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Improve the claims management process: Preventing payer denials


A physician’s roadmap to performance improvement must include best practices to reduce and reverse unpaid claims

You may be thinking you’re doing everything possible to submit clean, accurate claims to payers-yet denials persist. And if it seems that every day insurers are sending back different types of denials, you’re probably right.

Related: 15 ways to fight back from claim denials

"That’s the way it is,” says Elizabeth Woodcock, MBA, FACMPE, a healthcare consultant and author with Woodcock & Associates. “No matter how hard you try to make everything perfect, denials still happen. But you have to recognize that the insurance companies have an economic incentive to deny claims, so you’re never going to get it down to zero.”

That’s the bad news. The good news, however, is that with a strong parallel strategy of denial prevention and follow-up, you can significantly reduce your denial rate and ensure that almost all denied claims get paid.

Follow up promptly

To maximize reimbursements, review all denials within 72 hours and act on them within seven days, Woodcock says. Gone are the days billing staff can simply reprint a denied claim and send it back to the payer with a rubber stamp that says “appeal,” she adds. “Insurance companies would laugh at you.”

But by correcting claims, such as by adding requested information, and sending them back to payers quickly, Woodcock says that at least 80% of them eventually will get paid.

Open your treasure chest

The key to long-term revenue-cycle improvement, however, is learning from and correcting recurrent mistakes. Your most valuable resource in this quest is the denial report, Woodcock says.

It can be tempting simply to correct denied claims and send them back, but failing to analyze the reasons claims are rejected in the first place only perpetuates the problem. “Denials are your treasure chest for performance improvement,” Woodcock says. “This is your guide to really make a difference.”

More coverage: How physicians should negotiate with payers

For example, by reviewing your explanations of benefits you might learn that you’ve been submitting procedure codes that are inconsistent with diagnosis codes, indicating that you need to work on coding. Or you may find a pattern of missing or inaccurate demographic information, indicating possible problems with your front-desk registration procedures.

Divide and conquer

But to really put this information to work, you need to organize it. For Brett Waress, MHA, FACMPE, chief operating officer at Tenet Florida Physician Services, the first phase of that process is dividing denials into those the practice understands and those it does not.

“There are denials for reasons that are specified by insurance companies that we can understand, such as maybe we didn’t get the middle initial or get the patient registration right. Those are denials we know how to handle,” he says.

Denials in this group then go through another (but not the last) round of sorting so they are addressed by the correct department: front office; billing office; or clinical staff, including physicians, notes Waress.

“But there’s a whole other category of denials for reasons that we may not understand or appreciate. It may be a denial for bundling of services in a surgical procedure that is payer-specific and not supported by Medicare rules,” he says. “Those types of denials we like to be able to build them back into our contracting efforts, but it’s exceedingly difficult to call those out and have them addressed specifically in our contract.”

Another complicating factor in this process is lack of consistency in the terminology payers use to describe their reasons for denial. “So getting them translated, cross-referenced, and put into actionable information for those three sections is very difficult and manual,” he says.

This process is cumbersome for large systems like Tenet and small practices alike, but is too important to overlook, says Woodcock. “Even though it’s frustrating, we’re in a battle, and this battle is fought every single day. If we give up, we’re going to give up money as well.”

NEXT: Set priorities for your team



Set priorities

Addressing denials is far less daunting, however, if you prioritize well. “Don’t try to fix demographics, coding, and so forth in a month,” says Owen Dahl, MBA, FACHE, principal of Owen Dahl Consulting in The Woodlands, Texas. “Focus on your biggest impact point first.” Once the first item is resolved, move down to the next-biggest problem.

“It’s hard to chase more than one rabbit at a time,” agrees Waress. Where to begin, he adds, is a matter of preference. “You either pick the high-dollar, high effort or the low-dollar, low effort.” Either way, he says prioritization is extremely helpful for a practice of any size.

Rally (don’t punish) your team

Another common mistake is for a practice manager to attempt to come up with the solutions to identified problems alone, says Dahl.

“Talk and brainstorm with your staff and identify what the real source of the problem is,” he says. This approach not only eases the burden on managers, it also enhances buy-in among employees to follow through with the solutions they helped create.

Related: The prior authorization predicament

Keep in mind, too, that firing an employee who may be responsible for a discovered mistake may not be a productive move. “Eighty-five percent of the time an employee is involved in an error, a system causes the error, not the employee,” Dahl says.

