Top Strategies to Drastically Reduce Claim Denial Rates in 2024

Here are the primary impacts that make this a financial imperative:

• Revenue cycle disruption – Claim denials create major friction and delay in the revenue cycle. Providers experience cash flow issues when payments are delayed pending appeal or rebilling.
• Loss of revenue – Many providers simply write off smaller balance denials rather than investing resources into appeals. This results in direct lost revenue and lower net collections.
• Administrative costs – Significant labor is required to review denials, correct errors, manage appeals, and resubmit claims. These dollar costs add up over time with high denial volumes.

Data shows this is a widespread, high impact issue. One study estimated that 9% of hospital claims are initially denied, leading to administrative costs of reworking claims between $118-$136 per denial. Another set of research estimated that physician practices have an average 5-10% of charges denied, resulting in up to 3% in revenue loss.

Some key front-end prevention tactics include:

• Verifying patient insurance eligibility – Lack of coverage or invalid member ID are frequent denial reasons. Leveraging real-time eligibility checks and storing accurate patient policy/plan details enables submitting “clean” claims from the start.
• Capturing complete patient demographic/insurance data – Inconsistent or missing data errors can be prevented through well-designed digital registration and patient estimation workflows. Front-desk best practices like photo ID scanning and data quality checks reduce mistakes.
• Managing authorizations and pre-certifications – Concurrent utilization review processes, payer-specific requirements monitoring, and clear documentation of clinical appropriateness during care episodes supports obtaining proper authorizations to prevent denials.
• Coding quality and accuracy – Clinical documentation improvement initiatives, coder education/audits, and computerized coding solutions help ensure coding to the highest degree of specificity to justify medical necessity.
• Internal/external self-audits – Proactively identifying billing quality issues through self-audits enables targeted corrective action before denials occur from billing errors, insufficient documentation, etc.

By scrutinizing and fortifying front-end workflows, processes, and systems, providers can prevent many common denials before claims are even submitted. This avoidance mindset leads to much lower administrative costs and faster payments.

The most sophisticated solutions combine traditional scrubbing rules with advanced analytics to:

• Flag issues based on historical denial patterns, payment trends, and root cause analysis
• Predict denial propensity for individual claims or providers using models
• Score claims in real-time based on risk and financial impact
• Automate low-value tasks like payer website checks
• Enable closed-loop issue remediation to prevent repeat denials

This injection of intelligence allows providers to move well beyond back-end denial management to true real-time prevention. And the analytics enable proactive identification of systemic issues to target for improvement.

Every organization’s top process gaps will vary, but some common focus areas include:

Addressing Denied Claims for Medical Necessity

Improper or insufficient documentation of medical necessity continues to be one of the most prevalent denial reasons across payers.

This is an area rich in prevention opportunities, including:

• Clinical documentation improvement (CDI) programs – CDI specialists collaborate with physicians to enable complete, accurate clinical documentation supporting medical necessity guidelines. For example, capture of post-operative details showing complications supports approval of emergency procedures.
• Adherence to appropriate use criteria (AUC) and medical policies – Ongoing monitoring of payer AUC requirements and clear provider awareness of these rules helps satisfy evidentiary standards. Proactive tools can flag claims needing rigid policy adherence.
• Leveraging medical directors – Including physician leaders in case review, policy interpretation, and test case negotiation with payers before widespread denial patterns emerge.

Mastering Prior Authorization & Pre-Certification

Authorization-related denials occur when required documentation, clinical details, or payer pre-approval are lacking.

Providers can reduce denial rates through:

• Selection of optimum payer contracts – Thoroughly assessing authorization requirements and approval turn-around times for plans during payer negotiation to avoid unfavorable policies.
• Electronic authorizations and automation – Adopting ePA platforms and robotic process automation to standardize and accelerate authorization submission, follow-up, and evidentiary requirements.
• Use of peer-to-peer review – Equipping back-office teams with real-time access to peer physicians as escalation points when policy disagreements arise during authorization.

Verifying Patient Eligibility and Benefits

Eligibility and benefits discrepancies lead to surprise patient balances, provider/facility write-offs, and administrative rework.

Risk-based methods to proactively verify active coverage include:

• Real-time HIPAA 270/271 EDI transactions – Leveraging automated eligibility request/response transactions during patient registration and before service delivery.
• Point-of-service collection – Implementing scanning/swiping of members’ insurance ID cards and capturing policy/benefits details as part of scheduling and pre-registration workflows.
• Experienced financial counseling staff – Knowledgeable billing office personnel skilled in interpreting complex benefits/exclusions enable exhaustive data capture.
• Ongoing self-pay monitoring – Analytics pinpointing patterns of rising self-pay/uninsured patients for investigation into potential insurance lapses.

Strategies for Preventing Claims Coding Errors

Coding accuracy and specificity are critical to minimizing coding-related denials.

Strategies include:

• Certified coder workforce – Ensuring professional coders maintain up-to-date CEU credits and proficiency with coding guidelines.
• Coder training and audits – Routine educational sessions on coding updates and targeted auditing focused on top error areas.
• Coding algorithms & AI – Adopting machine learning coding assistance tools to assign and validate codes based on documentation.
• Coding controls – Edits and analytics to detect unbundled codes, invalid modifiers, inadequate number of diagnoses, etc.

Contract & Fee Schedule Loading Management

Improper charge entry, fee schedule loading gaps, or outdated contract terms result in reimbursement denials and tedious appeals.

Key preventions include:

• Robust payer contract management – Clear accountability for maintaining accurate, updated payer contract terms and fee schedules. Centralized repository with robust controls.
• Charge description master (CDM) integrity – Routine auditing and controls within the CDM to validate coding, revenue codes, and pricing aligns to contracted terms.
• Analytics-driven reconciliation – Using payment data to proactively identify re-occurring variances between expected reimbursement and received payments.

Other Common Focus Areas

Many other critical revenue cycle processes such as patient identification, data/charge capture, claim submission management, registration QA, and denial follow-up workflows must be continuously analyzed.

Top strategies include:

• Implementing standardized appeal workflows
• Automation and tracking tools supporting timely appeal status visibility
• Staff education on top denial reasons and appropriate documentation/rebuttal
• Clear accountabilities on routing different denial types
• Analytics monitoring appeal win/loss rates and aging to enable targeted interventions
• Use of peer-to-peer negotiation and external denial resolution partners when appropriate

Establishing a rigorous appeals management process not only enables revenue capture but also provides insights on systemic prevention opportunities. Periodic denial root cause analysis tying denials back to the original issues should identify process gaps to target for improvement.

Healthcare organizations successful in tackling this challenge will follow this blueprint of best practices:

• Optimizing front-end revenue cycle work: verification, documentation, authorizations
• Leveraging AI/ML-powered scrubbing and denial prevention platforms
• Ongoing process improvement driven by root cause and data analysis
• Focus on mastering common issue areas like medical necessity, authorizations, etc.
• Rigorous appeals management with analytics and targeted prevention