Claim Denials Guide for HIM Professionals & Coding staff

“Managing Hospital Revenue cycle is a challenging job. Denial of claims makes it even tougher.

Claim denials are an inevitable problem for hospitals. Typically, the hospital suffers annual losses from denial write-offs within range 1% to 5% of net patient revenue.

Denial of a claim is the refusal of an insurance company or carrier to honor a request by an individual (or his or her provider) to pay for healthcare services obtained from a healthcare professional.” [1]

Post claim submission, payer reviews it on various aspects. A claim can be refused by the payer for a variety of reasons.

Reasons for Denials

As per the 2013 American Medical Association National Health Insurer Report Card, below are the 5 major reasons for medical billing denials:

  1. Missing information, like leaving one required field blank, a missing modifier, the wrong plan code or no Social Security number.
  2. Duplicate claim or service,  claims re-submitted for the same beneficiary for the same date, same service item, and same provider
  3. Service already adjudicated, when benefits for a certain service are included in the payment/allowance for another service or procedure that has already been adjudicated.
  4. Not covered by payer, procedures not covered under patients’ current benefit plans
  5. The time limit for claim submission already passed: Claims need to be submitted within a specified timespan. Outside of the set time period, claims get denied.

AI-based computer-assisted coding software for IP, OP and Pro Fee

Types of Denials

CMS & RAC contractors categorized denials in two parts:

  1. Complex Denials: This level of review uses licensed medical professionals who examine a claim and related documentation to identify whether the service was covered and was necessary and reasonable.
  2. Automatic Denials: For these reviews,  system edits are leveraged to check claims for

proof of inaccurate/ improper coding, or other mistakes. RACs may send the provider a letter demanding repayment based on these reviews.

Difference between Denials & Rejections

CMS differentiates denials and rejections in the following manner:

  1. Claim Rejections: These types of claims don’t meet the specific data requirements or basic formatting. Before re-submitting the rejected claim, the correction of error is required. E.g. Transposed digit from the patient’s insurance ID number.
  2. Claim Denials: These are the claims where the negative determination was made by the payer.  Unlike claim rejections, these claims cannot just be re-submitted, though it can be appealed with necessary proof.

Knowing the differences between rejections and denials can help hospital staff accelerate the appeals process drastically, and pinpoint areas for continuous improvements.

Is Denial a big enough issue?

The answer is YES!

Claims denials represented a major threat to hospitals’ financial health as per the Nov 2017 Revenue Cycle Survey from the Advisory Board. [2]  Payors initially deny about 9% of hospital claims, putting about $5 million in payments per hospital at risk. [3]

Nov 2017 Revenue Cycle Survey Result from the Advisory Board

Denials are increasing!

Advisory Board study revealed that Hospital denials write off accounts for $3.5 million for a median 350-bed hospital. Successful denial appeals fell from 56% to 45% for commercial payers and from 51% to 41% for Medicaid over the past two years. [4] As per the ICD-10 monitor survey 2016, 71% of respondents believe that denials have increased post the ICD-10 adoption. [5]

Good News

Though, hospitals’ successful denial appeals got dropped for private payers and Medicaid payers. However, Medicare payer seemed to be relatively beneficial for hospitals. The median successful denial appeals increased from 50% to 64% for Medicare.[6] Change Healthcare study found that about 63 percent of denied claims were recoverable. [7]

Computer-assisted coding (CAC) can reduce the denials due to coding errors and medical necessity by a significant margin. According to HFMA, best practice for initial denials should be 5%. [7]

How Computer-assisted coding can help hospitals reduce denials?

With its NLP based CAC, ezDI targets denials in the following ways :

  • No More Inaccurate codes: Built-in coding compliance to prevent submitting the erroneous codes
  • Appealing against initial denials become easy: Complete audit trail between each assigned code and the related documentation, which can be used as a proof while appealing denials
  • Real-time alerts: Providing edits to coders to warn them about medical necessity errors
  • Categorizing denials: Identifying the root causes of denials by service lines/ MDCs, patient class/type, coders, physicians, DRGs, LOS, etc.

ezCAC targets to reduce the coding-related denials by 50%.  ezDI has helped hospitals moving from denial management to denial prevention by addressing the root causes of denials.

KPIs for Claims Management

KPIs for Claims Management


  1. Health Insurance Glossary, https://goo.gl/JgLFN2
  2. Advisory Board Survey, https://goo.gl/Ayfzrs
  3. Modern Healthcare, https://goo.gl/Hc7fJQ
  4. Advisory Board Survey, https://goo.gl/K6Q1Ps
  5. ICD-10 Monitor Survey 2016, https://goo.gl/3z45jR
  6. Revenue Cycle Survey from Advisory Board, https://goo.gl/ya99dC
  7. Change Healthcare, https://goo.gl/STcin3
  8. HFMA, https://goo.gl/2WmLtw
  9. HFMA, http://hfmamd.org/downloads/REGION_IV_2015/12__pnc_presentation.pdf
Gaurav Arya

Gaurav Arya

Gaurav Arya, a corporate strategist at ezDI, is engaged in helping hospitals and physicians deal with compliance and revenue challenges so that they can go back to focusing on patient care. Gaurav is instrumental in implementing and improving the CDI program and providing Healthcare KPI consulting.

He has an energetic personality and enjoys addressing the challenges associated with Mid-Revenue Cycle. He has prepared and executed many hours of education to assist CFOs/HIMs/Coders/CDIs in accurately reflecting documentation and ensure that the facilities get their entitled reimbursement.

Gaurav Arya completed his MBA from IIM Ahmedabad and graduated from IIT Varanasi.

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