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Creating an effective denial management strategy in healthcare

Payer denials remain one of the biggest challenges affecting the healthcare and the RCM industry. Healthcare providers find themselves increasingly handling payer denials, which reduce or delay the cash inflow and put them under financial stress. RCM leaders are under constant pressure to identify and curb the causes of denials and make fundamental and impactful changes to the overall RCM operations to ensure their clients are paid their due. Denial management service has never been more demanding than it is now.

An advisory board report states that payers are denying more claims than ever right now, and about 40% of all the denied claims have preventable reasons associated with them. Some of these reasons include:

  • Lack of medical necessity
  • Pre-authorization issues
  • Documentation problems
  • Eligibility issues
  • Issues with pre-certifications

One of the most critical tasks of any third-party denial management service provider is to create a sustainable, effective, and quick-acting denial management strategy that works for the client. Let’s assume this third-party service provider works for three large healthcare clients.

Creating such a strategy is challenging because it cannot be generalized to all clients. The team will have to develop individual denial management strategies for each client, depending on their current rate of denials, A/R cycle, cash inflow at any point in time, and the core causes of denials.

Thankfully, when it comes to creating a denials management strategy, there are a few general steps to the structure that can be followed for all practices

  1. Root-cause analysis and prevention
  2. Organization-wide implementation of solutions
  3. Monitoring and tracking 

Root cause analysis and prevention

Root-cause analysis is something every denial management service provider will take up periodically. However, the effectiveness of the process depends on how deep the analysis is.

Let’s consider the Emergency Department (ED). This is one of the healthcare departments that face severe physician burnout every year. ED experts must make decisions quickly and on the spot, which is one reason why there could be increased errors leading to denials.

Recent studies report that up to 20% of admission orders are erroneous in the ED. When a patient walks into the ED, the service providers must quickly decide whether the patient needs in-house admission. Asking patients who require continuous monitoring to leave after essential treatment may jeopardize their health and put them at risk.

Admitting a patient who could have gotten just outpatient treatment means the hospital has charged the payer more than needed. This would lead to payer denials.

A denial management service provider can identify admission errors as the root cause of the denials and submit the report to the client or go deeper into further analysis. Further analysis shows that 75% of all admission errors happened during the night shifts, between 12 AM and 6 AM.

This client usually manages with minimal staff during the night. Medical professionals are making increased admission errors at night because of higher workload, lack of a supportive team to discuss with, and burnout. So, the right solution would be to tweak staffing so more experts are available on deck for consultation and decision-making during the wee hours.

A deeper analysis by the denial management service provider would lead to more precise and quality solutions.

Organization-wide implementation

Once solutions are identified, they must be implemented organization-wide and not just at the top level. This is because problems could be at the lowest rings, and if the solutions aren’t implemented here, you would see no results.

Surveys report that, on average, a healthcare practice employs 982 people. How would you encourage all these employees to adhere to a change to bring a holistic reduction in denials?

Experts believe that incentives are the solution. Healthcare staff are some of the overworked individuals in any profession, and sometimes, getting them to change how they work or bring newer tools and technology that require them to learn and upskill may be extremely hard.

Incentives, including monetary and non-monetary benefits, may encourage them to know what’s new within the organization and try to adapt to it.

It also helps to create checklists and if-then scenarios for employees to handle everyday issues that may lead to denials. ‘If’ there is a discrepancy in the provider notes and bill generated, ‘Then’ hold back the bill and send for further clarification.

‘If’ a claim receives a soft denial, ‘Then’ make sure the appeal is submitted within a week.

Denial management services also include making hard decisions and knowing the financial impacts of these decisions. Reworking claims cost anywhere from $30 – $117 for the client. This does not include the time and resources spent on the rework.

That’s why all soft denials should not be appealed. You’ll end up losing more money by appealing than by letting go.

Monitoring and tracking

The last step to successful denial management is monitoring and tracking. Once the top root causes for denials are identified, all future claims need to be monitored for these causes before submissions. The denial management service provider can use technology to monitor every step of claims movements and identify problems before they turn big.

That’s why mere automation may work for healthcare practices in the future. They will need intelligent automation like AI to track and monitor problem areas and ensure the claims are checked and rechecked at multiple stages before they are sent out.

Tracking involves identifying patterns in denials and staying aware of the general denials trend in the industry. Making relevant changes to internal systems based on these inputs would further help reduce the chance of denied claims.


Despite how reasonable the efforts of denial management service providers are, it isn’t possible to bring down the denial rate to zero. However, many of the denied claims result from preventable causes, all of which can either be worked on and reduced or eliminated using the right denial management strategies.

Working with a partner like Quintessence Business Solutions and Services, you can be sure that your denials management is in place with the custom strategies and industry-best solutions. Let our denial management service experts take charge and implement long-lasting and effective solutions to tackle high denial rates.


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