Root Causes Linked to Claim Denials

Claim DenialsThree revenue cycle tips are provided to reduce denied claims.

Claim denials represent millions of dollars in lost and delayed net reimbursement annually. According to the American Medical Association (AMA), cost estimates of inefficient healthcare claims processing, payment, and reconciliation top out at $210 billion per year.

Claim denials are so common, they’ve become a fixture within the claims management arena, and implementing a complete claim denial management program can seem like an overwhelming burden. With resources stretched thin, a lack of tools to identify errors, and limited budgets, claim denial management can sometimes be overlooked, like a check-engine light being ignored.

The good news is that some claim denial situations are a relatively quick fix, and are the result of registration errors involving matters such as eligibility, authorization, or missing data. Others can be traced back to an error by a user or a technical issue – examples can include missing charges, an invalid sequence of procedures, missing occurrence code(s), invalid diagnoses, and so on. More than 90 percent of claim denials fall into one of three root causes:

  • End-User Error is related to department processes, such as charge entry or data entry. Employees ignoring error warnings or not entering payor-required data elements can be a root cause. Sometimes, we see payor rules that have not been addressed, which comes back to basic training issues.
  • Technical Set-Up Issuesappear in the form of old-charge requisitions that have invalid HCPCS/CPTs attached to them, claim formatting issues, or missing data as a result of not mapping the data appropriately to the claim. This is the second-biggest mishap we find in an average engagement.
  • Finally, there are Patient Requirements for payers like Medicare, mandating that patients must submit forms prior to approval and/or adjudication. If the patient hasn’t followed all required processes for their payer organization, claim denials will follow.

Managing your denials requires a multi-faceted approach. To start, here are three tips to help your organization identify, understand, and work toward remedying claim denial patterns.

Tip No.  1: Invest in Analytics and Technology

However manual your revenue cycle processes might be, technology can be incredibly effective in helping you get ahead of denials. Tracking critical key performance indicators (KPIs) can yield a huge efficiency boost, and the right business analytics will help you dive into your most problematic reason codes, as well as develop the metrics that best fit your organizational needs and goals.

Additionally, enhanced functionality within existing technologies that optimize or enhances your system after initial implementation may not be in place. Going live with newly implemented technology doesn’t always represent full functionality. Evaluate the level of “active” features compared to “inactive” features in the technology you’ve already invested in; this may uncover additional opportunities to validate data. Before you look elsewhere to solve data-driven issues, be sure your existing systems are optimized.

Tip No. 2: Leverage DNFB reporting

Discharged but not final billed (DNFB) reporting is controlled by HIM (healthcare information management) and is the single most important coding workflow/checkpoint. It is the optimal area in which to identify billing issues, reimbursement-related issues, missing or invalid case documentation, missing charges, and incomplete or missing ICD-10 data.

By leveraging DNFB reporting, in-house coders can identify and resolve coding-related issues during the pre-billing stage – before the patient account has ever been billed and before a claim is created. DNFB reporting also marks an ideal period to validate critical billing requirements necessary for adjudication.

DNFB reporting also allows revenue cycle teams to recognize claim denials as close to the patient’s date of service as possible. This “moment in time” provides a window into issues that can be resolved, required data that can be collected, and changes that can be made to fix or enhance a patient’s account data to fulfill pay requirements and avoid denials. DNFB reporting can be beefed up to serve as a contract validation that triggers optimal reimbursement.

Once DNFB reporting is complete, it is often too late to adjust data elements. Most electronic medical records (EMRs) finalize a patient’s case, making it difficult or impossible to change data, add data, or remove data so that the case is paid the first time when a claim is submitted. Move your focus to the front end of the DNFB process to ensure that errors and issues are resolved in the early and editable stages.

If your primary EMR allows it, use DNFB edits to determine a patient account’s progression to its final bill status. Instead of using “timeout” strings or “delay days” (the number of days from date of service to billing cut-off), let your DNFB edits trigger billing. Only when all DNFB edits are implemented does the system allow the patient account to “drop” a bill/claim.

Tip No. 3: Continued Analysis of Coding-Related Denials

Change is constant, and one change in an ICD-10 order can represent thousands of dollars in lost or gained reimbursement. Consistently and systematically comparing your coding denials to your encoder system is well worth the effort.

For example, a patient claim might be denied for an invalid diagnosis. When this happens, the provider’s encoder system may not have recognized the invalid diagnosis prior to billing. To confirm this denied claim, one should reload the patient case into the encoder. By pushing the denied claim back through the encoder, they can confirm whether the edits made by the encoder system for the invalid diagnosis are correct or not. If the encoder does not recognize the invalid diagnosis, then the code may be out of date and should be updated.

Often, the encoder will recognize the invalid diagnosis, but the coder lacks the training to react to the edit and prevent the same mistake from happening again. Unless the encoder is set up with hard stops, forcing the coder to react to the edit, these types of issues will continue to slip through the cracks in the process, resulting in denied claims.


Just like the ignored check-engine light, warnings in your denial processes are signs of larger and more expensive revenue cycle problems that may strike again in the future. Pay attention to your claim denials program – provide regular tune-ups and adjustments to stop cash flow leakage and prevent future claim denial problems

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