Denial Management - Four-Stage Process to Improve Medical Billing Performance

Yuval Lirov

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Partial denials cause the average medical practice lose as much as 11% of its revenue. Denial management is difficult because of complexity of denial causes, payer variety, and claim volume. Systematic denial management requires measurement, early claim validation, comprehensive monitoring, and custom appeal process tracking.

In a high-volume clinic, the only practical way to manage denials is to use computer technology and follow a four-step procedure:

  1. Prevent mistakes during claim submission. This can be accomplished with a built-in claim validation procedure including payer-specific tests. Such tests ("pre-submission scrubbing") compare every claim with Correct Coding Initiative (CCI) regulations, diligently review modifiers used to differentiate between procedures on the same claim, and compare charged amount with allowed amount according to previous experience or contract to avoid undercharging.

  2. Identify underpayments. Underpayment identification involves comparison of payment with allowed amount, identification of zero-paid items, and evaluation of payment timeliness. The results of this stage should be displayed in a comprehensive underpayment report sorted by payer, provider, claim identification, and the amount of underpayment.

  3. Appeal denials. Appeal management includes appeal prioritization, preparation of arguments and documentation, tracking, and escalation. Note that CCI spells out bundling standards but the number of standard interpretations grows in step with number of payers. Therefore, CCI provides justification basis for an appeal and every appeal must be argued on its own merits, including medical notes. Denial appeal process is typically managed with a custom process tracking system, such as TrackLogix.

  4. Measure denial rates. “You cannot manage what you do not measure. " By measuring denial rates and observing payment trends, you can see if your process requires modifications.

Denial risk is not uniform across all claims. Certain classes of claims run significantly higher denial risk, depending on claim complexity, temporary constraints, and payer idiosyncrasies:

  1. Claim complexity
    1. Modifiers
    2. Multiple line items

  2. Temporary constraints
    1. Patient Constraint, e. g. , claim submission during global periods
    2. Payer Constraint, e. g. , claim submission timing proximity to fiscal year start
    3. Procedure Constraint, e. g. , experimental services

  3. Payer idiosyncrasies
    1. Bundled services
    2. Disputed medical necessity

First, for complex claims, most payers pay full amount for one line item but only a percentage of the remaining items. This payment approach creates two opportunities for underpayment:

  1. The order of paid items
  2. Payment percentage of remaining items

Next, temporary constraints often cause payment errors because misapplication of constraints. For instance, claims submitted during the global period for services unrelated to global period are often denied. Similar mistakes may occur at the start of the fiscal year because of misapplication of rules for deductibles or outdated fee schedules.

Finally, payers often vary in their interpretations of Correct Coding Initiative (CCI) bundling rules or coverage of certain services. Developing sensitivity to such idiosyncrasies is key for full and timely payments.

Yuval Lirov, PhD, author of “Mission Critical Systems Management" (Prentice Hall) , inventor of multiple patents in artificial intelligence and computer security, and CEO of Billing Technologies. Vericle® delivers comprehensive practice workflow engine that integrates patient scheduling, electronic medical records (EMR), billing, transcription, and compliance management. By consolidating technology for hundreds of separate billing services, Vericle® tracks payer performance from a single point of control, shares compliance rules globally, and creates massive economies of scale. Yuval invites you to share your knowledge of medical billing and compliance at and register to the next webinar on audit risk at


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