Denial Management. What Is It? How Does It Work?

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Medical billing professional focused intently on his computer.

The rate at which medical claims get denied by insurers is pretty concerning. According to a recent analysis, the average claim denial rate increased by 23% compared to four years ago. For medical practices, this means unpaid services, resulting in lost or delayed revenues, hurting the financial health tremendously.  

But before you blame insurers for denying your claims, take a step back and look at your denial management strategy. The fact is, most denials result from wrong information or misinformation in your claims, forcing the insurer to interrupt your revenue flow. What’s more perplexing is that not all organizations commit to following up their claim denials, leading to unfavorable resolution or abandonment, which eventually causes the claims to be written off as bad debt.  

Good news: you can increase your organization’s claim acceptance rate to 95% or better or below by implementing a solid denial management strategy. Curious to find out more? This in-depth resource takes a deeper dive into the basics of denial management, including: 

  • What is denial management? 
  • How does denial management work? 
  • Why does denial management matter to your healthcare organization? 

What is Denial Management? 

In a word, denial management is a strategic process that aims to unmask and resolve problems leading to medical claim denials. But that’s not all; the process should also mitigate the risk of future denials, ensuring that practices get paid faster and enjoy a healthy cash flow.  

The denial management team is tasked with establishing a trend between recurring denial reason codes and denial reason codes. The goal is to point out the registration, billing, and medical coding setbacks through trend tracking and correct them to prevent future denials. The team also analyzes the payment patterns for individual payers so that it becomes effortless to detect a diversion from the normal trend.  

How Does Denial Management Work? 

In the section above, we’ve given a sneak peek or the general idea of how denial management works. Now it’s time to dive a little deeper and get the facts right in a systematic technique called the IMMP process, which stands for Identify, Manage, Monitor, and Prevent.  


The first step to an effective denial management process is identifying the root cause and reason for claim denial. Please note that when the insurer denies a claim, they usually indicate the reason in the accompanying explanation of payment. These indicators are better referred to as claim adjustment reason codes (CARC). 

The real assignment lies in interpreting the insurer’s feedback and determining the actual reason for claim denial. Unfortunately, deciphering the CARC usually takes time and requires top-level skills, considering that some insurers still use the non-standard, legacy codes that are overly confusing. But with dedicated denial management professionals, your organization should identify why a claim wasn’t reimbursed and who’s responsible for the payment, as it’s a critical step in getting the insurer to compensate your organization for the claims.  


After successfully identifying the reason for claim denial, it’s time to resolve the denial, i.e., get the medical claim paid by your insurer. The denial management team can accomplish that feat by implementing the following actions: 

1. Routing Denials Directly 

The first action involves organizing and speeding up the paperwork for denial-related info. That means using automated tools to route denied transactions directly into worklists. For instance, you want to route all coding-related denials to your coders for them to quickly and efficiently act on each item.  

2. Sorting the Work 

Here, the denial management team employs sophisticated software to sort their worklists by amount, time, reason, among other factors. This makes the team’s work more streamlined and efficient, unlike using manual systems.  

3. Creating Standardized Workflow 

The third action involves creating a standard action for each type of denial by:  

  • Marking the clinic’s most common reason for denial 
  • Identifying the most frequently used code regarding that denial 
  • Devising a strategic action plan for managing similar denials 

4. Using a Checklist 

Do you want your denial management process to be as systematic and error-free as possible? A checklist can help! Creating a simple checklist of do’s and don’ts can help your team avoid common mistakes that cause denials to stagnate or become uncollectible bad debts.  


Monitoring the denial management process is critical to keeping everything on track and accurate, ensuring that your claim gets compensated successfully this time around. So first, you want to keep a record of denials according to the type, date received, date appealed, and disposition. Secondly, audit the denial management team’s work by sampling and evaluating their appeals. Last but not least, ensure that the team has the right resources and technologies to do the job efficiently and speedily.  

But that’s not all; monitoring should also extend to the insurer to help your team better understand each claim denial. Remarkably, the goal should be to determine the time, source, number, and type of denial. With this intelligence, your organization can push for internal dialogue with the insurer to discuss better ways of doing business and reducing future claim denials.  


With the denial management team having gathered all relevant data regarding claims denial, the next assignment is to start a prevention campaign. First, you want to go through the denials one more time to determine the opportunities to retrain your staff, adjust workflows, and revise processes.  

You also want to gather different teams that contributed to the denial of the claim in one way or another. For instance, if the denial was registration-related, you should summon the front desk team and undertake them through the prevention program, so they don’t commit errors leading to claims denial in the future. Other claims denial categories you should focus on preventing pertain to coding systems, lack of authorization, and medical necessities.  

A young professional working on his office computer, filing insurance claims.
 Implementing a denial management strategy can help ensure your organization isn’t losing revenue to bad debt. 

Why does Denial Management Matter to Your Healthcare Organization? 

Ensuring your claims are complete, correct, and able to be processed by the insurance company is an achievement on its own, as it saves your organization from potential revenue loss. Here are four more reasons you want to implement denial management in your practice: 

  • The process can help identify areas that need improvement to avoid future denials. 
  • A denial management plan helps in the timely tracking, prioritizing, and appealing of denials based on case citations and state/federal statutes supporting your entity’s appeal.  
  • Collecting and analyzing denial patterns unmasks their root cause, enabling the denial management team to devise a permanent solution for such categories.  
  • Denial management also allows a healthcare organization to collect more candid information to support the appeal, which may increase the claim amount.  

Apex EDI is Your No.1 Rated Claims Clearinghouse Provider 

Let’s face it, managing medical claim denials isn’t child’s play. The process takes time, resources and requires top-class expertise to accurately identify the reason for claim denial, resolve the denial, and prevent the issue from resurfacing in the future. Moreover, dealing with insurers can prove hectic, as some are usually committed to frustrate entities into giving up on their claims.  

Thankfully, you can partner with a reliable claim processing partner like Apex EDI to help lift the weight off your shoulders. At Apex EDI, we’re a team of highly qualified and experienced insurance billing experts, and we take pride in helping healthcare organizations reduce their claim denial rates significantly, ensuring financial stability. We leverage intelligent automation and customizable workflows to process medical insurance claims as efficiently and quickly as possible.  

If you wish to see our clearinghouse solution live in action, schedule a FREE live demo today! 



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