Claim Denials Steadily Increasing—What You Need to Know

February 15, 2021 By: Quadax

Increasing claim denials significantly impacting hospital revenue performance.

Hospitals are receiving more claim denials from payers, with the average rate increasing by 23% in 2020 compared to four years ago, according to a recent analysis.1

The hospital claim denial rate has been steadily increasing since 2016, but the COVID-19 pandemic has accelerated the upward trajectory, pushing the denial rate up from 20% in the second quarter. Claims denied upon initial submission also grew from 9% in 2016 and 10% at the start of 2020 to a total of 11% by the third quarter of 2020, the internal analysis of about 102 million hospital claim remits showed.

A recent AHA report confirms that 89% of hospital leaders have experienced an increase in payment denials over the last three years, with about half of those respondents describing the increase as significant. Claim denials are impacting revenue performance for hospitals but also quality and accessibility of patient care, AHA asserts.

The silver lining

The good news for hospitals though is that most of these claim denials are potentially avoidable.

The analysis found that one in four denials originates in Registration and Eligibility. Overall, the analysis suggests that 86% of claim denials processed between July 2019 and June 2020 were potentially avoidable, meaning hospital staff could have intervened to prevent the denial.

In contrast, only 14% of the claim denials were unavoidable and nearly one in four potentially avoidable denials cannot be recovered.

Prevention is the key to averting hospital revenue loss

Strategies such as staff education and automation of front-end steps can help hospitals prevent common reasons for claim denials, which include coordination of benefits, benefit maximum, and plan coverage.

While some denials cannot be helped by the provider, for example, obtaining prior authorization for emerging health needs, hospital staff can enact best practices to avoid common denials.

Identifying root causes of denials, prioritizing remediation where it is most needed, and leveraging technology are all strategies hospitals should be considering when aiming to reduce claim denial rates.

Predictive analytics have particularly been helpful for organizations to identify the value of a claim denial and prioritize where staff should rework claims to maximize recoupment.

More advanced technologies like artificial intelligence are also becoming increasingly available to healthcare organizations and have the potential to significantly impact how providers manage claim denials.

Denials can be prevented—here’s how…

Eligibility is one of the top reasons for denials. Our clients were encountering some of the following issues before partnering with Quadax:

• Changes in payer rule sets
• Incorrect or outdated CPT code sets
• Outdated contracting model
• Insufficient or incorrect patient identifier information
• Invalid modifier combinations

We know the majority of denials are preventable. Here are some of the tools our customers are using to prevent denials:

Patient Access Services

Can you answer these questions about your organization’s denials?

1.  What percentage of rejected or denied claims have missing demographic information?

2.  What percentage of denials are related to eligibility issues?

3.  How can front-end payer rejections be prevented?

Our Patient Access products help you validate patient demographic information and confirm payer coverage before the claim is submitted.

Patient ID by Quadax validates patient demographic information in real time against our robust proprietary sources and helps conform patient identity, reduce mail costs and ensures HIPAA compliance.

Insurance Eligibility by Quadax confirms payer coverage and benefit information (including copays, coinsurance and deductibles) electronically to more than 800 payers, in real time or batch throughout the entire billing process—from scheduling, pre-registration, registration to discharge.

Intelligence by Quadax

Ultimately, front-end issues and mistakes aren’t the only reason for denied claims, there are many additional factors. Can your organization answer the following questions about your denials?

1.  What is driving denials to increase or decrease?

2.  What is the average Days in A/R?

3.  How can front-end payer rejections be prevented?

4.  What is the source of denials?

5.  How do you benchmark performance with similar organizations?

If any of those questions give you pause, we can help you answer them. We can provide you with cutting-edge insights through our Intelligence by Quadax platform, which is powered by Machine Learning to adapt and learn to continuously optimize and deliver insights that enable process optimization and automation opportunities.

In addition to the necessary insights into your data and processes, our Predictive Analytics can predict if a claim will be denied before it’s submitted. It can also predict the days to payment and expected payment amount. This information can be used to prioritize claim processing to predict and optimize cash flow and ultimately—your bottom line.

All of these tools can help you minimize denials as much as possible, but some denials are unfortunately inevitable.

Tools to work denials most effectively

How does your staff prioritize denials? Are your workflows efficient? Are certain categories of denials managed by specific individuals?

Our Denial Management solution automatically identifies both full and partial denials and maps the claim errors to pre-defined error categories and workflows those claims to the appropriate individual for follow-up. We report on the top error categories and the top denial codes to help your team reduce upstream denials.

Using Denial Management, you have full claim tracking of all activities associated with each claim and staff can easily access source documentation for reference.

Our appeal letter generator is a client favorite! Denials are automatically routed to dedicated advanced workflow statuses where appeal templates are automatically generated with specified appeal letters and any additional information is added to the required attachments. Removing the manual process of generating the appeal template saves your staff valuable time to focus on other areas of the denial process.

Let’s take on the revenue cycle together! Learn more about what makes us Best in KLAS in Claims Management at

1 Source: A Review of National Medical Claim Denial Trends 

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