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

Denial Management. What Is It? How Does It Work?
Dr Josh October 15, 2022 medical billing

Data from the American Academy of Family Physicians shows that about 5-10% of the total admitted medical claims get denied regularly. Another report from the Government Accountability Office paints an even less optimistic picture, showing that 25% of claims get denied. Denial rates vary among individual healthcare providers, which depicts the lack of standardization in the healthcare industry and the various challenges healthcare managing facilities and groups face on a daily basis with denial management in healthcare. 

This article delves into denial management medical billing and uncovers what it is and how it works. 

Let’s get started! 

What is Denial Management?

Denial management in healthcare is the practice of determining why medical claims are denied and developing the most suitable strategies for decreasing the number of denials. It also includes practically applying strategies that can increase the percentage of claims reimbursed first. Effective denial management covers the following aspects:

  • In-depth analytics and reporting that offers complete visibility to a healthcare practice’s performance 
  • Identification of the causes behind claims denial 
  • Reduction in the overall number of claim denials and increase in the number of paid claims

How Does Denial Management Work?

Denial management works on a systematic technique known as the IMMP process, which stands for Identify, Manage, Monitor, and Prevent. 

Related: The Three Different Types Of Billing Systems In Healthcare


The first step to effectively manage denial management is determining the root reasons and causes of the claim denial. An insurer generally indicates the reason behind the claim denial in the explanation of the payment that accompanies the denial. These explanation indicators are generally known as claim adjustment reason codes (CARC).

 However, the CARC codes are not as simple as they sound. The primary task is to understand the feedback from the insurer and decipher the reason behind the claim denial. This deciphering process takes considerable time and expert-level skills because some insurers still use non-standard, overly complex legacy codes. But dedicated denial management professionals can handle these codes and determine why a claim was denied and who is responsible for its reimbursement. 


After successfully identifying the claim denial cause, the next step is to manage the denial and get reimbursed. The denial management team can undertake this process through the following steps: 

Directly Routing Denials 

The first and foremost action is to expedite and organize the paperwork for denial-related data. This involves using automated tools to direct the denied transactions to worklists.

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Sorting the Action 

The denial management team uses complicated and innovative software to organize their worklists by time, amount, reason, and other factors. This allows their work to become more efficient and streamlined than manual systems. 

Developing Standardized Workflow  

The third action involves developing a standard action for every claim denial type through:

  • Rooting out the insurer’s most typical denial reason 
  • Determining that denial’s most frequently used code 
  • Developing a strategic action plan that manages similar claim denials 

Using A Checklist 

Checklists can help systemize a denial management process by rendering it error-free. Developing simple do’s, and don’ts can allow your team to avoid typical mistakes that result in stagnant denials or uncollectible bad debts. 


This step in the denial management process is crucial to keep all aspects accurate and on track, allowing a seamless compensation of your claim this time. Monitoring involves stacking your denial record according to the received date, type, disposition, and date appealed. It is also important to audit the denial management team’s work by supervising and sampling their appeals. 

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Lastly, monitoring involves ensuring that your team possesses suitable technologies and resources to perform the job effectively and promptly. This step in claim denial management extends to the insurer to help your team understand every claim denial better. The objective may be to determine the number, time, source, and type of denial. This information can help your organization conduct internal dialogues with the insurer to decide more convenient ways of conducting business and decreasing future claim denials.   


After a denial management team gathers all the necessary information regarding the claim denial, the final and most crucial step is to start a prevention campaign. The most common step in this process is to go through the intricacies of your denials another time to identify all aspects where you need to retrain your staff, revise procedures, or manage workflows. 

The denial management team also brings together different teams that played a part in the claim denial in one way or the other. For example, in the case of a registration-related denial, the team must bring together the front desk team and debrief them about the prevention program to ensure that they don’t commit errors that can lead to further claim denials. Some other claim denial categories a team should focus on including a lack of authorization, coding systems, and medical necessities.

Dr Josh

Dr. Josh is a physician who's helping spread the knowledge about Telehealth and its advantages. At SmartClinix, he's providing his expertise and knowledge in the form of engaging articles on various health & tech related topics.

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