And such systems aren’t necessarily IT-related, but may have to do with inadequate training, poor tools, or too many tasks being assigned to employees, which winds up compromising their performance.

“Look at this as a teachable or fixable moment,” Dahl says. “Don’t make the mistake of perpetuating the problem by firing one person and hiring a new one.”

Optimize technology

In addition to leveraging your team’s insights and expertise, take advantage of claims-scrubbing systems that help you catch errors before you submit them.

“The clearinghouse world has gotten much better and more sophisticated, so there are tools now available that practices may not be fully aware of or taking advantage of,” Dahl says.

Some basic versions of these tools may be bundled into general practice management software that practices already use, he says, adding the caveat that practices might need to spend some time to understand the technology and how it works.

Related: Direct-pay medical practices could diminish payer headaches

“People need to look at both what’s in their practice management system package and what’s in their claims management package from the clearinghouse, and then the compatibility of the two,” he says. “Do I fix a claim in the scrubber or the PMS and how do I make sure that data is being recorded properly?”

Furthermore, practices should determine whether their PMS allows them to build in their own edits on top of the basic pre-loaded rules, Woodcock says.

“You might say it’s kind of a pain to put in all those edits, all those rules. But remember, if I can prevent five, six, 15 or 25 errors from happening by building the rule each and every time, it’s definitely going to be worth the 30 to 45 minutes I spend researching and inputting that rule.”

Find a support system

Despite the influx of technology into claims processing in recent years, interpersonal relationships with payers still matter, says Dahl.

“Payers are getting more sophisticated and doing more things electronically just like we are, but there’s still no substitute for the fact that I’ve known Mary from insurance company X for all these years and she always tries her best to help me. How you communicate with Mary could change to e-mail, instant messaging, or texting, but I still recommend you contact Mary verbally on occasion just to say hi.”

Woodcock agrees, noting that such relationships may help give your practice a voice at the payer if you find that a claims-scrubbing rule built into the insurer’s system isn’t accurate.

“So that relationship may recognize that they’re working for a company just like us, and sometimes humans make mistakes in what they input and we need humans to correct them,” she says.

Unfortunately, when Waress experienced just such a problem with a payer incorrectly denying claims, he was unable to reach payer employees empowered to resolve the error.

“Even if they agree with and are sympathetic to your problem, people can’t always affect systemic changes in insurance algorithms,” he says.

As a result his practice ultimately had to undertake a formal dispute process involving the state medical society and department of insurance, which took 18 months to complete. Because the denials were found to violate the group’s contract as well as department of insurance rules, Waress was successful in obtaining a settlement from the payer that included penalties and interest.

“The department of insurance of the state I was in, particularly their health insurance division, was instrumental in helping us get the attention of payers and getting them to change the way they denied or paid claims,” he says.

For situations that require less extreme efforts, professional organizations such as the Medical Group Management Association and state medical societies can often help practices get in touch with other offices tackling the same challenges, Waress says. “The important thing to remember is that you’re not alone.”

NEXT: Common reasons for claim denials



Common reasons for claim denials

Duplicate claims

  • A duplicate claim was submitted when a practice hasn’t received reimbursement.


  • Errors or typos were made while collecting pertinent information from the patient or during the data entry process for a claim.


  • The service won’t be reimbursed because the patient hasn’t yet met their insurance plan’s deductible.

Health plan benefits exceeded

  • The patient has exceeded his or her health plan’s benefit for the provided service.

Insufficient information

  • The claim is deficient in certain information. It may be missing a prior authorization or the effective period of time within which the service must be provided for reimbursement to occur.

Problem with modifiers

  • The claim form is missing a modifier or modifiers, or the modifier(s) are invalid for the procedure code.

Site of service problem

  • An inconsistent site of service is marked on the claim form, such as an inpatient procedure billed in an outpatient setting.

Coding mix up

  • There is a coding or data error with mismatched totals or codes that are mutually exclusive.

Outdated codes

  • The claim includes outdated current procedural terminology codes, or it lists deleted or truncated diagnosis codes. 

Service not covered

  • A particular service isn’t cover under the health plan’s benefits.

Lack of medical necessity

  • The health plan could deny a claim if it appears that a service was not medically necessary, or if there is a mismatch between the actual diagnosis and the service performed.

Out of network

  • When the physician isn’t an in-network provider for the patient, the payer may reimburse a lesser amount if the patient has out-of-network benefits.
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