15 Nov 2023

Claims Denial Challenges

The management of rejections presents substantial difficulties for healthcare institutions. By the end of the year, the time, money, and effort required to submit rejected claims and lost income add up and can result in severe economic harm. Denial management is crucial to your company because of this. The significance of denial management in the healthcare industry, challenges, and perspectives to improve your revenue cycle management will all be covered in this blog post.

What are the claims denial challenges?

Healthcare providers claim denials are a significant problem. The Medical Group Management Association (MGMA) estimates that the average claim denial rate will be 7.5% in 2023. As a result, healthcare providers lose an average of $7.50 for every $100 in claims that are submitted due to denials. However, why are claims initially rejected?

These are the top five challenges:

  • Incorrect or insufficient patient data
  • Wrong coding
  • Services not covered
  • Poor or absent documentation
  • Absence of a medical need

Many claim denials may be avoided with diligent attention to detail and a full grasp of the claim’s procedure; however, others are inevitable.

Do you know the difference between claims rejections and claims denials?

From the standpoint of a provider of denial management services, it’s critical to understand the distinction between claim rejection and denial. When a specific claim is examined and rejected by the insurance company, it is referred to as a claim rejection. On the other side, a claim is rejected if it contains incorrect medical coding or inpatient data when it is presented to an insurance payer system.

To reduce mistakes in medical coding, custom healthcare software solutions provide a variety of customized software. These solutions aid in minimizing income loss brought on by denied claims. When discussing denial management, it’s important to consider some of the most frequent justifications for rejecting claims.

What Is the Cost of Claims Denials Financially?

Denials of claims can have a significant and diverse financial impact on healthcare providers. The following are some of the main ways that claim denials might financially affect a healthcare organization:

  1. Revenue Loss: A loss of revenue is the effect of claims denials that are most immediate and direct. Denied claims lead to delayed or non-payment for services provided, which has an impact on a provider’s cash flow.
  1. Reduced Profit Margins: When claims are rejected, providers frequently must devote time and money to the appeals procedure, which may be expensive in terms of staff time, technology, and administrative costs. Profit margins are lowered as a result of this extra expense.
  1. Increased Administrative Costs: Handling rejected claims, looking into rejection justifications, and filing appeals all demand administrative resources. Healthcare institutions may quickly accrue these expenses.
  1. Reimbursement Delay: Even when refused claims are ultimately resolved in the provider’s favor, the time and effort needed for appeals may cause reimbursement to be delayed. Financially, this might be challenging for a provider, especially for smaller practices.
  1. Resource Diversion: Dealing with claim rejections may take personnel and resources away from patient care and other crucial operational duties. Reduced productivity and efficiency could come from this.

How do you categorize the denials?

The next step in managing claim denials is sorting them into different groups based on why they happened. Here are some common reasons:

  • Prior Authorization: Sometimes, you need permission from the insurance company before providing certain services. If you don’t have this permission, your claim may be denied.
  • Missing Information and Mistakes in Codes: If there are important details missing or mistakes in the codes used, your claim might be denied.
  • Late Filing: Insurance companies have deadlines for when you can submit claims. If you miss these deadlines, your claim could be denied.
  • Not Covered Services: If the service you’re billing for isn’t covered by the patient’s insurance, or if the insurance company decides it’s not medically necessary, they might deny your claim.

There are also different types of denials to consider:

  • Soft Denial: This is a temporary denial that doesn’t need an appeal. If you fix the issue, the claim may still be paid.
  • Hard Denial: This is a denial that means you lose the payment, and you’ll need to appeal to try to get it.
  • Preventable Denial: It’s a hard denial that could have been avoided, like errors in codes or eligibility issues.
  • Clinical Denial: This is a hard denial because the insurance company thinks the service isn’t medically necessary.
  • Administrative Denial: It’s a soft denial, and the insurance company tells you exactly why they denied the claim.

After sorting denials into categories, you’ll need to assign different teams to fix the problems. Not all denials are the same, so this helps teams figure out which ones need attention first. Teams have limited resources, so this step helps them use their time and resources wisely.

What are the strategies to overcome claim denials?

Overcoming claim denials in healthcare requires a strategic and proactive approach. Here are some effective strategies to help healthcare providers reduce and address claim denials:

  1. Claims Analysis: Conduct a thorough analysis of claims denials to identify patterns and root causes. Look for common errors or issues that lead to denials.
  1. Staff Training:
  • Train billing and coding staff to stay updated with ever-changing regulations and payer policies. Regular education can help reduce coding errors.
  1. Pre-authorization and verification:
  • Ensure that pre-authorization and eligibility verification processes are rigorous and accurate. Verify patient insurance information and coverage before providing services.
  1. Automated Tools:
  1. Key Performance Indicators (KPIs):
  • Monitor KPIs related to claim denial rates, appeal success rates, and time to resolution. Use data to drive continuous improvement efforts.

What are the perspectives of healthcare professionals?

Healthcare providers can take several actions to address the problems caused by claim denials, including:

  • Check the patient’s coverage and eligibility.

Check the patient’s eligibility and coverage with their insurance provider before offering any treatments. This will make it more likely that the treatments will be paid for and that the patient will be charged the appropriate co-pay or deductible.

  • Obtain prior approval.

If any services require prior authorization, get it from the patient’s insurance provider before offering the services.

  • Examine assertions before submitting:

Check the claims thoroughly for any mistakes or omissions before submitting them. This will assist in lowering the number of denials.

  • Submit accurate and comprehensive documentation.

Make sure to submit claims with the necessary supporting paperwork. The patient’s insurance details, the date of service, the operation code(s), and the diagnostic code(s) are all included in this.

  • Create a denial management procedure.

The procedure that providers use to evaluate and contest rejected claims should be in place. To guarantee that rejections are swiftly handled, this procedure must be effective and timely.

  • Spend money on training.

Providers should spend money on medical coding and billing training for their employees. As a result, there may be fewer code mistakes and incomplete claims.

  • Employ a medical billing service.

The claims and appeals processes can be managed by providers with the aid of a medical billing business. By doing this, clinicians may have more time and resources to devote to patient care.

Healthcare providers can lower the number of claim denials and boost their financial performance by using the advice in this blog.


For healthcare professionals, claim denials are a complicated and continuous problem. Organizations must now more than ever make investments in thorough revenue cycle management strategiestechnology solutions, and personnel training due to the growing financial costs of rejections. By addressing the root causes of rejections and implementing best practices, healthcare providers may strengthen their financial situation, protect their income sources, and maintain a high level of patient satisfaction.

Finally, the level of care that healthcare professionals can deliver is directly linked to their financial well-being. By addressing the issue of claim denials, healthcare companies can preserve their financial line while simultaneously upholding a high level of service and patient satisfaction. In a market that is always evolving, providers must actively handle issues with the revenue cycle, particularly the ongoing fight against claim rejections.

One of the top healthcare service providers in the world is Velan. Contact our healthcare accounting manager to make sure that the submitted claims are accurate and clear. To avoid wasting time on claims that are rejected, outsource your healthcare invoicing.


Victor Bala

Medical & coding

About the Author:

Victor has over a decade of experience in delivering revenue cycle management services to the US healthcare providers. He has a proven track record of accelerating revenue collection by streamlining the billing, coding and AR processes. His team at Velan has been delivering revenue cycle management cycle, appointment scheduling, pre-authorization and credentialing services to physicians, group practices, and hospitals. He can be reached at victor.bala@velaninfo.com


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