What is healthcare denial management? What to look for in a denial management solution?

Denial management is the processing, analysis, and communication of denied claims. Unlike rejected claims (rejected because of errors or anomalies in the claim forms), denied claims are rejected after claims processing. Claims are denied because of non-covered services, non-separate services, incorrect usage of modifiers, and inconsistent data. For healthcare providers and practitioners, denial of claims is expensive. Although they have a high probability of recurrence, better denial management can minimize their negative effects.

How do denied claims impact, healthcare providers?

The main impact is on the financials of the healthcare provider. When claims are denied by the payors, insurers, or payers, there is a significant delay in payment. Sometimes, there is no clear timeline of when the payment will be released. Denial of claims could make insurers not release payments at all, especially if it is a non-covered service or treatment. Healthcare providers without custom claims denial management are hit badly every time this happens.

The claim denial can severely affect the healthcare provider, especially if the scope of payment involved is enormous. Therefore, one single claim denial is enough to affect a healthcare provider's financial performance. But healthcare providers who don't use denial management software might fall into the habit of getting their claims regularly denied, which might further aggravate their financial standings.

What are the categories of claims denials?

The three categories of claim denial are listed below:

Administrative denials

When there is an error in the medical coding that the healthcare provider submits to the insurer, the payor could deny the claim using their standard denial management workflow. Errors in the claims generate denial codes, which serve as indicators of the nature of the issue. The payor will issue denial codes such as Contractual Obligation (CO), Patient Responsibility (PO), and Other Adjustment (OA). These denial codes serve as indicators for the corrective action required of the provider.

Clinical denials

When the payor adjudicates that the patient's treatment was not medically necessary, the payor can issue a clinical claim denial. The criteria to form this denial management in medical billing adjudication depend on the payor policies, the insurance policy, and the patient. Other factors such as the duration of the policy, insurance coverage, and length of the treatment are also used in the determination.

Policy claims denials

The policy details might not cover certain aspects of the treatment or itself. For example, a patient might have an insurance plan with no coverage for certain medication or procedure types, and Payors could deny claims on this ground.

How to manage denials using a healthcare denials management solution?

A healthcare denial management software system can automate the management of denied claims. The system can identify potential denials and rectify them to increase the chances of reimbursement. The system can help providers improve their appeals. The system can also leverage analytics to spot trends and provide actionable insights so that providers may use this information for creating successful claims.

Conclusion

Although denial of claims is an indispensable part of healthcare delivery, providers can increase their chances of reimbursements by using a custom healthcare denial management software solution.